SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a party other than the Registrant ☐
Check the appropriate box:
| ☒ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☐ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to §240.14a-12 | |
TherapeuticsMD, 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):
| ☒ | No fee required. | |||
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| ||||
Aggregate number of securities to which transaction applies:
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
Proposed maximum aggregate value of transaction:
Total fee paid:
Amount previously paid:
Form, Schedule or Registration Statement No.:
Filing party:
Date Filed:
PRELIMINARY – SUBJECT TO AMENDMENT AND COMPLETION
THERAPEUTICSMD, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 2021JUNE 26, 2023
An Annual Meeting of Stockholders of TherapeuticsMD, Inc., a Nevada corporation, will be held at 8:00 a.m., Eastern Time, on Thursday, May 27, 2021. Due to continuing concerns regarding the COVID-19 pandemicJune 26, 2023. We did not hold an annual meeting last year and to protect the healthas such we are holding a combined 2022 and safety of our employees, directors, and stockholders, the2023 annual meeting this year. The annual meeting will be a virtual meeting conducted solely online via live webcast and can be attended by visiting www.virtualshareholdermeeting.com/TXMD2021.TXMD2023.
The Annual Meeting of Stockholders will be held for the following purposes:
1. To elect directors to serve until our next annual meeting of stockholders or until their successors are duly elected and qualified;
2. To approve, on a non-binding advisory basis, the compensation of our named executive officers for the fiscal year ended December 31, 20202022 (“say-on-pay”);
3. To approve a stock option exchange program for those employees of the company who are not named executive officers;
4. To approve an amendment to the TherapeuticsMD, Inc. 2019 Stock Incentive Plan (the “2019 Plan”)our Amended and Restated Articles of Incorporation, as amended, to increase the number of authorized shares thereunder;of common stock, $0.001 par value per share, from 12,000,000 shares to 32,000,000 shares;
4. To approve, pursuant to Nasdaq Rules 5635(b) and 5635(d), the issuance of up to 5,000,000 shares of the Company’s common stock to be sold in one or more private placements to Rubric Capital Management LP (“Rubric”) or one or more of its affiliates, under a subscription agreement with Rubric;
5. To ratify the appointment of Grant Thornton LLP, or Grant Thornton, an independent registered public accounting firm, as the independent auditor of our company for the fiscal year ending December 31, 2021;2023; and
6. To transact such other business as may properly come before the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the proxy statement accompanying this notice.
Only stockholders of record at the close of business on April 5, 2021May 2, 2023 are entitled to notice of and to vote at the meeting. All stockholders are cordially invited to attend the meeting and vote virtuallyvirtually.
In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”) that allow companies to furnish their proxy materials over the Internet, we are mailing a Notice of Internet Availability of Proxy Materials instead of a paper copy of our proxy statement and our 20202022 and 2023 Annual ReportReports to most of our stockholders. The Notice of Internet Availability of Proxy Materials contains instructions on how to access those documents and vote over the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions on how to request a paper copy of our proxy materials, including our proxy statement, our 20202022 and 2023 Annual Report,Reports, and a proxy card. We believe this process will allow us to provide our stockholders the information they need in a more timely manner, while reducing the environmental impact and lowering our costs of printing and delivering the proxy materials.
Whether or not you plan to virtually attend, it is important that your shares be represented and voted at the annual meeting. You may vote your shares over the Internet as described in the Notice of Internet Availability of Proxy Materials. As an alternative, if you received a paper copy of the proxy materials by mail, you can also vote by mail by following the instructions on the proxy card. You may also vote by telephone as described in your proxy card. Even if you have submitted a proxy before the meeting, you may still attend the meeting, revoke your proxy and vote virtually. We appreciate your continued support of our company.
By Order of the Board of Directors,
Chief Executive Officer |
Boca Raton, Florida
April [●]May [X], 20212023
 | 1 |
| Proxy Summary | 4 | ||||||
| Voting and Other Matters | 5 | ||||||
| Proposal One: Election of Directors | 9 | ||||||
| 9 | |||||||
| Corporate Governance | |||||||
Committee Charters, Corporate Governance, and Code of Ethics | |||||||
| |||||||
| Executive Compensation | |||||||
Nonqualified Defined Contribution and Nonqualified Deferred Compensation | |||||||
Limitation of Directors’ Liability; Indemnification of Directors, Officers, Employees, and Agents | |||||||
| 26 | |||||||
| Equity Compensation Plan Information | |||||||
| Certain Transactions and Relationships | |||||||
| Director Compensation | |||||||
|
| 2 |
| 3 |
This summary highlights information contained elsewhere in the Proxy Statement. This summary does not contain all of the information you should consider. Please read the entire Proxy Statement carefully before voting.
20212022 and 2023 Annual Meeting of Stockholders
 |  |  | ||||||||||
Date and Time:
8:00 am Eastern Time | Place: Online via live webcast at: | Record Date:
| ||||||||||
| www.virtualshareholdermeeting.com/ | ||||||||||||
Items of Business:
To elect directors to serve until our next annual meeting of stockholders or until their successors are duly elected and qualified;
To approve, on a non-binding advisory basis, the compensation of our named executive officers for the fiscal year ended December 31, 20202022 (“say-on-pay”);
To approve aan amendment to our Amended and Restated Articles of Incorporation, as amended, to increase the number of authorized shares of common stock, option exchange program for those employees of the company who are not named executive officers;$0.001 par value per share, from 12,000,000 shares to 32,000,000 shares (the “Charter Amendment”);
To approve, an amendmentpursuant to Nasdaq Rules 5635(b) and 5635(d), the TherapeuticsMD, Inc. 2019 Stock Incentive Plan;issuance of up to 5,000,000 shares of the Company’s common stock to be sold in one or more private placements to Rubric Capital Management LP (“Rubric”), or one or more of its affiliates, under a subscription agreement with Rubric (the “Private Placement Proposal”);
To ratify the appointment of Grant Thornton LLP, or Grant Thornton, an independent registered public accounting firm, as the independent auditor of our company for the fiscal year ending December 31, 2021;2023; and
To transact such other business as may properly come before the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the proxy statement accompanying this notice.
| 4 |
|
THERAPEUTICSMD, INC.
951 Yamato Road, Suite 220
Boca Raton, Florida 33431
PROXY STATEMENT
General
The accompanying proxy is solicited on behalf of TherapeuticsMD, Inc., a Nevada corporation, by our Board of Directors for use at our Annual Meeting of Stockholders to be held at 8:00 a.m., Eastern Time, on Thursday, May 27, 2021,Monday, June 26, 2023, or at any adjournment thereof, for the purposes set forth in this proxy statement and in the accompanying notice. Due to continuing concerns regarding the COVID-19 pandemic and to protect the health and safety of our employees, directors, and stockholders, theThe annual meeting will be a virtual meeting conducted solely online via live webcast and can be attended by visiting www.virtualshareholdermeeting.com/TXMD2021.TXMD2023. In accordance with rules adopted by the SECSecurities and Exchange Commission (the “SEC”) that allow companies to furnish their proxy materials over the Internet, we are mailing a Notice of Internet Availability of Proxy Materials instead of a paper copy of our proxy statement and our 20202022 and 2023 Annual ReportReports to most of our stockholders. The Notice of Internet Availability of Proxy Materials contains instructions on how to access those documents and vote over the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions on how to request a paper copy of our proxy materials, including our proxy statement, our 20202022 and 2023 Annual Report,Reports, and a proxy card. We believe this process will allow us to provide our stockholders the information they need in a more timely manner, while reducing the environmental impact and lowering our costs of printing and delivering the proxy materials.
These proxy solicitation materials are anticipated to first be distributed on or about April [●]May [X], 20212023 to all stockholders entitled to vote at the meeting.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on MayJune 27, 202126, 2023. These proxy materials, which include the notice of annual meeting, this proxy statement and our 20202022 and 2023 Annual Report for the fiscal year ended December 31, 2020,Reports, are available at www.proxyvote.com.
We encourage you to access the meeting 15 minutes prior to the start time leaving ample time for the check in and to ensure that you can hear audio prior to the meeting. If you encounter any difficulties accessing the meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual annual meeting page for assistance. Technical support will be available 15 minutes prior to the start of the meeting.
Record Date and Outstanding Shares
Stockholders of record at the close of business on April 5, 2021May 2, 2023 are entitled to notice of and to vote at the meeting. On the record date, there were issued and outstanding [●] shares of our common stock. Each holder of common stock voting at the meeting, either virtually or by proxy, may cast one vote per share of common stock held on all matters to be voted on at the meeting.
If, at the close of business on April 5, 2021,May 2, 2023, your shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A., then you are a stockholder of record. As a stockholder of record, you may vote virtually at the meeting. However, whether or not you plan to attend the meeting, we urge you to vote by proxy over the Internet or by telephone as instructed on the Notice of Internet Availability of Proxy Materials, or to fill out and return the proxy card to ensure your vote is counted. Even if you have submitted a proxy before the meeting, you may still attend the meeting, revoke your proxy and vote virtually.
If, at the close of business on April 5, 2021,May 2, 2023, your shares were held in an account at a brokerage firm, bank, or similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your
| 5 |
these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the meeting. As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account. You should have received voting instructions with these proxy materials from that organization rather than from us. You should follow the instructions provided by that organization to submit your vote. You are also invited to attend the meeting virtually. However, since you are not the stockholder of record, you may not vote your shares virtually at the meeting unless you obtain a 16-digit control number from the broker, bank, or other nominee that holds your shares giving you the right to vote the shares at the meeting.
Quorum
The presence, virtually or by proxy, of the holders of a majority of the total number of shares entitled to vote constitutes a quorum for the transaction of business at the meeting.
Required Votes
Assuming that a quorum is present, the ninefour persons receiving the largest number of “for” votes of our common stock present virtually or by proxy at the meeting and entitled to vote (a plurality) will be elected directors. Stockholders do not have the right to cumulate their votes in the election of directors. We have adopted a majority voting policy as part of our Corporate Governance Guidelines. The majority voting policy is applicable solely to uncontested elections, which are those elections in which the number of nominees for election is less than or equal to the number of directors to be elected. Under the majority voting policy, any nominee for director who receives more “withheld” votes than “for” votes in an uncontested election must submit a written offer to resign as director. Any such resignation will be reviewed by the Nominating and Corporate Governance Committeeindependent members of our Board of Directors and, within 90 days after the election, the independent members of our Board of Directors will determine whether to accept, reject or take other appropriate action with respect to, the resignation, in furtherance of the best interests of TherapeuticsMD and our stockholders.
Assuming that a quorum is present, the affirmative vote of a majority of shares of common stock outstanding on the record date will be required to approve the non-executive stock option exchange program and the amendment to our Amended and Restated Articles of Incorporation, as amended, to increase the TherapeuticsMD, Inc. 2019 Stock Incentive Plannumber of authorized shares of common stock, $0.001 par value per share, from 12,000,000 shares to 32,000,000 shares (the “2019 Plan”“Charter Amendment”), and. Assuming that a quorum is present, the affirmative vote of a majority of the votes cast will be required to ratify the appointment of Grant Thornton as the independent auditor of our company for the fiscal year ending December 31, 2021.2023 and approve the Private Placement Proposal. The advisory vote on the compensation of our named executive officers for the fiscal year ended December 31, 20202022 (“say-on-pay”) is non-binding, but our Board of Directors and the Compensation Committee of our Board of Directors (the “Compensation Committee”), will consider the input of stockholders based on whether a majority of shares entitled to vote on the matter and represented either virtually or by proxy vote for the say-on-pay proposal.
Votes cast by proxy or virtually at the meeting will be tabulated by the election inspector appointed for the meeting who will determine whether a quorum is present. The election inspector will treat abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum, but as unvoted for purposes of determining the approval of any matter submitted to the stockholders for a vote. If a brokerage firm, bank, or similar organization indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote with respect to that matter.
Voting of Proxies
When a proxy is properly executed and returned, the shares it represents will be voted at the meeting as directed. If no specification is indicated, the shares will be voted (1) “for” the election of each of the ninefour nominees for director set forth in this proxy statement, (2) “for” the approval of the compensation of our named executive officers for the fiscal year ended December 31, 2020,2022, (3) “for” the non-executive stock option exchange program,approval of the Charter Amendment, (4) “for” the approval of the amendment to the 2019 Plan,Private Placement Proposal, (5) “for”
| 6 |
“for” the ratification of the appointment of Grant Thornton, an independent registered public accounting firm, as the independent auditor of our company for the fiscal year ending December 31, 2021,2023, and (6) as the persons specified in the proxy deem advisable on such other matters as may come before the meeting.
|
Broker Non-Votes and Abstentions
Brokers, banks, or other nominees that hold shares of common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion if permitted by the stock exchange or other organization of which they are members. Brokers, banks, and other nominees are permitted to vote the beneficial owner’s proxy in their own discretion as to certain “routine” proposals when they have not received instructions from the beneficial owner, such as the approval of the Charter Amendment and the ratification of the appointment of Grant Thornton as the independent auditor of our company for the fiscal year ending December 31, 2021.2023. If a broker, bank, or other nominee votes such “uninstructed” shares for or against a “routine” proposal, those shares will be counted towards determining whether or not a quorum is present and are considered entitled to vote on the “routine” proposals. However, where a proposal is “non-routine,” a broker, bank, or other nominee is not permitted to exercise its voting discretion on that proposal without specific instructions from the beneficial owner. These non-voted shares are referred to as “broker non-votes” when the nominee has voted on other non-routine matters with authorization or voted on routine matters. These shares will be counted towards determining whether or not a quorum is present, but will not be considered entitled to vote on the “non-routine” proposals.
Please note that brokers, banks, and other nominees may not use discretionary authority to vote shares on the election of directors, or the approval of the compensation of our named executive officers, the approval of the non-executive stock option exchange program or the approval of the amendment to the 2019 PlanPrivate Placement Proposal, if they have not received specific instructions from their clients. For your vote to be counted in the above, you now will need to communicate your voting decisions to your broker, bank, or other nominee before the date of the meeting.
As provided in our bylaws, as amended, except as otherwise provided by law, or our Amended and Restated Articles of Incorporation, as amended, a majority of the shares entitled to vote on the matter and represented either in person (virtually for this year’s annual meeting) or by proxy at the meeting in which a quorum is present shall be act of the stockholders. Therefore, for matters other than the (i) election of our directors, which requires a plurality vote subject to the majority voting policy in our Corporate Governance Guidelines and (ii) the approval of the non-executiveCharter Amendment, which requires the affirmative vote of a majority of shares of common stock option exchange program and (iii)outstanding on the approval of the amendment to the 2019 Plan,record date, the number of votes cast “for” a proposal must exceed the number of votes cast “against” that proposal. For all matters other than the election of our directors, if a stockholder votes to “abstain”, it will have the same effect as a vote “against” that proposal. Because broker non-votes do not represent votes cast “for” or “against” a proposal, broker non-votes will have no effect on the proposal to elect directors, or the say-on-pay proposal, or the Purchase Plan proposal, as each such proposal is determined by reference to the votes actually cast by the shares present or represented by proxy and entitled to vote. Because the Charter Amendment proposal and the proposal to ratify the appointment of Grant Thornton as the independent auditor of our company for the fiscal year ending December 31, 2021 is a2023 are “routine” proposal,proposals, broker non-votes will not occur with respect to these proposals. Therefore, if no vote is specified on the proxy and in the absence of directions to the contrary, the shares will be voted “FOR” the Charter Amendment and “FOR” the proposal to ratify the appointment of Grant Thornton as the independent auditor of our company for the fiscal year ending December 31, 2021.2023.
Revocability of Proxies
Any stockholder giving a proxy may revoke the proxy at any time before its use by furnishing to us either a written notice of revocation or a duly executed proxy bearing a later date, or by attending the meeting and voting virtually. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.
| 7 |
Election Inspector
Votes cast by proxy or virtually at the meeting will be tabulated by the election inspector appointed for the meeting, who will determine whether a quorum is present. The election inspector will treat broker non-votes and abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum, and as described in the “Broker Non-Votes and Abstentions” section of this proxy statement for purposes of determining the approval of any matter submitted to the stockholders for a vote.
|
Solicitation
We will bear the cost of this solicitation. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for expenses incurred in forwarding solicitation materials to such beneficial owners. Proxies also may be solicited by certain of our directors and officers, personally or by telephone or e-mail, without additional compensation.
Submitting a Question or Making a Comment During the Meeting
If you want to submit a question or make a comment during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/TXMD2021,TXMD2023, type your question into the “Ask a Question” field, and click “Submit”. Questions and comments submitted via the virtual meeting platform that are pertinent to meeting matters will be addressed during the meeting. Questions and comments that are not pertinent to meeting matters or that are not addressed during the meeting due to time constraints will be addressed after the meeting by our investor relations department. Consistent with our approach when meetings are held in person, questions or comments that are not related to the proposals under discussion, are about personal concerns not shared by stockholders generally, or use blatantly offensive language may be ruled out of order.
Why is the Meeting Being Held Virtually?
We have been closely monitoring the COVID-19 pandemic and the related recommendations and protocols issued by public health authorities and federal, state, and local governments, including current recommendations regarding travel restrictions and large gatherings. In light of these continuing concerns and in order to protect the health and safety of our employees, directors, and stockholders, we will be conducting the annual meeting solely online. We are excited to embrace the latest technology to provide expanded access, improved communication and cost savings for our stockholders and our company. We believe that hosting a virtual meeting will enable more of our stockholders to attend and participate in the meeting since our stockholders can participate from any location around the world with Internet access.
| 8 |
|
ELECTIONOF DIRECTORS
Our Amended and Restated Articles of Incorporation and bylaws, each as amended, provide that the number of directors shall be fixed from time to time by resolution of our Board of Directors. Presently, the number of directors is fixed at nine.four. Our bylaws, as amended, provide that all directors are elected at each annual meeting of our stockholders for a term of one year and hold office until their successors are elected and qualified.
A board of ninefour directors is to be elected at this meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them “for” each of the nominees named below. All of the nominees currently are directors of our company. In the event that any nominee is unable or declines to serve as a director at the time of the meeting, the proxies will be voted for any nominee designated by our current Board of Directors to fill the vacancy. It is not expected that any nominee will be unable or will decline to serve as a director.
Vote Required
Assuming that a quorum is present, the ninefour persons receiving the largest number of “for” votes of our common stock present virtually or by proxy at the meeting and entitled to vote (a plurality) will be elected directors, subject to the majority voting policy in our Corporate Governance Guidelines.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE NOMINEES LISTED BELOW.
|
| 9 |
| TOMMY G. THOMPSON
Chairman of the Board
Director Since: 2012
Age:
Committee:
Audit | Biographical Information
Tommy G. Thompson
Key Qualifications and Experience
We believe Secretary Thompson’s experience in public service and on the boards of directors of numerous public companies, particularly his services and knowledge related to the healthcare industry as a whole, makes him well suited to serve on our Board of Directors. Secretary Thompson received both his B.S. and J.D. from the University of Wisconsin-Madison. |
|
|
|
|
|
|
|
|
| COOPER C. COLLINS
Director Since: 2012
Age:
Committees:
Audit Compensation | Biographical Information Cooper C. Collins has served as a director of our company since February 2012. Mr. Collins has served as Chief Executive Officer of Fortis BioPharma LLC since June 2015. Mr. Collins served as Chief Strategy Officer of Pernix Therapeutics Holdings, Inc. [NASDAQ: PTX], or Pernix, from May 2013 until April 2014, as its President and Chief Executive Officer from March 2010 until May 2013, and as a director from March 2010 until February 2014. Mr. Collins joined Pernix Therapeutics, Inc., a predecessor of Pernix, in 2002, where he was appointed as a director in January 2007, its President in December 2007 and its Chief Executive Officer in June 2008, serving in those three capacities until March 2010. From December 2005 to December 2007, Mr. Collins served as Vice President of Business and Product Development of Pernix Therapeutics, Inc. and as its Territory Manager from December 2003 to December 2005. Mr. Collins was employed for three years by the National Football League franchise, the New Orleans Saints, in its media relations department.
Key Qualifications and Experience
We believe Mr. Collins’ specialty pharmaceutical company knowledge and executive experience provide the requisite qualifications, skills, perspectives, and experience that make him well qualified to serve on our Board of Directors. While on a football scholarship, Mr. Collins received a B.A. from Nicholls State University, where he later received an M.B.A. |
|
|
|
|
|
|
| GAIL K. NAUGHTON, PH.D.
Director Since: 2020
Age:
Committee:
Compensation | Biographical Information Gail K. Naughton, Ph.D. has served as a director of our company since March 2020. Dr. Naughton has served as the Chief Scientific Officer and Chief Business Development Officer of Histogen, a company she founded which is focused on the development of novel solutions based on the products of cells grown under simulated embryonic conditions, since April 2017. Dr. Naughton served as the Chairman and Chief Executive Officer of Histogen from June 2007 until April 2017. Prior to Histogen, Dr. Naughton was the Vice Chairman of Advanced Tissue Sciences, Inc., a human-based tissue engineering company, from March 2002 to October 2002, President from August 2000 to March 2002, President and Chief Operating Officer from 1995 to 2000 and Executive Vice President, Chief Operating Officer from 1991 to 1995. Dr. Naughton also served as Dean of the College of Business Administration at San Diego State University from August 2002 to June 2011. She has spent over 30 years extensively researching the tissue engineering process, holds over 105 U.S. and foreign patents, and has founded two regenerative medicine companies. Dr. Naughton has brought several tissue engineered products to market including a product for severe burns (TransCyte), a dermal replacement for diabetic ulcers (Dermagraft), an aesthetic dermal filler (Cosmederm/Cosmeplast), and SkinMedica’s TNS product for skin care. Dr. Naughton has been extensively published and a frequent speaker in the field of tissue engineering. In 2000, Dr. Naughton received the 27th Annual National Inventor of the Year award by the Intellectual Property Owners Association in honor of her pioneering work in the field of tissue engineering. Dr. Naughton
Key Qualifications and Experience
We believe Dr. Naughton’s extensive executive experience, her in-depth knowledge of the healthcare industry and regenerative medicine technology, her experience developing FDA-approved products, and her service on other public company boards and committees, provide the requisite qualifications, skills, perspectives, and experience that make her well qualified to serve on our Board of Directors. Dr. Naughton received her B.S. in Biology from St. Francis College, her M.S. in Histology and her Ph.D. in Hematology from the New York University Medical Center and her E.M.B.A. from UCLA. |
Director Since:
Age:
Audit | Compensation | Biographical Information
Key Qualifications and Experience
We believe Mr. |
| 11 |
The following table sets forth certain information regarding our current executive officers:
Name | Age | Position | ||||
| ||||||
| ||||||
| ||||||
| ||||||
Marlan D. Walker | ||||||
| Chief | |||||
In connection with the Company’s transformation into a pharmaceutical royalty company, the termination of our executive management team (except for Mr. Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 31, 2022. Listed below are biographical descriptions of our current executive officers. For Mr. Finizio’s information, see the description under “Election of Directors” above.officer and our principal financial and accounting officer.
James C. D’Arecca has served as Chief Financial Officer of our company since June 2020. Prior to joining TherapeuticsMD, Mr. D’Arecca served as the Senior Vice President and Chief Accounting Officer of Allergan plc (formerly known as Actavis plc) from August 2013 until its merger with AbbVie Inc. in May 2020. Mr. D’Arecca was a key member of the finance team through Allergan’s journey from a generics manufacturer (Watson/Actavis) to a leading global pharmaceutical company. Mr. D’Arecca joined Actavis from Bausch & Lomb, where he served as its Chief Accounting Officer. Prior to Bausch & Lomb, he served in various roles of increasing responsibility at Merck & Co. Inc. and Schering-Plough in finance and business development. He also spent 13 years with PricewaterhouseCoopers, with an industry focus on pharmaceuticals, medical devices, and consumer products. Mr. D’Arecca earned his MBA from Columbia University, his B.S. in accounting from Rutgers University, and is a Certified Public Accountant.
John C.K. Milligan, IV has served as President and Secretary of our company since October 2011 and served as a director of our company from October 2011 to March 2020. From December 2008 to October 2011, Mr. Milligan served as President and director of VitaMed. Prior to VitaMed, Mr. Milligan co-founded CareFusion, LLC, serving as President and General Manager from August 2001 to February 2008, and then as President and Chief Operating Officer of CareFusion, Inc. From 1997 to 2001, Mr. Milligan was Vice President, Sales and Operations for Omnicell, Inc. Prior to Omnicell, Mr. Milligan also held executive management positions at Serving Software Inc. and HBO & Co., a healthcare information systems company, both of which were subsequently acquired by McKesson Corporation. Mr. Milligan is a graduate of the U.S. Naval Academy.
Edward Borkowski has served as Executive Vice President of our company since 2020. Prior to joining TherapeuticsMD, Mr. Borkowski served as Executive Vice President and interim Chief Financial Officer of MiMedx Group, Inc. [Nasdaq: MDGX] from April 2018 to December 2019, as Chief Financial Officer of Aceto Corporation [Nasdaq: ACET] from February 2018 to April 2018, and was a director and held several executive positions with Concordia International, an international specialty pharmaceutical company, from May 2015 to February 2018. From March 2013 to March 2016, he served as Acting Chief Financial Officer of Amerigen Pharmaceuticals, a generic pharmaceutical company with a focus on oral, controlled release products. He is currently a director of AzurRx BioPharma Inc. [Nasdaq: AZRX] and Acacia Pharma Group Plc [Euronext Brussels: ACPH], and a Trustee of Allegheny College. Mr. Borkowski previously served as a director of Co-Diagnostics, Inc. [Nasdaq: CODX] from May 2017 to June 2019. Mr. Bork owski previously served in executive roles at ConvaTec, CareFusion Corporation and Mylan N.V. and began his career with Arthur Andersen & Co. Mr. Borkowski earned his degree in Economics and Political Science from Allegheny College and received an MBA in accounting from Rutgers University.
Marlan Walker has served as Chief Executive Officer of our company since December 2022. Previously he served as General Counsel of our company sincefrom March 2016. Mr. Walker previously also served as Chief Development Officer from April 2018 to December 2019 and as our Corporate and Intellectual Property Counsel from June 2013 until he became our General Counsel. Mr. Walker’s
|
experience is focused in management of legal issues and risk in the life science industries across a variety of disciplines. His legal practice prior to his time at TherapeuticsMD included long-term portfolio strategy and management, patent preparation and prosecution, contract negotiation and drafting, life-cycle management, and Hatch-Waxman.Hatch-Waxman matters. After law school, he took a position at Greenberg Traurig, LLP in August 2005. In March of 2009, he moved to Luce Forward Hamilton & Scripps. Mr. Walker accepted an in-house position as Intellectual Property Counsel for Medicis Pharmaceutical Corp. in June 2011, which was acquired by Valeant Pharmaceutical International, Inc. in December 2012. In February 2013, Mr. Walker accepted a position at Kilpatrick Townsend & Stockton, but chose to move in-house again in June 2013, when he accepted a position at our company. Mr. Walker graduated from Arizona State University Sandra Day O’ConnerO’Connor College of Law with his J.D. in 2004, and an LL.M. in Intellectual Property Law at The George Washington University Law School in 2005. He holds a Master’s Degree in Molecular Biology and a B.S. degree, both earned from Brigham Young University.
Michael C. Donegan has served as Interim Chief Financial Officer of our Company from April 2022, Chief Accounting Officer and Vice President – Finance of our company sinceCompany from November 2020 and Vice President – Finance of our company sinceCompany from April 2013. Mr. Donegan ceased serving in these roles effective as of December 30, 2022, however he is continuing to serve as the Company’s Principal Financial Officer and Principal Accounting Officer in a consulting capacity. Mr. Donegan has a 30-year background in accounting and finance. From August 2012 to April 2013, Mr. Donegan served as an independent consultant exclusively for our company,Company, where he conceptualized, designed and executed our Sarbanes-Oxley 404 compliance program. From August 2007 to August 2012, Mr. Donegan served as an independent consultant designing and implementing Sarbanes-Oxley 404 compliance programs for various non-accelerated filers and executed on pre-designed Sarbanes-Oxley 404 compliance programs for certain large accelerated filers. From January 2005 to August 2007, Mr. Donegan served as an independent consultant exclusively for Tyco International, where he enhanced and executed the Sarbanes-Oxley 404 compliance model with their corporate headquarters group. From November 2001 to December 2004, Mr. Donegan was Manager of Financial Systems at Tyco International at its global headquarters. From 1994 to 2001, Mr. Donegan held various positions in the global consolidation/SEC reporting group at Sensormatic Electronics Corporation culminating with the acquisition of Sensormatic Electronics Corporation by Tyco International in the fall of 2001 when he was the Manager of Financial Systems. Mr. Donegan began his career at Ernst & Young, LLP where he worked in both the audit and tax departments. Mr. Donegan earned his B.S. in Accounting and his Master of Accounting from the University of Florida.
The following table sets forth certain information regarding our current significant employees who are not executive officers:
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
Listed below are biographical descriptions of such non-executive officers.
Dr. Brian Bernick has served as co-founder and Chief Scientific Officer of our company since October 2011 and co-founder and director of vitaMedMD, from April 2008 to October 2011. Dr. Bernick served as a director of our company from October 2011 until March 2020. Dr. Bernick previously served as our Chief Clinical Officer from November 2013 to May 2018 and as our Chief Medical Officer from February 2012 until November 2013. Dr. Bernick is a board-certified obstetrician/gynecologist with over 25 years of clinical medical experience. Dr. Bernick was the Department Chair of Obstetrics and Gynecology at Boca Raton Regional Hospital and served on that hospital’s Medical Executive Board
|
as well as the Board of Directors of the Palm Beach Medical Society and VitalMD Group Holding, LLC, one of the largest physician-owned and physician-managed medical groups in Florida. Dr. Bernick has served on the American College of Obstetricians and Gynecologists’ (ACOG) national committee on Professional Liability. Dr. Bernick is the recipient of several national and regional awards, including recognition by his peers as one of the top doctor’s in his specialty by Castle Connolly as well as the recipient of the American Medical Association Foundation’s Leadership Award. Dr. Bernick has over 100 peer-reviewed publications and presentations of original research at medical conferences. Dr. Bernick is responsible for numerous U.S. and foreign patents focusing on drug therapies and analysis. Dr. Bernick is an affiliate associate professor of obstetrics and gynecology at Florida Atlantic University College of Medicine. Dr. Bernick holds a B.A. in Economics from Northwestern University, received his Doctorate in Medicine from the Chicago Medical School, and completed his residency at the University of Pennsylvania.
Dawn Halkuff has served as Chief Commercial Officer of our company since October 2016. Prior to that, Ms. Halkuff held numerous senior level positions over 20 years of commercial and marketing experience. Ms. Halkuff was previously at Pfizer, Inc. [NYSE: PFE], where she held various leadership roles in women’s health from 2010 to 2016. Most recently, Ms. Halkuff was Senior Vice President of the Pfizer Consumer Healthcare Wellness Organization and a member of the Consumer Global Leadership Team. Prior to that, Ms. Halkuff was the commercial lead for sales and marketing of the Pfizer Women’s Health Division, focusing on the company’s reinvestment in hormone therapy treatment, including Premarin Vaginal Cream® and oral hot flash treatments. From 2005 to 2010, Ms. Halkuff was Head of Global Innovation at Weight Watchers International [NYSE: WTW], where she created new weight-loss products, services, and solutions for women worldwide. Ms. Halkuff currently serves as a member of the board of directors of Society of Women’s Health Research and Xeris Pharmaceuticals, Inc. [NASDAQ: XERS]. Ms. Halkuff holds a B.A. in Psychology from University of Connecticut and an M.B.A. from Pennsylvania State University.
John Knighton has served as Chief Compliance Officer of our company since March 2018. Mr. Knighton directly reports to the General Counsel and also reports in specific instances to the Chief Executive Officer and the Chair of the Audit Committee of our Board of Directors. Mr. Knighton previously served as Head of Global Compliance at Orexigen Therapeutics from 2016 to 2018 and as Chief Compliance Officer at MicroPort Orthopedics from 2014 to 2016. From 2010 to 2013, Mr. Knighton served in senior compliance roles of increasing responsibility at Wright Medical Technology, holding the titles of Director of Compliance, Sr. Director of Compliance Operations and Interim Chief Compliance Officer. From 2007 to 2010, Mr. Knighton served as Director at King Pharmaceuticals (2007-2010). Earlier in his career, Mr. Knighton served in Life Science Legal and Compliance positions at Solvay Pharmaceuticals and as a Consultant on the Life Science Compliance team at Ernst and Young, LLP. Mr. Knighton has designed and implemented multiple compliance programs in complex situations and has also conducted a number of business development diligence, audit and investigation projects related to complex matters facing global life science companies. Mr. Knighton received his BS in Accountancy from Villanova University and his Doctor of Law from Emory University School of Law. He is a member of the State Bar of Georgia.
Mitchell L. Krassan has served as Chief Strategy & Performance Officer of our company since October 2011. From April 2010 to October 2011, Mr. Krassan served as Chief Strategy and Performance Officer of VitaMed. From September 2010 to June 2011, Mr. Krassan serves as our Chief Financial Officer. Mr. Krassan was a partner with EquiMark Limited, a private investment partnership, from 1997 to 2010. From November 1994 to July 1997, Mr. Krassan served as Chief Financial Officer and Chief Operating Officer of The Reich Group/Telespectrum Worldwide, a fully integrated direct marketing firm that provided clients expertise in market research and analysis, strategic planning, marketing, creative, and production services, telemarketing and database development. Mr. Krassan earned a B.S. in Accounting from the University of Maryland, received his certification as a CPA in the state of Maryland, and earned his M.B.A. in Management from New York University.
Adam Miller has served as Chief Information Officer of our company since March 2018. Mr. Miller has more than 16 years of experience in the information technology field, including more than 13 years
|
specifically in healthcare IT. Prior to becoming CIO, Mr. Miller served as Vice President of Information Technology at TherapeuticsMD and has led our information technology department since May 2011. Mr. Miller has been responsible for all aspects of IT including governance and planning, IT solutions management and development, infrastructure, security, and operations. Before joining TherapeuticsMD, Mr. Miller was a consultant for Quilogy, a healthcare-focused Microsoft Gold Partner consulting firm. While at Quilogy, Mr. Miller spent time on projects for Kindred Healthcare, the University of Kentucky, and Microsoft filling various roles in project management, development, business analysis, administration, and training. Mr. Miller has also held various IT-related roles with Healthcare Recoveries, Louisville Gas & Electric, and Brown-Forman. Mr. Miller holds a B.S.B.A. in Computer Information Systems with a Concentration in Information Security from the University of Louisville’s College of Business. He is also an active member in the South Florida information technology community.
Dr. Sebastian Mirkin has served as Chief Medical Officer of our company since November 2013. Dr. Mirkin has more than 20 years of experience and leadership in clinical development and medical affairs in women’s health in global pharmaceutical companies. From October 2009 to November 2013, Dr. Sebastian was Clinical Lead and Global Clinical Lead of Women’s Health, Clinical Research at Pfizer. From October 2005 to October 2009, he was Director and Senior Director, Clinical Research, Women’s Health at Wyeth, and from October 2004 to October 2005 he was Global Lead Medical Services, Women’s Health at Organon. Dr. Mirkin oversaw the development and successful marketing authorization of several novel medicines in the United States, Europe, and Japan. Dr. Mirkin holds a Doctor in Medicine degree from National University, Argentina. Trained in Obstetrics/Gynecology, Dr. Mirkin completed his fellowship in Reproductive Medicine at The Jones Institute of Reproductive Medicine in Norfolk, Virginia.
Bharat Warrier has served as Chief Manufacturing Officer of our company since December 2018. Mr. Warrier previously served as our Vice President of Manufacturing and Product Development from January 2017 to December 2018, our Senior Director of Manufacturing and Product Development from January 2016 to January 2017 and our Director of Technical Operations from December 2014 to January 2016. He has been the functional lead on several FDA submissions while also spearheading the scale-up and commercial manufacturing of products—both in-house and at contract manufacturing facilities. Prior to joining TherapeuticsMD, Mr. Warrier held positions at Valeant Pharmaceuticals, Medicis Pharmaceuticals, Novartis Consumer Health, and Morton Grove Pharmaceuticals. He has more than 15 years of pharmaceutical experience in the areas of manufacturing, technical services, formulation, and process development. Mr. Warrier earned a Bachelor of Pharmacy degree from Sri Ramachandra University, India, an M.S. degree in Pharmaceutical Sciences from the University of Missouri—Kansas City, and a Master’s Certificate in Regulatory Affairs and Quality Assurance from Purdue University.
|
Since October 9, 2017, our common stock has been listed on the Nasdaq Global Select Market of the Nasdaq Stock Market LLC, or Nasdaq, under the symbol “TXMD.” From April 23, 2013 to October 6, 2017, our common stock was listed on the NYSE American under the symbol “TXMD.” Under the rules of Nasdaq, independent directors must comprise a majority of a listed company’s board of directors.
Our Board of Directors has affirmatively determined, after considering all the relevant facts and circumstances, that each of Dr. Gail Naughton, Ms. Ling and Messrs. Tommy G. Thompson, Bisaro, Carroll,Cooper C. Collins Musing and Russell,Justin Roberts is an independent director, that Mr. Nicholas Segal was an independent director prior to his resignation in March 2020, and that Jane F. Barlow, M.D., M.B.A, M.P.H.Ms. Karen L. Ling and Robert V. LaPenta, Jr.Messrs. Paul M. Bisaro, Jules A. Musing and Angus C. Russell were independent directors prior to their resignations in April 2020,December 2022, as “independence” is defined under the applicable rules and regulations of the SEC and the listing standards of Nasdaq, and does not have a relationship with us (either directly or as a partner, stockholder, or officer of an organization that has a relationship with us) that would interfere with their exercise of independent judgment in carrying out their responsibilities as directors. Accordingly, a majority of our directors are independent, as required under the applicable Nasdaq rules. Mr. Finizio,Hugh O’Dowd, our former Chief Executive Officer, iswas not considered an independent director prior to his resignation because of his executive position with our company. Likewise, Mr. Milligan and Dr. Bernick were not considered independent directors prior to their resignations in March 2020 because of their executive position and other employment relationship, respectively, with our company. There are no family relationships among any of our directors or officers.
Committee Charters, Corporate Governance, and Code of Ethics
Our Board of Directors has adopted charters for the Audit Compensation, and Nominating and Corporate GovernanceCompensation Committees describing the authority and responsibilities delegated to each committee by our Board of Directors. Our Board of Directors has also adopted Corporate Governance Guidelines, a Code of Conduct and Ethics, and a Code of Ethics for the Chief Executive Officer and senior financial officers of our company, including our Chief Financial Officer and principal accounting officer.company. We post on our website, at www.therapeuticsmd.com, the charters of our Audit Compensation, and Nominating and Corporate GovernanceCompensation Committees; our Corporate Governance Guidelines, Code of Conduct and Ethics, and Code of Ethics for the Chief Executive Officer and senior financial officers, and any amendments or waivers thereto; and any other corporate governance materials contemplated by the SEC or Nasdaq. These documents are also available in print to any stockholder requesting a copy in writing from our corporate secretary at our executive offices set forth in this proxy statement.
We regularly schedule executive sessions in which non-employee directors will meet without the presence or participation of management, with at least one of such sessions including only independent directors. Mr. Thompson, as the Executive Chairman of our Board of Directors, chairs the executive sessions.
Our Board of Directors has an Audit Committee a Compensation Committee, and a Nominating and Corporate GovernanceCompensation Committee, each consisting entirely of independent directors.
Given the relatively small size of our Board of Directors and the desire to involve the entire Board of Directors in nominating decisions, we have elected to no longer have a separate Nominating Committee. Since we do not have a Nominating Committee, our independent directors, who currently constitute all of the Board of Directors, determine the director nominees. Our Board of Directors may employ a variety of methods for identifying and evaluating director nominees. If vacancies are anticipated or arise, our Board of Directors considers various potential candidates who may come to our attention through current Board members, professional search firms, stockholders or other persons. These candidates may be evaluated by our Board of Directors at any time during the year.
|
In evaluating a director candidate, our Board of Directors will review their qualifications including capability, availability to serve, conflicts of interest, general understanding of business, understanding of our business and technology, educational and professional background, personal accomplishments and other relevant factors. Our Board of Directors has not established any specific qualification standards for director nominees, and we do not have a formal diversity policy relating to the identification and evaluation of nominees for director, although from time to time the Board of Directors may identify certain skills or attributes as being particularly desirable to help meet specific needs that have arisen. Our Board of Directors may also interview prospective nominees in person or by telephone. After completing this evaluation, the Board of Directors will determine the nominees. The Board has not adopted a formal process for considering director candidates who may be recommended by stockholders. However, our policy is to give due consideration to any and all such candidates.
Audit Committee | ||||
Members
Cooper C. Collins,Chair Justin Roberts Tommy G. Thompson | The purpose of the Audit Committee is to oversee our financial and reporting processes and the audits of our financial statements and to provide assistance to our Board of Directors with respect to its oversight of the integrity of our financial statements, our company’s compliance with legal and regulatory matters, the independent registered public accountant’s qualifications and independence, and the performance of our independent registered public accountant. The primary responsibilities of the Audit Committee are set forth in its charter and include various matters with respect to the oversight of our accounting and financial reporting process and audits of our financial statements on behalf of our Board of Directors. The Audit Committee also selects the independent registered public accountant to conduct the annual audit of our financial statements; reviews the proposed scope of such audit; reviews accounting and financial controls with the independent registered public accountant and our financial accounting staff; and reviews and approves any transactions between us and our directors, officers, and their affiliates.
The Audit Committee currently consists of Messrs. | |||
Compensation Committee | ||||
Members
Cooper C. Collins
| The purpose of the Compensation Committee includes, among other things, determining, or recommending to our Board of Directors for determination, the compensation of our Chief Executive Officer and other executive officers and directors, and discharging the responsibilities of our Board of Directors relating to our compensation | |||
|
| ||
|
| |
|
Board’s Role in Risk Oversight
Risk is inherent in every business. As is the case in virtually all businesses, we face a number of risks, including operational, economic, financial, legal, regulatory, and competitive risks. Our management is responsible for the day-to-day management of the risks we face. Our Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management.
Our Board of Directors’ involvement in our business strategy and strategic plans plays a key role in its oversight of risk management, its assessment of management’s risk appetite, and its determination of the appropriate level of enterprise risk. Our Board of Directors receives updates at least quarterly from senior management and periodically from outside advisors regarding the various risks we face, including operational, cybersecurity and information technology, economic, financial, legal, regulatory, and competitive risks. Our Board of Directors also reviews the various risks we identify in our filings with the SEC as well as risks relating to various specific developments, such as debt and equity issuances.
The committees of our Board of Directors assist our Board of Directors in fulfilling its oversight role in certain areas of risks. The Audit Committee oversees the financial and reporting processes of our company and the audit of the financial statements of our company and provides assistance to our Board of Directors with respect to the oversight and integrity of the financial statements of our company, our company’s compliance with legal and regulatory matters, the independent auditor’s qualification and independence, and the performance of our independent auditor. The Audit Committee also receives reports regarding our compliance program and our cybersecurity and information technology programs. The Compensation Committee considers the risks that our compensation policies and practices may have in attracting, retaining, and motivating valued employees and endeavors to assure that it is not reasonably likely that our compensation plans and policies would create undue risk or have a material adverse effect on our company.
| ||||||||||||||||||
|
| |||||||||||||||||
| ||||||||||||||||||
We seek diversity in experience, viewpoint, education, skill, and other individual qualities and attributes to be represented on our Board of Directors. We believe directors should have various qualifications, including individual character and integrity; business experience and leadership ability; strategic planning skills, ability, and experience; requisite knowledge of our industry and finance, accounting, and legal matters; communications and interpersonal skills; and the ability and willingness to devote time to our company. We also believe the skill sets, backgrounds, and qualifications of our
directors, taken as a whole, should provide a significant mix of diversity in personal and professional experience, background, viewpoints, perspectives, knowledge, and abilities. Nominees are not to be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability, or any other basis prohibited by law. The assessment of directors is made in the context of the perceived needs of our Board of Directors from time to time.
All of our directors have held high-level positions in business or professional service firms and have experience in dealing with complex issues. We believe that all of our directors are individuals of high
|
character and integrity, are able to work well with others, and have committed to devote sufficient time to the business and affairs of our company. In addition to these attributes, the description of each director’s background sets forth above indicates the specific experience, qualifications, and skills necessary to conclude that each individual should continue to serve as a director of our company.
| 15 |
The Board Diversity Matrix set forth below reports self-identified diversity statistics for our Board of Directors in the format required by Nasdaq’s rules.
Board Diversity Matrix for TherapeuticsMD, Inc. (As of April 20, 2023) | ||||||||||||||
Board size: | ||||||||||||||
Total number of directors | 4 | |||||||||||||
Gender: | Female | Male | Non-Binary | Did not Disclose Gender | ||||||||||
Directors | 1 | 2 | 0 | 1 | ||||||||||
Number of Directors who identify in any of the categories below: | ||||||||||||||
African American or Black | 0 | 0 | 0 | 0 | ||||||||||
Alaskan Native or Native American | 0 | 0 | 0 | 0 | ||||||||||
Asian | 0 | 0 | 0 | 0 | ||||||||||
Hispanic or Latinx | 0 | 0 | 0 | 0 | ||||||||||
Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | ||||||||||
White | 1 | 2 | 0 | 0 | ||||||||||
Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | ||||||||||
LGBTQ+ | 0 | |||||||||||||
Did Not Disclose Demographic Background | 1 | |||||||||||||
We believe that effective board leadership structure depends on the experience, skills, and personal interaction among persons in leadership roles as well as the needs of our company at any point in time. We currently maintain separate roles between the Chief Executive Officer and the Executive Chairman of the Board of Directors in recognition of the differences between the two responsibilities. Our Chief Executive Officer is responsible for setting our strategic direction and day-to-day leadership and performance of our company. The Executive Chairman of the Board of Directors provides input to the Chief Executive Officer, sets the agenda for board meetings, and presides over meetings of the full Board of Directors as well as executive sessions of our Board of Directors. Our Board of Directors believes that our current leadership structure provides the most effective leadership model for our company, as it promotes balance between the Board of Directors’ independent authority to oversee our business and the Chief Executive Officer and his management team, which manage the business on a day-to-day basis.
Compensation Committee Interlocks and Insider Participation
During our fiscal yearyears ended December 31, 2020,2021 and December 31, 2022, Mr. Collins served as a member of the Compensation Committee. Ms. Ling and Messrs. Collins,Mr. Musing and Carroll served as members of the Compensation Committee. Dr. BarlowCommittee until their resignations as members of the Board of Directors in December 2022 and Mr. Carroll served as a member of the Compensation Committee until herhis resignation as a member of the Board of Directors in April 2020 and Mr. Thompson served as a member of the Compensation Committee in 2020 through June 2020.December 2021.
None of Ms. Ling Dr. Barlow or Messrs. Collins Musing, Carroll or ThompsonMusing have been at any time one of our officers or employees or had any relationship with us that requires disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
During the fiscal yearyears ended December 31, 2020,2021 and December 31, 2022, none of our executive officers served on the compensation committee or board of directors of any entity whose executive officers serve as a member of our Board of Directors or Compensation Committee.
| 16 |
Currently,In 2021, we have not implemented a policy regarding retroactive adjustments to any cash or stock-based incentive compensation paid to our executive officers and other employees where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement. We intend to adoptadopted a general compensation recovery, or clawback, policy covering our annual and long-term incentive award plans and arrangements after the SEC adopts final rules implementing the requirement of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).
Anti-Hedging and Anti-Pledging Policy
In April 2020, the Board of Directors amended the company’sCompany’s Code of Conduct and Ethics to include a policy regarding hedging and pledging transactions. Pursuant to the policy, directors, officers, and employees are prohibited from: (1) directly or indirectly engaging in any hedging transactions with respect to any directly or indirectly owned securities of the company, which includes the purchase of any financial instrument (including puts, calls, equity swaps, forward contracts, collars, , exchange funds or other derivative securities) on an exchange or in any other market in order to hedge or offset any decrease in the market value of such securities; (2) engaging in short sale transactions or forward sale transactions or any short-term or speculative transactions in the company’s securities or in other transactions in the company’s securities that may lead to inadvertent violations of insider trading
|
laws; and (3) pledging securities of the company as collateral for a loan or otherwise using securities of the company to secure a debt, including through the use of traditional margin accounts with a broker.
Our Board of Directors held a total of six37 meetings during the fiscal year ended December 31, 2020.2022. No director attended fewer than 75% of the aggregate of (i) the total number of meetings of our Board of Directors and (ii) the total number of meetings held by all committees of our Board of Directors on which such director was a member.
During the fiscal year ended December 31, 2020,2022, the Audit Committee held fivesix meetings, the Compensation Committee held eightnine meetings and the Nominating and Corporate Governance Committee held fourtwo meetings.
We encourage our directors to attend each annual meeting of stockholders. All of our directors virtually attended the 2021 annual meeting of stockholders last year.stockholders.
Stockholders may communicate with our Board of Directors or specific members of our Board of Directors, including our independent directors and the members of our various board committees, by submitting a letter addressed to our Board of Directors of TherapeuticsMD, Inc. at the address set forth in this proxy statement c/o any specified individual director or directors. Any such letters are forwarded to the indicated directors. In addition, at the request of the Board of Directors, communications that do not directly relate to our Board of Directors’ duties and responsibilities as directors will be excluded from distribution. Such excluded items include, among others, “spam,” advertisements, mass mailings, form letters, and email campaigns that involve unduly large numbers of similar communications; solicitations for goods, services, employment or contributions; and surveys. Additionally, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will also be screened for omission. Any excluded communication will be made available to any director upon his or her request.
ESG Overview
Our mission is to advance women’s health and to raise awareness of women’s unique healthcare needs and challenges. We are committed to ensuring access to care and to serving patients in underserved and underrepresented communities. We strive to operate in an ethical manner and to uphold high standards of sustainability.
|
During board meetings in 2020, TherapeuticsMD’s Chairman and Board of Directors have made ESG a more prominent issue and instructed the company to expand efforts in these areas, in addition to the advances already made through the end of 2020. The following is a summary of our ESG efforts through the end of 2020:
|
|
| ||||||||||
|
|
| ||||||||||
|
EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS
Our Board of Directors has appointed a Compensation Committee, consisting of independent members of our Board of Directors, to review and approve corporate goals and objectives relevant to the compensation of our Chief Executive Officer, or CEO, evaluate the performance of our CEO on achieving those goals and objectives, and determine or recommend to our Board of Directors the compensation of our CEO based on this evaluation. The Compensation Committee also recommends to our Board of Directors, or as directed by our Board of Directors, determines and approves, the compensation of our other executive officers. The Compensation Committee makes every effort to ensure our executive compensation program is consistent with our values and is aligned with our business strategy and corporate goals.
For 2020,2022, our named executive officers, or NEOs, were:
|
|
| ||
 |  |  | ||
AsMarlan Walker, CEO
Brian Bernick, Former Interim co-CEO
Mark Glickman, Former Interim co-CEO
Hugh O’Dowd, Former CEO
James D’Arecca, Former CFO
Michael Donegan, Former Interim CFO
On September 6, 2022, Mr. O’Dowd ceased serving as Chief Executive Officer of our Company and Dr. Bernick and Mr. Glickman were appointed as Interim Co-Chief Executive Officers. On December 30, 2022, Dr. Bernick and Mr. Glickman ceased serving as Interim Co-Chief Executive Officers of our Company and Mr. Walker was appointed Chief Executive Officer. Mr. Donegan ceased serving as Interim Chief Financial Officer effective as of December 30, 2022, however he is continuing to serve as the Company’s Principal Financial Officer and Principal Accounting Officer in a smaller reportingconsulting capacity. In connection with the Company’s transformation into a pharmaceutical royalty company, the rules of the U.S. Securities and Exchange Commission permit us to report only three NEOs and to omit the Compensation Discussion and Analysis section. However, we have chosen to provide this Compensation Discussion and Analysis to provide more information about our compensation program to our stockholders. Each of the NEOs’ pay outcomes are discussed below in the contexttermination of our executive pay philosophymanagement team (except for Mr. Marlan Walker, our former General Counsel and the achievement of key goalscurrent Chief Executive Officer) and objectives.
We maintain a pay for performance philosophy drivenall other employees was completed by a pay mix emphasizing variable and performance-based pay tied to corporate performance results and our stock price. We believe this philosophy supports our company’s business strategy of developing and commercializing innovative new products targeted exclusively for women to the benefit of our company’s current stockholders and future customers.December 31, 2022.
|
The three core elements of our executive compensation program each serve a different purpose:
|
| |
|
| |
|
| |
We discuss below our performance outcomes and related compensation decisions for 2020.
2020 Performance
After the U.S. Food and Drug Administration, or FDA, approval in 2018 of our products IMVEXXY®, BIJUVA®, and ANNOVERA® and the expansion of our commercial operations, 2020 marked the second full year in which we transitioned the primary focus of our corporate performance goals and objectives to a balance of growth- and earnings-related financial metrics with strategic milestones. 2020 was an important milestone for the company. With the launch of ANNOVERA in the midst of the COVID-19 pandemic, the company now had three major products on the market. The COVID-19 pandemic, however, greatly affected the company’s performance throughout most of 2020, including causing us to pause the launch of ANNOVERA from March to July, as we further discuss below.
2020 Pay Decisions
During 2020, we maintained a disciplined executive compensation program designed with the intent of providing incentives necessary to retaining key employees to avoid further disruption to the company’s objectives and programs in 2020. The executive compensation program included the following:
No Salary Increases: Maintained NEO salaries at 2019 levels (which were kept constant with 2017 and 2018 levels), which are below market competitive levels.
No change to Target Annual Incentives: No changes in annual incentive target levels from 2019 target levels.
Target Annual Incentive Payout: Paid annual incentives at 100% of target to our NEOs for the achievement of our target 2020 financial metric and strategic-milestone-based objectives which were necessarily affected by the COVID-19 pandemic and the unprecedented market conditions, plus executing on the company’s COVID -19 contingency plan that identified several factors needed for success, including retaining our employee base, particularly our key employees; reducing our operating expenses and cash burn; and leveraging platforms designed to increase access to our products for women (especially in light of the July launch of ANNOVERA).
Below Market Equity Awards Grants: Made annual equity awards to our NEOs in the form of restricted stock units at levels below market competitive levels.
Modest Overall Total Compensation: Compared to peers, the total compensation for our NEOs is modest, with lower than median salaries and equity grants, coupled with a slightly higher than average bonus payout to maintain short-term performance incentives and focus during the COVID-19 pandemic.
|
The Compensation Committee will continue to monitor our executive compensation program and consider further changes as our business continues to evolve in the future, including the continued focus on more financial metrics in our annual incentive plan as we expand our commercial operations. The Compensation Committee anticipates the annual incentive plan transition will take place over the next several years as we move through a process of fully commercializing each of our approved pharmaceutical products.
Results of Say-on-Pay Vote
Since we conducted our first stockholder advisory vote on the compensation of our NEOs (commonly referred to as a “say-on-pay” vote) in August 2013, we have had overwhelming support from our stockholders, achieving more than 90% support in each of the six annual votes from 2013 through 2019 and over 86% support in 2020.
Consequently, the Compensation Committee and our Board of Directors have not made significant changes to our executive compensation program, or their decision-making process, in recent years as a result of the stockholder say-on-pay vote. However, as noted, the Compensation Committee has taken steps to refocus our executive compensation incentive programs to be more financially oriented as we complete the transition from a drug development company to a company undertaking the commercialization of its FDA-approved pharmaceutical products. The Compensation Committee will consider the results of future say-on-pay votes as our compensation philosophy continues to evolve and compensation decisions are made each year.
Role of the Compensation Committee and Chief Executive Officer
The Compensation Committee determines, or recommends to our Board of Directors for determination, the compensation of our CEO and our other executive officers. At least annually, the Compensation Committee evaluates the performance of our CEO and determines, or recommends to our Board of Directors for determination, the compensation for our CEO in the context of the accomplishment of the goals and objectives of our executive compensation program for the year. The Compensation Committee and our Board of Directors, together with our CEO, annually assess the performance of our other NEOs. Based on the determinations of the Compensation Committee and our Board of Directors after receiving recommendations from our CEO, when applicable, the Compensation Committee and our Board of Directors determine the compensation for our other NEOs. The Compensation Committee may also receive input from independent compensation consultants that it may engage from time to time.
At the request of the Compensation Committee, our CEO generally attends a portion of some of our Compensation Committee meetings. This enables the Compensation Committee to review the corporate and individual goals the CEO regards as important to achieve our overall success. The Compensation Committee also requests the CEO to assess the performance against the goals and objectives for our other NEOs. The Compensation Committee makes all decisions regarding individual and corporate goals and objectives. Our CEO does not attend any portion of meetings at which his own compensation is determined.
Compensation Surveys and Compensation Consultants
The Compensation Committee periodically reviews compensation data representative of similar companies to determine appropriate compensation levels the Compensation Committee believes will enable us to attract executives from other companies and to retain and motivate our executives. The Compensation Committee uses peer group information and broader life sciences industry survey data as frames of reference but does not specifically benchmark or target our compensation levels against any desired targeted level of competitiveness.
From time to time, we retain the services of independent compensation consultants to review a wide variety of factors relevant to executive compensation, trends in executive compensation, and the
|
identification of relevant peer companies. When engaged by the Compensation Committee, our compensation consultants report directly to the Compensation Committee and the Compensation Committee makes all determinations regarding the engagement, fees, and services of our compensation consultants.
During 2019, the Compensation Committee retained PayGovernance LLC, or PayGovernance, as its independent compensation consultant to provide executive compensation services to the Compensation Committee, primarily for compensation decisions related to 2020. PayGovernance analyzed and proposed changes to our company’s peer group, provided information with respect to market competitive pay levels for executives and outside directors, and assisted the Compensation Committee with the refocus of our executive compensation program discussed above in the Executive Summary.
In September 2020, the Compensation Committee retained Meridian Compensation Partners, LLC, or Meridian, as its new independent compensation consultant, primarily for compensation decisions related to 2020 and to assist the Compensation Committee in the development of the stock option exchange program and amendment to the 2019 Stock Incentive Plan included as Proposals Three and Four in this proxy statement.
In accordance with the requirements of applicable SEC rules and the listing standards of Nasdaq, the Compensation Committee has reviewed the independence of both PayGovernance and Meridian and has determined that both PayGovernance and Meridian meet the independence criteria established under such rules and listing standards.
Salary
Salaries for NEOs are established based on an executive’s position, responsibilities, skills, and experience. In determining salaries, we account for individual performance and contributions, future potential, competitive salary levels for comparable positions at other companies, salary levels relative to other positions within our company, and corporate needs. The evaluation of the Compensation Committee and our Board of Directors of the foregoing factors is subjective, and the Compensation Committee and our Board of Directors do not assign a particular weight to any factor. Salaries represent a minority of our NEOs’ total compensation opportunity in furtherance of our pay-for-performance philosophy, which places greater emphasis on the combined value of our annual incentives and stock-based awards.
Annual Incentive Compensation
Annual incentive compensation reflects our pay-for-performance philosophy. We generally adhere to the following process in determining annual incentive compensation:
Our Board of Directors approves our annual operating plan, which forms the basis for the corporate performance measures and individual performance goals and objectives for our annual performance-based incentive compensation.
The Compensation Committee reviews and sets the framework for the annual performance-based incentive compensation for the year, including:
Confirming the plan participants;
Establishing a target annual incentive opportunity for each participating NEO; and
Reviewing the corporate performance measures for the fiscal year. In 2020, it was determined that, given the COVID-19 pandemic, focus on the corporate performance measures were paramount and the application of individual performance objectives was suspended in 2020.
|
We may establish objective performance criteria when setting performance goals for the incentive compensation program for a particular year or may use subjective factors, or a combination of these factors. These performance criteria may include a wide range of factors, including:
Reaching sales goals for our FDA-approved products;
Increasing cash flows, earnings from operations, or other financial metrics;
Product launches;
Licensing agreements; and
Pre-natal vitamins sales.
The performance criteria may vary on a year-to-year and executive-by-executive basis depending on the goals then deemed important for our company and the executive officer and may be established for all or a portion of a year or for multiple years. We attempt to set each of our performance goals at a level that can be realistically achieved but is challenging and consistent with achieving the desired corporate goal. In establishing performance goals, the Compensation Committee and our Board of Directors also may take into consideration prevailing as well as expected future economic conditions affecting our company’s business and industry. As noted above, we anticipate the annual incentive plan performance goals and objectives will continue to transition toward sales goals and increasing cash flow and earnings as we continue the process of commercializing our FDA-approved pharmaceutical products.
Stock-Based Awards
We strongly believe in using our common stock to tie executive rewards directly to our long-term success and increases in stockholder value. Grants of stock-based awards to our NEOs ensures strong and significant alignment with our stockholders. We have no ongoing policy for allocating among different types of stock-based awards and maintain the flexibility to grant each type of stock-based award. Among other factors, the amount and type of stock-based awards granted to our NEOs account for awards previously granted and the equity held by each individual NEO. While we have the flexibility to grant each type of stock award, we traditionally used stock options during the development stage of our products, but have transitioned to predominantly using a combination of time-based and performance-based restricted stock units beginning with our 2020 grants.
Stock based compensation typically vests over multiple years to encourage executive retention and emphasize long-term performance and may also include specific performance metrics to be earned. Our Board of Directors typically ratifies Compensation Committee grants of stock-based awards after reviewing allocations recommended and approved by the Compensation Committee following advice from the Compensation Committee’s compensation consultant, an analysis of peer companies, specific goals to be achieved, and a wide range of other factors.
Other Benefits
NEOs are eligible to participate in benefit programs available to all full-time employees. These programs include medical insurance, a qualified retirement program allowed under Section 401(k) of the Internal Revenue Code, as amended (the “Code”), and life insurance coverage.
Policies for the Pricing and Timing of Stock-Based Grants
Our Board of Directors sets the price of all stock-based awards at the closing price of our stock on the date of grant on Nasdaq.
Each of our NEOs is a party to an employment agreement with us, which provides for salaries, annual short-term cash-based incentive compensation, and stock option grants. The employment agreements for each of Messrs. Finizio, Milligan, and Borkowski provide for benefits in the event of certain termination situations, including changes in control of our company. These arrangements have
|
no effect on our ongoing compensation arrangements absent such executive termination event or change in control. See “Executive Compensation — Employment Agreements.”
Use of Market Data
In determining the compensation of our NEOs, we consider compensation levels of executives at similar companies and other competitive factors to enable us to attract executives from other companies and retain and motivate our executives. We periodically review compensation levels of a peer group of companies and consider broader life sciences industry pay survey data. We use peer group and other information as a point of reference, but do not benchmark or target our compensation levels to specific competitive positioning against our peer group or other competitive datapoints.
For 2020 pay change considerations, PayGovernance developed a group of 19 similarly situated life science companies. This 2020 peer group was used by the Compensation Committee and our Board of Directors when establishing our 2020 executive compensation program for our NEOs, along with information from the Radford Global Life Sciences Survey. The 2020 Peer Group consisted of the following companies:
|
| |||||
The 2020 peer group was based on the following criteria:
Industry: Companies competing in the biotech and pharmaceutical industries with further focus on women’s health companies.
Phase of Development: Mix of commercial and near commercialization stage, reflecting our increasing progress toward commercializing our FDA-approved pharmaceutical products.
Market Capitalization: Companies with a market capitalization between $329 million and $2.5 billion with a median market capitalization of $1.0 billion.
Number of Employees: Companies with between 96 and 515 employees, with a median number of employees of 332.
The 2020 peer group development process started by removing six companies from the 2019 peer group primarily due to the fact that they were pre-commercial companies and no longer reflected our increasing progress towards commercialization (Arena Pharmaceuticals, Blueprint Medicines, Deciphera Pharmaceuticals, Dynavax Technologies, ImmunoGen, and MacroGenics, Inc.), removing two companies no longer as relevant for our executive pay benchmarking purposes following merger and acquisition activity (Array BioPharma and Spark Therapeutics, Inc.), and removing two companies that had market caps below and above the desired range (Acorda Therapeutics, Inc. and Amarin Corporation plc, respectively).
|
We added the following eight companies, all of which met the majority of our criteria as set forth above:
|
| |||||
Salary
Our NEOs received salaries for 2020 in accordance with their respective 2020 compensation plans as recommended by the Compensation Committee and approved by our Board of Directors. As is our practice, we set salaries for our NEOs at the beginning of the year as follows:
Executive Officer | Annualized Fiscal 2019 Salary | Annualized Fiscal 2020 Salary | % Increase | |||||||||||||
Robert G. Finizio | $ | 600,000 | $ | 600,000 | 0% | |||||||||||
John C.K. Milligan, IV | $ | 450,000 | $ | 450,000 | 0% | |||||||||||
Edward Borkowski | N/A | $ | 430,000 | N/A | ||||||||||||
During 2020, the salaries of Messrs. Finizio and Milligan remained the same as their respective 2019, 2018 and 2017 salaries. Mr. Borkowski became Executive Vice President, Operations, effective January 1, 2020.
Annual Performance-Based Incentive Plan
We use annual performance-based incentive compensation to motivate our NEOs to achieve our annual objectives as set forth in our Board-approved annual operating plan, while making progress towards and supporting our longer-term strategic goals. Historically, the Compensation Committee and our Board of Directors also established individual performance objectives for each of our NEOs. However, given the unprecedented challenges resulting from the COVID-19 pandemic, the Compensation Committee and Board of Directors determined that the full and complete alignment of the executive team was needed to achieve the 2020 corporate performance measures; thus, we suspended the application of the individual performance goals for 2020. The payment of 2020 annual incentives is based upon the achievement of one or more corporate performance objectives.
Our annual cash incentive plan is tied to important short-term business goals as an incentive to attract and retain high quality personnel, as well as motivate our employee base to achieve annual goals. Annual cash bonuses for our NEOs are targeted at a percentage of their base salaries, with actual payouts determined by the Compensation Committee, with consultation with the Chief Executive Officer for our other NEOs, based on their collective evaluation of 2020 company performance. In 2020, our annual cash incentive also served a secondary objective, which was to incentivize and retain the company’s management in the face of significant COVID-19 headwinds.
Corporate Performance Measures
For fiscal 2020, the Compensation Committee and our Board of Directors selected several components to measure performance that they believed best supported our annual operating plan and enhanced long-term value creation. As determined by the Compensation Committee and our Board of Directors, our NEOs were eligible to receive annual incentive compensation based on specific corporate performance measures for fiscal 2020. The Compensation Committee and our Board of Directors set these target levels to be aggressive, yet achievable, with diligent effort during 2020.
|
The 2020 annual operating plan approved by our Board of Directors at the end of 2019 anticipated significant sales growth of our FDA-approved products during the year, with a launch of ANNOVERA early in the year and continued sales momentum generated from our menopause products, IMVEXXY and BIJUVA. However, beginning in March 2020 the COVID-19 pandemic and related shutdowns significantly affected our business and the sales projections included in our 2020 annual operating plan, primarily due to our sales force having limited access to healthcare professionals and our patients deferring visits to healthcare professionals in certain areas due to stay at home, quarantine and social distancing orders, and closures and restrictions on travel. The COVID-19 pandemic continued to affect sales of all of our products through the fourth quarter of 2020.
We developed a comprehensive COVID-19 contingency plan designed to preserve the value of our investments in our sales and marketing infrastructure, protect our balance sheet during this period of market disruption, and meet the needs of our patients and prescribers. This contingency plan was designed to monitor the COVID-19 pandemic and adapt to the length of time that COVID-19 may impact our business. It was developed with the intention to conserve our financial resources during the COVID-19 pandemic. As part of this plan, among other things, we paused the planned full commercial launch of ANNOVERA in March 2020 and suspended marketing spend for IMVEXXY and BIJUVA. We reinitiated the full commercial launch of ANNOVERA in July 2020, when we observed that access to healthcare professionals had started to improve. While we currently believe that our COVID-19 contingency plan has the ability to mitigate the effect of the COVID-19 pandemic on our business, the severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, the effectiveness of, and ability to widely distribute, the COVID-19 vaccine, the duration of stay-at-home, quarantine, and social distancing orders, the ability of our sales force to access healthcare professionals to promote our products, increases in unemployment (which could reduce access to commercial health insurance for our patients, thus limiting payer coverage for our products) and the impact of the pandemic on our global supply chain, all of which are uncertain and cannot be predicted.
Notwithstanding the significant, unpredictable, and unprecedented effect that the COVID-19 pandemic had on the economy and our company, as part of our COVID-19 contingency plan we identified a variety of factors that we needed to address to successfully weather the COVID-19 pandemic, including:
|
|
|
|
In June 2020, the Compensation Committee and our Board of Directors adopted new corporate performance measures for the 2020 annual cash incentive targets for management that were based on the ongoing market conditions of the COVID-19 pandemic and the effects of our COVID-19 contingency plan, as opposed to our original corporate performance measures, which had been rendered obsolete in the early days of the pandemic. The new corporate performance measures were designed to incentivize our NEOs to continue to execute on our COVID-19 contingency plan and work diligently to preserve the trajectory of our product launches, which the Compensation Committee and our Board of Directors believed would drive long term value for our stockholders, whereas strictly adhering to unattainable corporate performance measures would not have had an incentivizing effect on our NEOs.
|
| ||||||||
|
Target Annual Incentive Opportunities
The Compensation Committee and our Board of Directors determined the target annual incentive opportunities for each of our NEOs for fiscal 2020 should be a percentage of each NEO’s salary. The target annual incentive opportunities established for each NEO for fiscal 2020 were as follows and were identical to the target annual incentive opportunities for 2020, except for Mr. Borkowski who joined our company effective January 1, 2020:
Executive Officer | Annualized Fiscal 2020 Salary | Target Annual Incentive Opportunity (as a percentage of salary) | Annualized Target Annual Incentive Opportunity (as a dollar amount) | |||||||||
Robert G. Finizio | $ | 600,000 | 100 | % | $ | 600,000 | ||||||
John C.K. Milligan, IV | $ | 450,000 | 70 | % | $ | 315,000 | ||||||
Edward Borkowski | $ | 430,000 | 85 | % | $ | 365,500 | ||||||
In setting the target annual incentive opportunities for our NEOs, the Compensation Committee and our Board of Directors considered several factors, including:
Our overall financial and operational results for the prior fiscal year;
The prior performance of each NEO;
Each NEO’s roles and responsibilities;
Each NEO’s individual experience and skills;
Competitive market practices for annual incentives; and
For our NEOs other than our CEO, the recommendations of our CEO.
Individual Performance Objectives
In prior years, our CEO also developed and recommended to the Compensation Committee and our Board of Directors a series of individual performance objectives for our NEOs, which he deemed to be integral to the achievement of our annual operating plan. However, for purposes of the fiscal 2020 annual performance-based incentive compensation, our CEO and the Compensation Committee determined that achieving our 2020 corporate performance measures required the aligned performance of our entire executive team and that individual performance goals were not necessary for each of our NEOs for 2020.
Fiscal 2020 Annual Incentive Decisions
The annual incentive compensation for each of our NEOs was determined based on an assessment by the Compensation Committee and our Board of Directors of success in achieving the corporate performance measures, after considering the recommendations of our CEO for NEOs other than himself.
Following fiscal 2020, the Compensation Committee determined that, based on the performance of our company and our NEOs during fiscal 2020 as described above, our NEOs met 100% of our corporate performance measures, which were revised after our original corporate performance measures were rendered obsolete in the early days of the pandemic, including successfully implementing our COVID-19 contingency plan that identified, among other things, the need to retain our employee base, particularly our key employees; reduce our operating expenses and cash burn; and leverage platforms designed to increase access to our products for women, especially in light of the launch of ANNOVERA and approved the below annual incentive payments to our NEOs for fiscal 2020.
Executive Officer | Annualized Fiscal 2020 Salary | Target Annual (as a of salary) | Total Cash Incentive Payments for Fiscal 2020 | Percentage of Target Annual Incentive Opportunity | ||||||||||||
Robert G. Finizio | $ | 600,000 | 100 | % | $ | 600,000 | 100 | % | ||||||||
John C.K. Milligan, IV | $ | 450,000 | 70 | % | $ | 315,000 | 100 | % | ||||||||
Edward Borkowski | $ | 430,000 | 85 | % | $ | 365,000 | 100 | % | ||||||||
|
Our original corporate performance measures were either no longer relevant or were not achievable within the context of the pandemic environment. Had we not revised our corporate performance measures, our NEOs would have not met the original, obsolete performance measures or been able to earn annual incentive payments, which would have jeopardized our ability to motivate achievement relative to our new performance priorities and align compensation with execution against these priorities.
Stock-Based Awards
As we transitioned from a research and development organization to a commercialization organization, the Compensation Committee and our Board of Directors decided to move toward an approach to grant restricted stock units and performance stock units to better align our equity compensation practices with those of our peer companies. The Compensation Committee and our Board of Directors believed that moving to such a practice would better support our company’s recruiting and retention needs for both NEOs and other executives, as well as other employees, in the context of our commercialization efforts. The following grants were made in 2020 to our NEOs:
Executive Officer | Date of Grant | Number of Restricted Stock Units Granted | Number of Performance Stock Units Granted | Number of Stock Options Granted | ||||||||||||
Robert G. Finizio | 03/30/2020 | 475,000 | 475,000 | — | ||||||||||||
Robert G. Finizio | 11/24/2020 | (1) | 1 | — | — | |||||||||||
John C.K. Milligan, IV | 03/30/2020 | 310,500 | 310,500 | — | ||||||||||||
John C.K. Milligan, IV | 11/24/2020 | (1) | 360,000 | — | — | |||||||||||
Edward Borkowski | 01/28/2020 | (1) | 1,000,000 | — | — | |||||||||||
Edward Borkowski | 03/30/2020 | 310,500 | 310,500 | 125,000 | ||||||||||||
|
The Compensation Committee chose to make these grants based on market data from the 2020 peer group for similar positions at similar companies. Our Chief Executive Officer requested that the Compensation Committee limit his November 2020 equity award to one share in order to make more equity available to the rest of our management team with less dilution to our stockholders.
The restricted stock units (RSUs) vest equally in three annual instalments beginning on the one year anniversary of the date of grant. The performance stock units (PSUs) vest upon our achievement of break-even of quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) for a fiscal quarter no later than the quarter ending December 31, 2022, otherwise the PSUs will be forfeited. The number of PSUs listed is the base number of PSUs that may vest. The actual number of PSUs that will vest will be between zero and two times the base number of PSUs depending on when we achieve break-even of quarterly EBITDA. In accordance with the terms of our 2019 Plan, no PSUs will vest prior to the one-year anniversary of the grant date.
Each officer forfeits the unvested portion, if any, of the RSUs and PSUs if the officer’s service to our company is terminated for any reason, except as may otherwise be determined by our Board of Directors or as provided in an applicable employment agreement. For Messrs. Finizio, Milligan, and Borkowski, stock-based awards vest upon termination due to death or “disability,” termination by our company without “cause,” or resignation by the executive for “good reason” (as such terms are defined in the employment agreements).
See “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End 2020” tables for further information on equity awards granted to and held by each of our NEOs.
|
Severance and Change in Control Benefits
We have severance and change in control benefits for our NEOs documented in their respective employment agreements. We believe these benefits were necessary to attract our NEOs and the change in control benefits are in the best interests of our company and our stockholders because they help assure we will have the continued dedication and objectivity of our executive officers, notwithstanding the possibility or occurrence of a change in control. For further details, see “Executive Compensation — Potential Payments Upon Termination or Change in Control” below.
Tax and Accounting Considerations
Deductibility of Executive Compensation
The tax treatment of the elements of our compensation program is one factor considered in the design of the compensation program. Under Section 162(m) of the Code, the federal income tax deduction for certain types of compensation paid to certain executive officers of publicly-held companies is limited to $1.0 million per officer per fiscal year unless such compensation meets certain requirements. This limitation does not apply to certain compensation awards granted prior to November 3, 2017 that meet the transition requirements under Section 162(m) of the Code for “qualifying performance based” compensation (i.e., compensation paid only if performance meets pre-established objective goals based on performance criteria approved by stockholders). Although the Compensation Committee considers the impact of Section 162(m) of the Code as well as other tax and accounting consequences when developing and implementing our executive compensation programs, the Compensation Committee retains the flexibility to design and administer compensation programs in the best interests of our company and stockholders. In addition, due to the ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code and the transition rule thereunder, no assurances can be given that compensation intended by the Compensation Committee to satisfy the requirements for deductibility under Section 162(m) of the Code would, in fact, do so. Further, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with our business needs. In addition, the Compensation Committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.
Taxation of “Parachute” Payments and Deferred Compensation
Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits from a change in control of a company that exceed certain prescribed limits, and the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any NEO, with a “gross-up” or other reimbursement payment for any tax liability they might owe as a result of the application of Sections 280G and 4999 during fiscal 2020, and we have not agreed and are not otherwise obligated to provide any executive officer with such a “gross-up” or other reimbursement.
Accounting for Stock-Based Compensation
We account for stock-based awards in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation—Stock Compensation,” or ASC 718. In determining stock-based awards, the Compensation Committee considers the potential expense of these awards under ASC 718 and the impact on our earnings per share.
|
Fiscal Year 20202022 Summary Compensation Table
The following table lists the compensation of our company’s principal executive officer, principal financial officer, and each of our two other most highly compensated executive officers who were serving as executive officers (collectively, our NEOs) on December 31, 2020,NEOs for the end of our last completed fiscal year.years provided. The following information includes the dollar value of salaries, bonus awards, the number of awards granted, non-equity incentive plan compensation, and certain other compensation, if any, whether paid or deferred.any.
Name and Principal Position | Year | Salary | Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation | Total | |||||||||||||||||||||
Robert G. Finizio Chief Executive Officer | 2020 | $ | 600,000 | $ | 1,524,751 | $ | — | $ | 600,000 | $ | 21,785 | (4) | $ | 2,746,536 | ||||||||||||||
| 2019 | $ | 600,000 | $ | — | $ | 2 | $ | 600,000 | $ | 22,218 | (4) | $ | 1,222,220 | |||||||||||||||
John C.K. Milligan, IV President and Secretary | 2020 | $ | 450,000 | $ | 1,479,105 | $ | — | $ | 315,000 | $ | 31,285 | (5) | $ | 2,275,390 | ||||||||||||||
| 2019 | $ | 450,000 | $ | — | $ | 645,956 | $ | 315,000 | $ | 29,683 | (5) | $ | 1,440,639 | |||||||||||||||
Edward Borkowski Executive Vice President | 2020 | $ | 430,000 | $ | — | $ | 3,599,967 | $ | 365,500 | $ | 81,687 | (6) | $ | 4,477,154 | ||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation(2) ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
Marlan D. Walker(3) Chief Executive Officer | 2022 | 424,500 | 207,500 | (4) | 292,656 | (5) | — | 466,875 | 26,224 | (6) | 1,417,755 | |||||||||||||||||||||
| 2021 | 415,000 | — | 1,090,987 | (5) | — | 66,400 | 24,806 | (6) | 1,597,193 | |||||||||||||||||||||||
Michael Donegan(3) Former Interim Chief Financial Officer | 2022 | 307,308 | 90,000 | (4) | 135,072 | (7) | — | 295,500 | 18,860 | (8) | 846,740 | |||||||||||||||||||||
Brian Bernick, M.D.(3) Former Interim Co-Chief Executive Officer | 2022 | 500,000 | 250,000 | (4) | 292,656 | (9) | — | 812,500 | 18,860 | (10) | 1,624,016 | |||||||||||||||||||||
Mark Glickman(3) Former Interim Co-Chief Executive Officer | 2022 | 408,462 | 175,000 | (4) | 292,656 | (11) | — | 608,750 | 118,860 | (12) | 1,428,728 | |||||||||||||||||||||
Hugh O’Dowd(3) Former Chief Executive Officer | 2022 | 521,442 | — | 2,391,900 | (14) | — | 725,000 | 25,966 | (15) | 3,664,308 | ||||||||||||||||||||||
| 2021 | 273,000 | 250,000 | (13) | 4,372,500 | (14) | — | — | 289,495 | (15) | 4,934,995 | ||||||||||||||||||||||
James C. D’Arecca(3) Former Chief Financial Officer | 2022 | 121,731 | — | — | — | — | 86,160 | (17) | 207,890 | |||||||||||||||||||||||
| 2021 | 420,000 | — | 1,048,669 | (16) | — | 126,000 | 126,985 | (17) | 1,721,654 | |||||||||||||||||||||||
| (1) | Represents the grant date fair |
| (2) |
|
Amounts in this column represent the amounts earned and payable under our annual |
| (3) | On April 1, 2022, Mr. D’Arecca ceased serving as the Chief Financial Officer and Principal Financial Officer of |
| (4) |
|
| (5) | For 2022, the amount represents (i) 5,200 PSUs with a grant date fair value of $179,400 and (ii) 5,200 RSUs with a grant date fair value of $113,256. For 2021, the amount represents (i) 231,130 RSUs with a grant date fair value of $252,051, which includes 57,797 RSUs with a grant date fair value of $42,318 awarded in connection to the 2021 Stock Option Exchange Program, and (ii) 693,336 PSUs with a grant date fair value of $838,936 assuming maximum payout. |
| (6) | For 2022, other compensation paid |
|
|
| (8) | For 2022, other compensation paid |
| (9) | For 2022, the amount represents (i) 5,200 PSUs with a grant date fair value of $179,400 and (ii) 5,200 RSUs with a grant date fair value of $113,256. |
| (10) | For 2022, other compensation paid was related to (i) employer match to 401(k) plan of $2,000, and (ii) health and welfare benefits paid by the Company. |
| (11) | For 2022, the amount represents (i) 5,200 PSUs with a grant date fair value of $179,400 and (ii) 5,200 RSUs with a grant date fair value of $113,256. |
| (12) | For 2022, other compensation paid includes (i) $100,000 for consulting fees paid pursuant to Mr. Glickman’s agreement, (ii) employer match to 401(k) plan of $2,000, and (iii) health and welfare benefits paid by the Company. |
| (13) | For 2021, the amount represents a sign-on bonus paid to Mr. O’Dowd. |
|
| (14) | For 2022, the amount represents (i) 42,500 PSUs with a grant date fair value of $1,466,250 and (ii) 42,500 RSUs with a grant date fair value of $925,650. For 2021, the amount represents 550,000 RSUs with a grant date fair value of $2,186,250 and 550,000 PSUs with a grant date fair value of $2,186,250. |
| (15) | For 2022, other compensation paid includes (i) $11,321 for unused vacation, (ii) employer match to 401(k) plan of $2,000, and (iii) health and welfare benefits paid by the company. For 2021, other compensation paid was related to (i) reimbursed taxable relocation expenses of $282,293, (ii) employer match to 401(k) plan of $2,000, and (iii) health and welfare benefits paid by the Company. |
| (16) | For 2021, the amount represents (i) 3,467 RSUs with a grant date fair value of $209,733 and (ii) 13,867 PSUs with a grant date fair value of $838,936 assuming maximum payout. |
| (17) | For 2022, other compensation paid includes (i) $43,270 for unused vacation, (ii) $32,815 of travel reimbursement, (iii) employer match to 401(k) plan of $2,000, and (iv) health and welfare benefits paid by the company. For 2021, other compensation paid was related to (i) reimbursed taxable travel expenses of $102,179 reflecting travel to and from the Company’s headquarters in Florida, (ii) employer match to 401(k) plan of $2,000, and (iii) health and welfare benefits paid by the Company. |
| 20 |
Outstanding Equity Awards at Fiscal Year-End 20202022
The following table sets forth information with respect to outstanding equity-based awards held by our NEOs at December 31, 2020.2022.
| Option Awards | ||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | ||||||||||||||||||||||
Name | Grant Date | Exercisable | Unexercisable | |||||||||||||||||||||
Robert G. Finizio | 02/27/2012 | 300,000 | — | $ | 2.20 | 02/27/2022 | ||||||||||||||||||
| 04/16/2012 | 50,000 | — | $ | 2.55 | 04/16/2022 | |||||||||||||||||||
| 11/30/2012 | 268,474 | — | $ | 3.00 | 11/30/2022 | |||||||||||||||||||
| 12/17/2015 | 950,000 | — | $ | 8.92 | 12/17/2025 | |||||||||||||||||||
| 03/15/2017 | 445,000 | — | $ | 6.83 | 03/15/2027 | |||||||||||||||||||
| 03/15/2018 | 293,334 | 146,666 | (1) | $ | 5.16 | 03/15/2028 | ||||||||||||||||||
| 08/28/2019 | — | 1 | (2) | $ | 2.73 | 08/28/2029 | ||||||||||||||||||
John C.K. Milligan, IV | 02/27/2012 | 300,000 | — | $ | 2.20 | 02/27/2022 | ||||||||||||||||||
| 04/16/2012 | 75,000 | — | $ | 2.55 | 04/16/2022 | |||||||||||||||||||
| 11/30/2012 | 800,000 | — | $ | 3.00 | 11/30/2022 | |||||||||||||||||||
| 05/02/2013 | 50,000 | — | $ | 2.80 | 05/02/2023 | |||||||||||||||||||
| 01/06/2014 | 45,000 | — | $ | 5.05 | 01/06/2024 | |||||||||||||||||||
| 12/17/2015 | 500,000 | — | $ | 8.92 | 12/17/2025 | |||||||||||||||||||
| 03/15/2017 | 260,000 | — | $ | 6.83 | 03/15/2027 | |||||||||||||||||||
| 03/15/2018 | 180,000 | 90,000 | (1) | $ | 5.16 | 03/15/2028 | ||||||||||||||||||
| 08/28/2019 | 133,334 | 266,666 | (3) | $ | 2.73 | 08/28/2029 | ||||||||||||||||||
Edward Borkowski | 03/30/2020 | 125,000 | (4) | $ | 1.07 | 03/30/2032 | ||||||||||||||||||
| Warrants | ||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Warrants | Warrant Exercise Price | Warrant Expiration Date | ||||||||||||||||||||||
Name | Grant Date | Exercisable | Unexercisable | |||||||||||||||||||||
Robert G. Finizio | 03/06/2011 | 179,000 | — | $ | 0.24 | 03/06/2021 | ||||||||||||||||||
John C.K. Milligan, IV | 03/06/2011 | 179,000 | — | $ | 0.24 | 03/06/2021 | ||||||||||||||||||
| Restricted Stock Units and Performance Stock Units | ||||||||||||||||||||||||
Number of Securities Underlying Restricted Stock Units | ||||||||||||||||||||||||
Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(5) | Restricted Stock Units Grant Date Price | ||||||||||||||||||||
Robert G. Finizio | 03/30/2020 | 475,000 | (6) | $ | 574,750 | $ | 1.07 | |||||||||||||||||
| 03/30/2020 | 475,000 | (7) | $ | 574,750 | $ | 1.07 | ||||||||||||||||||
| 11/24/2020 | 1 | (8) | $ | 1 | $ | 1.34 | ||||||||||||||||||
John C.K. Milligan, IV | 03/30/2020 | 310,500 | (6) | $ | 375,705 | $ | 1.07 | |||||||||||||||||
| 03/30/2020 | 310,500 | (7) | $ | 375,705 | $ | 1.07 | ||||||||||||||||||
| 11/24/2020 | 360,000 | (9) | $ | 435,600 | $ | 1.34 | ||||||||||||||||||
Edward Borkowski | 01/28/2020 | 1,000,000 | (10) | $ | 1,210,000 | $ | 2.52 | |||||||||||||||||
| 03/30/2020 | 310,500 | (7) | $ | 375,705 | $ | 1.07 | ||||||||||||||||||
| 03/30/2020 | 310,500 | (9) | $ | 375,705 | $ | 1.07 | ||||||||||||||||||
| Option Awards | ||||||||||||||||||||||||
Equity Award | Number of Securities Underlying Unexercised Options | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||||||||
Name | Exercisable (#) | Unexercisable (#) | ||||||||||||||||||||||
Marlan D. Walker | 06/21/2013 | 3,600 | 149.00 | 06/21/2023 | ||||||||||||||||||||
| 10/03/2013 | 300 | 157.00 | 10/03/2023 | |||||||||||||||||||||
| 06/05/2014 | 5,900 | 201.00 | 06/05/2024 | |||||||||||||||||||||
| 11/21/2014 | 2,000 | 200.50 | 11/21/2024 | |||||||||||||||||||||
| 07/30/2019 | 3,000 | 1,000 | 109.00 | 07/30/2029 | ||||||||||||||||||||
Michael Donegan | 06/21/2013 | 1,500 | 149.00 | 06/21/2023 | ||||||||||||||||||||
| 08/28/2019 | 2,400 | 136.50 | 08/28/2029 | |||||||||||||||||||||
Brian Bernick | 08/28/2019 | 6,000 | (1) | 136.50 | 03/30/2023 | |||||||||||||||||||
| (1) | This amount reflects fully vested stock options |
| Stock Awards | ||||||||||||||||||||||||||||||||
Number of Shares | Market Value of Shares | Equity Incentive Plan Awards | ||||||||||||||||||||||||||||||
Name | Equity Award Date | Number (#) | Market Value of ($) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of ($) | |||||||||||||||||||||||||||
Marlan D. Walker | 03/30/2020 | 1,010 | (3) | 5,646 | 3,030 | (4) | 16,938 | |||||||||||||||||||||||||
| 07/01/2021 | 2,311 | (3) | 12,918 | 3,467 | (5) | 19,379 | ||||||||||||||||||||||||||
| 09/29/2021 | 770 | (3) | 4,304 | |||||||||||||||||||||||||||||
| 03/23/2022 | 5,200 | (3) | 29,068 | |||||||||||||||||||||||||||||
| 03/31/2022 | 5,200 | (6) | 29,068 | |||||||||||||||||||||||||||||
Michael Donegan | 03/30/2020 | 1,520 | 8,497 | |||||||||||||||||||||||||||||
| 07/01/2021 | 3,466 | 19,375 | ||||||||||||||||||||||||||||||
| 09/29/2021 | 519 | 2,901 | ||||||||||||||||||||||||||||||
| 03/23/2022 | 2,400 | | 13,416 | | ||||||||||||||||||||||||||||
| 03/31/2022 | 2,400 | 13,416 | ||||||||||||||||||||||||||||||
Mark Glickman | 10/15/2021 | 15,366 | 85,896 | |||||||||||||||||||||||||||||
| 03/23/2022 | 5,200 | 29,068 | ||||||||||||||||||||||||||||||
| 03/31/2022 | 5,200 | 29,068 | ||||||||||||||||||||||||||||||
Brian Bernick, M.D. | 03/20/2020 | 4,040 | 22,584 | |||||||||||||||||||||||||||||
| 07/01/2021 | 10,400 | 58,136 | ||||||||||||||||||||||||||||||
| 09/29/2021 | 1,107 | 6,188 | ||||||||||||||||||||||||||||||
| 03/23/2022 | 5,200 | 29,068 | ||||||||||||||||||||||||||||||
| 03/31/2022 | 5,200 | 29,068 | ||||||||||||||||||||||||||||||
Hugh O’Dowd | 08/31/2021 | 36,666 | 204,963 | |||||||||||||||||||||||||||||
| 03/23/2022 | 42,500 | 237,575 | ||||||||||||||||||||||||||||||
| 03/31/2022 | 42,500 | 237,575 | ||||||||||||||||||||||||||||||
| 21 |
| Stock Awards | ||||||||||||||||||||||||||||||||
of Shares | Market Value of Shares | Equity Incentive Plan Awards | ||||||||||||||||||||||||||||||
Name | Equity Award Date | Number (#) | Market Value of ($) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of ($) | |||||||||||||||||||||||||||
James C. D’Arecca | — | — | — | — | — | — | ||||||||||||||||||||||||||
| (1) | The amount reflects vested RSUs that were settled in January 2023. The amounts in this column are based on the closing price of our common stock |
|
|
The amounts in this column are based on the closing price of our common stock on December |
The amount reflects |
The amount reflects the |
The |
|
|
Option Exercises and Stock Vested in Fiscal Year 2020
During fiscal year 2020, none of our NEOs acquired shares upon the exercise of stock options or the vesting of stock awards.
Pension Benefits
We do not offer any defined benefit pension plans for any of our employees. We have a 401(k) plan in which employees may participate.
Other Compensation
All of our executive officers are eligible to participate in our employee benefit plans, including medical dental, life insurance, and tax-qualified Section 401(k) retirement savingsdental plans. These plans are available to all employees and do not discriminate in favor of executive officers. It is generally our policy to not extend significant perquisites to executives that are not broadly available to our other employees. In designing these elements, we seek to provide an overall level of benefits that is competitive with that offered by similarly situated companies in the markets in which we operate based upon our general understanding of industry practice. These benefits are not considered in determining the compensation of our executive officers.
Employment AgreementsAgreement
Robert G. FinizioMarlan D. Walker has an amended and restated employment agreement, as amended (the “Walker Employment Agreement”), with the Company that commenced on November 24, 2020December 18, 2018, and replaced his employment agreement dated November 8, 2012.was amended twice effective October 15, 2021 and December 30, 2022. The amendedWalker Employment Agreement provides that we will continue to employ Mr. Walker, and restated agreementMr. Walker will continue to serve the Company, unless sooner terminated pursuant to the terms of the Walker Employment Agreement.
| 22 |
The Walker Employment Agreement provides for a two-year term and will automatically renew for additional one-year terms each year on the anniversary of execution unless notice of non-renewal is given by either our company or Mr. Finizio at least 90 days prior to such anniversary. The agreement originally provided for: (i) a base salary of $600,000$428,000 per year until April 15, 2023; thereafter, a base salary of $500,000 per year and a lump-sum bonus payment of $20,909, (ii) an annual short-term incentive compensation of 100%50% of salary, at the discretion of our Board of Directors, and (iii) one restricted stock unit70,000 RSUs vesting on November 24, 2022, and (iv) coverage under directors and officers insurance.June 30, 2023. Mr. FinizioWalker will receive employee benefits, vacation, and other perquisites as may be determined from time to time.
Conditions of termination call for (i) termination immediately upon death, (ii) termination upon a disability in which Mr. FinizioWalker is unable to perform his duties for more than six consecutive months, during any 12-month period, (iii) voluntary termination without good reason by Mr. FinizioWalker with prior notice, (iv) involuntary termination by our companyCompany without good cause, with 30-day notice (or 90-day notice when termination is due to the non-extension of the employment term by our company), (v) termination for good cause, and (vi) termination for good reason wherein Mr. FinizioWalker will have 90 days from the date of occurrence of a criteriacondition giving rise to good noticereason to provide a notice of termination of his employment with the company,Company, which will be effective 31 days after we receive notice and the criteria remains uncorrected.
John C.K. Milligan, IV has an amended and restated employment agreement that commenced on November 24, 2020 and replaced his employment agreement dated November 8, 2012. The amended
|
and restated agreement provides for a two-year term and will automatically renew for additional one-year terms each year on the anniversary of execution unless notice of non-renewal is given by either our company or Mr. Milligan at least 90 days prior to such anniversary. The agreement originally provided for: (i) a salary of $450,000 per year, (ii) an annual short-term incentive compensation of 70% of salary, at the discretion of our Board of Directors, (iii) 360,000 restricted stock units vesting on November 24, 2022, and (iv) coverage under directors and officers insurance. Mr. Milligan will receive employee benefits, vacation, and other perquisites as may be determined from time to time. Conditions of termination call for (i) termination immediately upon death, (ii) termination upon a disability in which Mr. Milligan is unable to perform his duties for more than six months during any 12-month period, (iii) voluntary termination by Mr. Milligan with prior notice, (iv) involuntary termination by our company without cause with 30-day notice (or 90-day notice when termination is due to the non-extension of the employment term by our company), (v) termination for cause, and (vi) termination for good reason wherein Mr. Milligan will have 90 days from the date of occurrence of a criteria giving rise to good notice provide notice of termination his employment with the company, which will be effective 31 days after we receive notice and the criteria remains uncorrected.
Edward Borkowski has an employment agreement that commenced on January 1, 2020. The agreement provides for a three-year term and will automatically renew for additional one-year terms each year on the anniversary of execution unless notice of non-renewal is given by either our company or Mr. Borkowski at least 90 days prior to such anniversary. The agreement originally provided for: (i) a salary of $430,000 per year, (ii) an annual short-term incentive compensation of 85% of salary, at the discretion of our Board of Directors, (iii) 1,000,000 restricted stock units vesting on January 1, 2023, (iv) an option to purchase 125,000 shares of the company’s common stock, and (v) coverage under directors and officers insurance. Mr. Borkowski will receive employee benefits, vacation, and other perquisites as may be determined from time to time. Conditions of termination call for (i) termination immediately upon death, (ii) termination upon a disability in which Mr. Borkowski is unable to perform his duties for more than six months during any 12-month period, (iii) voluntary termination by Mr. Borkowski with prior notice, (iv) involuntary termination by our company without cause with 30-day notice (or 90-day notice when termination is due to the non-extension of the employment term by our company), (v) termination for cause, and (vi) termination for good reason wherein Mr. Borkowski will have 90 days from the date of occurrence of a criteria giving rise to good notice provide notice of termination his employment with the company, which will be effective 31 days after the company receives notice and the criteria remains uncorrected.
Potential Payments Upon Termination or Change in Control
We have employment agreements with certain of our executive officers as described above. The arrangements reflected in these employment agreements are designed to encourage the officers’ full attention and dedication to our companyCompany currently and, in the event of any proposed change in control, provide these officers with individual financial security. The employment agreements provide for specified payments and benefits by us to our executive officers only upon a qualifying termination of employment as described below.
Effective April 1, 2022, Mr. James C. D’Arecca transitioned from his position as the Company’s Chief Financial Officer; his termination was by the Executive without Good Reason, as that term was defined in his Employment Agreement. Effective September 6, 2022, Mr. O’Dowd transitioned from his position as the Company’s Chief Executive Officer; his termination was by the Company without Good Cause, as that term was defined in his Employment Agreement. Effective December 30, 2022, Dr. Bernick transitioned from his position as the Company’s Co-Chief Executive Officer; his termination was by the Company without Good Cause, as that term was defined in his Amended and Restated Employment Agreement. Effective December 30, 2022, Mr. Glickman transitioned from his position as the Company’s Co-Chief Executive Officer; his termination was by the Company without Good Cause, as that term was defined in his Employment Agreement. Effective December 30, 2022, Mr. Donegan transitioned from his position as the Company’s Interim Chief Financial Officer; his termination was by the Company without Good Cause, as that term was defined in his Amended and Restated Employment Agreement. The Company entered into a Consulting Agreement with Mr. Donegan, pursuant to which Mr. Donegan will continue to serve as the Company’s Principal Financial and Accounting Officer.
Except as otherwise set forth below, the terminations of Messrs. D’Arecca, O’Dowd, Glickman, and Donegan, and Dr. Bernick (together, the “Departed Officers”), and the severance and other termination benefits paid to each of them was in accordance with their respective Employment Agreements or Amended and Restated Employment Agreement, as applicable, and no discretionary severance amounts were paid. Information with respect to the Employment Agreement and Amended and Restated Employment Agreement, as applicable, for each Departed Officer, is provided for each of his actual terms of separation.
Termination by Us Without Good Cause or by Executive with Good Reason — No Change in Control
Pursuant to Mr. O’Dowd’s Employment Agreement, he is entitled to receive (i) an amount equal to his annual base salary, which was provided in a single lump sum, (ii) an amount equal to his targeted annual bonus award for 2022, which amount was provided in a single lump sum, (iii) COBRA benefits for a period of eighteen (18) months following his termination, (iv) all unvested equity compensation, including performance-based equity at target level achievement, held by the executive will vest as of the effective date of such termination, and (v) payment for accrued but unused paid time off consistent with the Company’s policies and procedures therefor in effect.
| 23 |
Pursuant to Dr. Bernick’s Amended and Restated Employment Agreement, Mr. Glickman’s Employment Agreement, and Mr. Donegan’s Amended and Restated Employment Agreement, Dr. Bernick, Mr. Glickman, and Mr. Donegan are each entitled to receive (i) the executive’s annual base salary for a period of twelve (12) months following the effective date of such termination, (ii) an amount equal to the executive’s targeted annual bonus award for 2022, (iii) COBRA benefits for a period of twenty-four (24) months following the executive’s termination, (iv) all unvested equity compensation, including performance-based equity at target level achievement, held by the executive will vest as of the effective date of such termination, and (v) payment for accrued but unused paid time off consistent with the Company’s policies and procedures therefor in effect (the “Separation Benefits”). Mr. Glickman also received $100,000 for ongoing consulting services. In addition to the amount received for ongoing consulting services and the Separation Benefits, Mr. Glickman received the fourth tranche of his performance bonus ($131,250) awarded under the 2022 Executive Retention and Performance Bonus Plan (the “ERB Plan”) and the second tranche of his performance bonus ($131,250) awarded under the ERB Plan, in exchange for providing transition assistance to the Company through March 31, 2023. In addition to the Separation Benefits, Mr. Donegan received the fourth tranche of his performance bonus ($67,500) awarded under the ERB Plan and the second tranche of his performance bonus ($67,500) awarded under the ERB Plan, in exchange for providing transition assistance to the Company through March 31, 2023, to be paid in a single lump sum within thirty (30) days following the end of the transition period.
In connection with his termination without Good Cause effective as of December 30, 2022, the Company entered into a General Consulting and Services Agreement with MCD Consulting and Management Services, LLC (“MCD”), the manager of which is Mr. Donegan (the “Consulting Agreement”). Pursuant to the Consulting Agreement, Mr. Donegan provides consulting services deemed to be the functional equivalent of services normally and customarily provided by an employed chief financial officer until such time as Mr. Donegan transitions his role to a third party provider. The Consulting Agreement will be in effect until the completion of Mr. Donegan’s services.
Pursuant to the Consulting Agreement, MCD received a signing fee of $100,000 and will receive an additional fee of $50,000 per month. In addition, because the term of the Consulting Agreement was extended past March 31, 2023, MCD will receive an hourly fee of $205.28 per hour of services performed by Mr. Donegan. Because the Consulting Agreement was not terminated by MCD prior to March 31, 2023, or by the Company due to MCD’s material breach prior to March 31, 2023, MCD received an additional one-time fee of $100,000 on March 31, 2023. In addition, Mr. Donegan received a grant of 50,000 RSUs that vested on March 31, 2023.
Under the employment agreementsWalker Employment Agreement, for each of Messrs. Finizio, Milligan, and Borkowski,Mr. Walker, in the event of termination of the executive’s employment without “cause” (referred to as “good cause” in certain employment agreements)the Walker Employment Agreement) or resignation by the executive for “good reason” (as each term is defined in the employment agreements)Walker Employment Agreement), the executivehe would be entitled to, subject to the executive’shis signing and not revoking a full and complete release of all claims against the companyCompany and its affiliates, (i) the sum of his salary, payable on a biweekly basis ratably over 12eighteen (18) months, and one and one half times (1.5x) his target annual incentive compensation for the fiscal year in which such termination of employment occurs, (ii) a continuation of welfare benefits for a period of two years after such termination, (iii) COBRA benefits for a period of twenty-four (24) months following such termination, (iv) payment for any annual short-term incentive compensation earned for the calendar year immediately preceding the calendar year of such termination, (v) unpaid accrued base salary and unused vacation pay through the termination date, and (iv)(vi) amounts accrued but unpaid at the time of termination.
|
Additionally, all outstanding equity awards that vest solely on the passage of time held by such executives would immediately vest in full for each of Messrs. Finizio, Milligan, and Borkowski. Furthermore, the above obligations of the companyCompany are subject to the executive complying with a 24-month non-solicitation agreement of employees and customers, and a 18-month non-competition agreement that can be extended by our company for an additional 12 months, in which we will pay executive another 12 months of base salary and six months of COBRA health insurance benefits (12 months of insurance benefits for Mr. Finizio).agreement.
Termination or Resignation in Connection with a Change in Control
In the event of termination of the executive’sMr. Walker’s employment without “cause”“good cause” or resignation by the executive for “good reason” (as each term is defined in the employment agreements), in the 12 months following a change in control, Messrs. Finizio, Milligan, and BorkowskiMr. Walker would have all the benefits and obligations for termination without a change in control, except that the executiveshe would receive the sum their respective salariesof his salary and continuation of welfare benefits for 18 months (24 months for Mr. Finizio) and each would receive 150% of theirhis targeted annual bonus award.
| 24 |
Termination by Reason of Death or Disability
For Messrs. Finizio, Milligan, and Borkowski,Mr. Walker, in the event of termination of the executive’s employment by reason of his death or “disability” (as such term is defined in the employment agreements)Walker Employment Agreement), in addition to those payments and benefits provided to salaried employees generally, including amounts accrued but unpaid at the time of termination, each of the executiveshe would be entitled to (i) pro-rated target annual incentive compensation for the fiscal year in which such termination of employment occurs, payable in a lump sum, subject to the executive’s signing and not revoking a full and complete release of all claims against the company and its affiliates in the event of a disability, (ii) immediate vesting of all outstanding equity awards that vest solely on the passage of time, (iii) accrued but unused vacation pay through the termination date, payable in a lump sum, and (iv) all other rights and benefits the executive is vested in, pursuant to other plans and programs of our company.
Termination by the Executive Without Good Reason
Pursuant to Mr. D’Arecca’s Employment Agreement, he is entitled to receive no further compensation under his Employment Agreement other than the payment of his base salary that accrued and remained unpaid as of the date of his termination, unreimbursed business expenses, and accrued but unused paid time off consistent with the Company’s policies and procedures therefor in effect.
The tablestable below reflectreflects the amount of compensation to certain of our NEOs,Marlan Walker, the only NEO currently employed by the Company, assuming termination of such executive’s employment without cause or for good reason or following a change in control of our company on December 31, 2020.2022. Other than as set forth below, no amounts will be paid to our NEOs in the event of termination.
Robert G. FinizioMarlan Walker
Executive Benefits and Payments | Termination Cause | Termination Without Cause or with Good Reason Following a Change in Control | Termination by Reason of Death or Disability | |||||||||
Cash severance | $ | 1,839,571 | (1) | $ | 2,139,571 | (2) | $ | 600,000 | (3) | |||
Equity awards(4) | 1,149,501 | 1,149,501 | 1,149,501 | |||||||||
Other | — | — | — | |||||||||
|
John C.K. Milligan, IV
Executive Benefits and Payments | Termination Good Cause in Control) | Termination Without Good Cause or with Good Reason Following a Change in Control | Termination by Reason of Death or Disability | |||||||||
Cash severance | $ | 804,571 | (1) | $ | 1,177,178 | (2) | $ | 315,000 | (3) | |||
Equity awards(4) | 1,187,010 | 1,187,010 | 1,187,010 | |||||||||
Other | — | — | — | |||||||||
Edward Borkowski
Executive Benefits and Payments | Termination Good Cause | Termination Without Good Cause or with Good Reason Following a Change in Control | Termination by Death or | Termination Without Good Cause or with Good Reason (Not in Connection with a Change in Control) ($) | Termination Without Good Cause or with Good Reason Following a Change in Control ($) | Termination by ($) | ||||||||||||||||||
Cash severance | $ | 839,613 | (1) | $ | 1,226,335 | (2) | $ | 365,500 | (3) | 1,125,000 | (1) | 1,125,000 | (2) | 250,000 | (3) | |||||||||
Equity awards(4) | 1,978,910 | 1,978,910 | 1,978,910 | 127,014 | 127,014 | 127,014 | ||||||||||||||||||
Other | — | — | — | |||||||||||||||||||||
| (1) | Consists of payments due to executive for (i) |
| (2) | Consists of payments due to executive for (i) |
| (3) | Represents full annual incentive compensation that would be prorated based on termination date. |
| (4) | Represents the value of unvested equity awards that would become fully vested. The value is calculated by multiplying the number of shares underlying each accelerated award by the difference between |
Nonqualified Defined Contribution and Nonqualified Deferred Compensation
We do not offer any nonqualified defined contribution plans or nonqualified deferred compensation plans for any of our NEOs.
| 25 |
Limitation of Directors’ Liability; Indemnification of Directors, Officers, Employees, and Agents
Our Amended and Restated Articles of Incorporation and bylaws, each as amended, provide that we may indemnify to the full extent of our power to do so, all directors, officers, employees, and/or agents. The effect of this provision in the Amended and Restated Articles of Incorporation, as amended, is to eliminate the rights of our company and our stockholders, either directly or through stockholders’ derivative suits brought on behalf of our company, to recover monetary damages from a director for breach of the fiduciary duty of care as a director except in those instances described under Nevada law.
Insofar as indemnification by our company for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to officers and directors of our company pursuant to the foregoing provisions or otherwise, we are aware that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Pay vs. Performance Comparison
As required by Item 402(v) of Regulation S-K, the information below reflects the relationship between executive compensation actually paid by us (“CAP”) to our PEOs, as principal executive officer, and other non-CEO NEOs (“Other NEOs”) and our financial performance for the years ended December 31, 2022, and 2021. The disclosure included in this section is required by SEC rules and does not necessarily align with how the Company or the Compensation Committee views the link between the Company’s performance and the compensation of its NEOs.
The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years presented.
The following table sets forth information regarding actual compensation paid to our PEOs and Other NEOs for service during each of the last two completed fiscal years, as applicable.
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | ||||||||||||||||||||||||||||||
Year | Summary Compensation Table Total for Robert G. Finizio(2) | Compensation Actually paid to Robert G. Finizio(3) | Summary Compensation Table Total for Hugh O’Dowd(2) | Compensation Actually paid to Hugh O’Dowd(3) | Summary Compensation Table Total for Brian Bernick(2) | Compensation Actually paid to Brian Bernick(3) | Summary Compensation Table Total for Mark Glickman(2) | Compensation Actually paid to Mark Glickman(3) | Summary Compensation Table Total for Marlan Walker(2) | Compensation Actually paid to Marlan Walker(3) | ||||||||||||||||||||||||||||||
2022(1) | N/A | N/A | $ | 3,664,308 | $ | 419,883 | $ | 1,624,016 | $ | 1,143,643 | $ | 1,428,728 | $ | 975,497 | $ | 1,417,755 | $ | 1,011,560 | ||||||||||||||||||||||
2021(1) | $ | 7,047,652 | $ | 2,624,921 | $ | 4,934,995 | $ | 3,080,095 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||
(l) | (m) | (n) | (o) | (p) | ||||||||||||
Year | Average Summary Compensation Table Total for Non-PEO Named Executive Officer(4) | Average Compensation Actually Paid to Non-PEO Named Executive Officers(5) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return | Net Income (in thousands) | ||||||||||||
2022 | $ | 527,315 | $ | 393,204 | $ | 9.24 | $ | 111,997 | ||||||||
2021 | $ | 1,848,103 | $ | 527,723 | $ | 29.75 | $ | (172,415 | ) | |||||||
| (1) | During 2022 our Chief Executive Officers were Hugh O’Dowd, Brian Bernick, Mark Glickman and Marlan Walker. During 2021, our Chief Executive Officers were Robert G. Finizio and Hugh O’Dowd. During 2022 our remaining NEOs consisted of Michael Donegan, who ceased serving as an officer of our company effective as of December 30, 2022, and James C. D’Arecca, who ceased serving as an officer of our company on April 1, 2022. During 2021, our remaining NEOs consisted of James D’Arecca, Marlan Walker, John C.K. Milligan IV, who ceased serving as an officer of our company on April 8, 2021, and Edward Borkowski, who ceased serving as an officer of our company on September 30, 2021. |
| (2) | The dollar amounts reported in columns (b), (d), (f), (h) and (j) represent the amount of total compensation reported for Mr. Finizio, Mr. O’Dowd, Mr. Bernick, Mr. Glickman and Mr. Walker (collectively, our “PEOs”) for each covered fiscal year in the “Total” column of the Summary Compensation Table for each applicable year. |
|
| (3) | The dollar amounts reported in columns (c), (e), (g), (i) and (k) represent the amount of “compensation actually paid” to our PEOs, as computed in accordance with Item 402(v) of Regulation S-K, for each covered fiscal year. The dollar amounts do not reflect the actual amount of compensation earned or received by or paid to the PEOs during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the total compensation for each covered fiscal year to determine the “compensation actually paid” to our PEOs for such fiscal year: |
| Adjustments to Determine Compensation “Actually Paid” for CEO and Other NEOs | Hugh O’Dowd | Brian Bernick | Mark Glickman | Marlan Walker | Robert Finizio | |||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||
Summary Compensation Table – Total Compensation | $ | 3,664,308 | $ | 4,934,995 | $ | 1,624,016 | N/A | $ | 1,428,728 | $ | — | $ | 1,417,755 | $ | — | N/A | $ | 7,047,652 | ||||||||||||||||||
Deduction for Amounts Reported under the “Stock Awards” Column in the Summary Compensation Table | (2,391,900 | ) | (4,372,500 | ) | (292,656 | ) | N/A | (292,656 | ) | — | (292,656 | ) | — | N/A | (4,517,331 | ) | ||||||||||||||||||||
Deduction for Amounts Reported under the “Option Awards” Column in the Summary Compensation Table | — | — | — | N/A | — | — | — | — | N/A | — | ||||||||||||||||||||||||||
Increase for fair value of awards granted during the year that remain unvested as of year-end | — | 2,517,600 | — | N/A | — | — | 58,136 | — | N/A | — | ||||||||||||||||||||||||||
Increase for fair value of awards granted during the year that vested during the year | 237,575 | — | 58,136 | N/A | 58,136 | — | — | — | N/A | 873,600 | ||||||||||||||||||||||||||
Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | — | — | — | N/A | — | — | (152,916 | ) | — | N/A | — | |||||||||||||||||||||||||
Increase for change in fair value from prior year-end to vesting date of awards granted prior to year that vested during the year | (545,600 | ) | — | (233,853 | ) | N/A | (212,211 | ) | — | (10,089 | ) | — | N/A | (779,000 | ) | |||||||||||||||||||||
Decrease for change in fair value from prior year to vesting date of awards granted prior to year that were forfeited during the year | (544,500 | ) | — | (12,000 | ) | N/A | (6,500 | ) | — | (8,670 | ) | — | N/A | — | ||||||||||||||||||||||
Deduction for Amounts Reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column in the Summary Compensation Table | — | — | — | N/A | — | — | — | — | N/A | — | ||||||||||||||||||||||||||
Increase based upon Incremental Fair Value of Awards Modified during year | — | — | — | N/A | — | — | — | — | N/A | — | ||||||||||||||||||||||||||
Increase based on Dividends or Other Earnings Paid during year prior to Vesting Date of Award | — | — | — | N/A | — | — | — | — | N/A | — | ||||||||||||||||||||||||||
Total Adjustments to Summary Compensation | — | — | — | N/A | — | — | — | — | N/A | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total Compensation Actually Paid | $ | 419,883 | $ | 3,080,095 | $ | 1,143,643 | N/A | $ | 975,497 | $ | — | $ | 1,011,560 | $ | — | N/A | $ | 2,624,921 | ||||||||||||||||||
| (4) | The dollar amounts reported in column (m) represent the average amount of total compensation reported for our NEOs as a group (excluding our PEOs) for each covered fiscal year in the “Total” column of the Summary Compensation Table for each applicable year. |
| 27 |
| (5) | The dollar amounts reported in column (n) represent the average amount of “compensation actually paid” to our NEOs as a group (excluding our PEOs), as computed in accordance with Item 402(v) of Regulation S-K for each covered fiscal year. The dollar amounts do not reflect the actual average amount of compensation earned or received by or paid to our NEOs as a group (excluding our PEOs) during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the average total compensation for each covered fiscal year to determine the “compensation actually paid” to our NEOs as a group (excluding our PEOs) for such fiscal year: |
Adjustments to Determine Compensation “Actually Paid” for Other NEOs | 2022 | 2021 | ||||||
Summary Compensation Table – Total Compensation | $ | 527,315 | $ | 1,848,103 | ||||
Deduction for Amounts Reported under the “Stock Awards” Column in the Summary Compensation Table | (67,536 | ) | (1,079,414 | ) | ||||
Deduction for Amounts Reported under the “Option Awards” Column in the Summary Compensation Table | — | — | ||||||
Increase for fair value of awards granted during the year that remain unvested as of year-end | — | 194,160 | ||||||
Increase for fair value of awards granted during the year that vested during the year | 13,416 | 414,474 | ||||||
Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | — | (368,999 | ) | |||||
Increase for change in fair value from prior year-end to vesting date of awards granted prior to year that vested during the year | (142,128 | ) | (213,456 | ) | ||||
Decrease for change in fair value from prior year to vesting date of awards granted prior to year that were forfeited during the year | (2,220 | ) | — | |||||
Deduction for Amounts Reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column in the Summary Compensation Table | — | — | ||||||
Increase based upon Incremental Fair Value of Awards Modified during year | — | — | ||||||
Increase based on Dividends or Other Earnings Paid during year prior to Vesting Date of Award | — | — | ||||||
Total Adjustments to Summary Compensation | — | — | ||||||
|
|
|
| |||||
Total Compensation Actually Paid | $ | 393,204 | $ | 527,723 | ||||
Analysis of Information Presented in the Pay Versus Performance Table
In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table above.
Compensation Actually Paid and Net Income
| 28 |
Compensation Actually Paid and Company TSR
All information provided above under the “Pay vs. Performance Comparison” heading will not be deemed to be incorporated by reference into any of TherapeuticsMD’s filings under the Securities Act or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent TherapeuticsMD specifically incorporates such information by reference.
| 29 |
EQUITY COMPENSATION PLAN INFORMATION
As of December 31, 2020,2022, the following table shows the number of securities to be issued upon exercise of outstanding options under equity compensation plans approved by our stockholders, which plans do not provide for the issuance of warrants or other rights.
Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | |||||||||||||||||||||||||||||
| (a) Number of Securities to be Issued Upon | (c) Number of Securities Remaining Available For Future Issuance Under Equity | |||||||||||||||||||||||||||||||
Plan Name | Exercise of Outstanding Options (#) | Vesting and Settlement of Restricted Stock Units (“RSUs”) (#) | Vesting and Settlement of Performance Stock Units (“PSUs”)(1) (#) | (b) Weighted- | Compensation Plans (Excluding Securities Reflected in Columns (a))(2) (#) | |||||||||||||||||||||||||||
Equity Compensation Plans Approved by Stockholders | 23,781,930 | (1) | $ | 4.80 | 2,583,565 | (2) | ||||||||||||||||||||||||||
2019 Plan(3) | 45,477 | 115,676 | 99,812 | 122.89 | 352,000 | |||||||||||||||||||||||||||
2012 Plan | 10,808 | — | — | 281.16 | — | |||||||||||||||||||||||||||
2009 Plan | 114,478 | — | — | 266.97 | — | |||||||||||||||||||||||||||
Equity Compensation Plans Not Approved by Stockholders | — | — | — | |||||||||||||||||||||||||||||
None | — | — | — | — | — | |||||||||||||||||||||||||||
| (1) |
|
|
| (2) | The number of remaining shares of common stock available for future issuance is based on an assumption that the maximum performance goals for PSUs |
| 30 | ||||||||
|
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Policy Relating to Related Party Transactions
We have a policy that we will not enter into any material transaction in which a director or officer has a direct or indirect financial interest unless the transaction is determined by our Board of Directors to be fair to us or is approved by a majority of our disinterested directors or by our stockholders, as provided for under Nevada law. Generally, our Board of Directors as a whole, other than an affected director, if applicable, determines whether a director or officer has a direct or indirect (i.e., any) financial interest in a transaction deemed material based upon our Code of Conduct and Ethics and Nevada law. From time to time, our Audit Committee, in accordance with its charter, will also review potential conflict of interest transactions involving members of our Board of Directors and our executive officers. The policy with respect to such transactions is provided in our company’s Code of Conduct and Ethics.
Related Party Transactions
Other than compensation arrangements, we describe below transactions and series of similar transactions, since January 1, 2020,2021, to which we were a party or will be a party, in which:
the amounts involved exceeded or will exceed $120,000; and
any of our directors, executive officers, or holders of more than 5% of our voting securities, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest.
Compensation arrangements for our directors and NEOs are described elsewhere in this proxy statement.
Agreements with Catalent, Inc.
In July 2015, J. Martin Carroll, a former director of our company, was appointed to the board of directors of Catalent, Inc. Mr. Carroll resigned from our board of directors effective December 31, 2021. From time to time, we have entered into agreements with Catalent, Inc. and its affiliates, or Catalent, in the normal course of business. AgreementsThese agreements, however, were transferred to Mayne Pharma as part of our transaction with Mayne. Since July 2015, agreements with Catalent have beenwere reviewed by independent directors of our company, or a committee consisting of independent directors of our company since July 2015.during the time in which Mr. Carroll sat on our board of directors. During the years ended December 31, 2020, 20192022, 2021 and 2018,2020, we were billed by Catalent approximately $3,036,000, $6,101,000$4,287,181, $4,839,531, and $4,111,000,$5,007,040, respectively, for manufacturing activities related to our clinical trials, scale-up, registration batches, stability, and validation testing. As of December 31, 2020 and 2019, there were amounts due to Catalent of approximately $0 and $35,000, respectively. In addition, we have minimum purchase requirements in place with Catalent.
Agreements with American International Group, Inc.
In April 2020, Karen L. Ling was appointed to our Board of Directors. At the time, Ms. Ling served as Executive Vice President and Chief Human Resources Officer of American International Group, Inc., or AIG, was appointed toAIG. Ms. Ling resigned from our boardBoard of directors.Directors effective December 30, 2022. From time to time, we have entered into agreements with AIG in the normal course of business. Agreements with AIG have been reviewed by independent directors of our company,Company, or a committee consisting of independent directors of our company,Company, since April 2020. During the yearyears ended December 31, 2022, 2021 and 2020, we were billed by AIG approximately $209,000$10,000, $43,000, and $187,000 for various insurance coverage for our company.
|
COMPENSATION COMMITTEE REPORTAgreements with Rubric Capital Management LP
The Compensation Committee has reviewed and discussed with managementOn August 23, 2022, we appointed Mr. Justin Roberts as a director to fill a newly created vacancy on the Compensation Discussion and Analysis section included in this proxy statement and, based on such review and discussions, the Compensation Committee recommended to our Board of Directors thatDirectors. As a director of the Compensation Discussion and Analysis section be includedCompany, Mr. Roberts is entitled to receive compensation in this proxy statement.the same
| ||
|
manner as our other non-employee directors, but he has elected not to receive any compensation for his service as a non-employee director at this time. Mr. Roberts currently serves as a Partner of Rubric. On July 29, 2022, September 30, 2022, October 28, 2022 and May 1, 2023, we entered into subscription agreements with Rubric. On December 30, 2022, and in accordance with the terms of the Certificate of Designation, the Company redeemed all 29,000 outstanding shares of the Company’s Series A Preferred Stock from Rubric at a purchase price of $1,333 per share. The Company also paid certain affiliates of Rubric approximately $3.0 million as a make-whole payment pursuant to the subscription agreements previously entered into between the Company and Rubric.
| 32 |
We compensate our non-employee directors with a combination of cash and equity. Our Board of Directors receives the following cash compensation for their service: each director receives an annual cash retainer of $57,500; the chairperson of the Board receives an additional $22,500 annual cash retainer; the chairperson of our Audit Committee receives an annual cash retainer of $30,000 and the other members of the Audit Committee receive an annual cash retainer of $15,000; the chairperson of the Compensation Committee receives an annual cash retainer of $20,000 and the other members of the Compensation Committee receive an annual cash retainer of $12,000; and the chairperson of each of our other committees receives an annual cash retainer of $12,500 and the other members receive an annual cash retainer of $7,500. We also reimburse our directors for reasonable expenses related to attendance at Board of Directors and committee meetings. In addition, each director who served on our Board of Directors after April 1, 2020September 29, 2022 received an annual award of 96,8645,000 restricted stock units, with the exception of the Chairman of the Board who received an annual award of 145,29634,175 restricted stock units. All restricted stock units granted to our directors in 20202022 represent a contingent right to receive one share of common stock and will vest on the one year anniversary of the date of grant. We do not pay our directors per meeting fees.
The following table and accompanying footnotes detail compensation paid to our directors for services rendered for the year ended December 31, 2020. Messrs. Finizio’s and Milligan’s2022. Mr. Roberts is entitled to receive compensation in the same manner as our other non-employee directors, but he has elected not to receive any compensation for his service as a non-employee director at this time. Mr. O’Dowd’s compensation is described above under “Executive Compensation.”
Name(1) | Fees Earned or Paid in Cash | Stock Awards(2)(3) | All Other Compensation | Total | ||||||||||||
Brian A. Bernick, M.D.(4) | $ | — | $ | — | $ | 96,610 | $ | 96,610 | ||||||||
Jane Barlow, M.D., M.B.A., M.P.H.(5) | $ | 38,500 | $ | 116,237 | $ | 77,000 | $ | 231,737 | ||||||||
Paul Bisaro(6) | $ | 58,125 | $ | 116,237 | $ | — | $ | 174,362 | ||||||||
J. Martin Carroll | $ | 83,250 | $ | 116,237 | $ | — | $ | 199,487 | ||||||||
Cooper C. Collins | $ | 92,250 | $ | 116,237 | $ | — | $ | 208,487 | ||||||||
Robert V. LaPenta, Jr.(5) | $ | 47,500 | $ | 116,237 | $ | 95,000 | $ | 258,737 | ||||||||
Karen L. Ling(7) | $ | 46,125 | $ | 116,237 | $ | — | $ | 162,362 | ||||||||
Jules A. Musing | $ | 75,000 | $ | 116,237 | $ | — | $ | 191,237 | ||||||||
Gail Naughton, Ph.D.(6) | $ | 50,635 | $ | 116,237 | $ | — | $ | 166,872 | ||||||||
Nicholas Segal(5)(8) | $ | 18,125 | $ | — | $ | 54,375 | $ | 72,500 | ||||||||
Angus C. Russell | $ | 87,500 | $ | 116,237 | $ | — | $ | 203,737 | ||||||||
Tommy G. Thompson | $ | 106,000 | $ | 174,355 | $ | — | $ | 280,355 | ||||||||
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards(2) ($) | All Other Compensation ($) | Total ($) | ||||||||||||
Tommy G. Thompson(6) | 150,000 | 229,998 | — | 379,998 | ||||||||||||
Paul M. Bisaro(3) | 90,868 | 33,650 | — | 124,518 | ||||||||||||
Cooper C. Collins | 92,000 | 33,650 | — | 125,650 | ||||||||||||
Karen L. Ling(3) | 76,456 | 33,650 | — | 110,106 | ||||||||||||
Jules A. Musing(3) | 70,544 | 33,650 | — | 104,194 | ||||||||||||
Gail Naughton, Ph.D. | 72,500 | 33,650 | — | 106,150 | ||||||||||||
Angus C. Russell(3) | 87,500 | 33,650 | — | 121,150 | ||||||||||||
Justin Roberts(5) | — | — | — | — | ||||||||||||
Robert G. Finizio(4) | 7,507 | — | — | 7,507 | ||||||||||||
| (1) | As of December 31, |
|
Name | Option Awards | Stock Awards | ||||||
Dr. Bernick | 1,260,000 | 533,000 | ||||||
Dr. Barlow | 175,000 | 96,864 | ||||||
Mr. Bisaro | — | 96,864 | ||||||
Mr. Carroll | 350,000 | 96,864 | ||||||
Mr. Collins | 570,000 | 96,864 | ||||||
Mr. LaPenta, Jr. | 570,000 | 96,864 | ||||||
Ms. Ling | — | 96,864 | ||||||
Mr. Musing | 695,000 | 96,864 | ||||||
Dr. Naughton | — | 96,864 | ||||||
Mr. Russell | 350,000 | 96,864 | ||||||
Mr. Segal | 495,000 | — | ||||||
Mr. Thompson | 1,095,000 | 145,296 | ||||||
There were no forfeitures of option or restricted stock awards by any directors in fiscal year 2020.
Name | Option Awards (#) | Stock Awards (#) | ||||||
Tommy G. Thompson | 20,400 | 34,175 | ||||||
Paul M. Bisaro | — | — | ||||||
Cooper C. Collins | 9,900 | 5,000 | ||||||
Karen L. Ling | — | — | ||||||
Jules A. Musing | 13,900 | — | ||||||
Gail Naughton, Ph.D. | — | 5,000 | ||||||
Angus C. Russell | 7,000 | — | ||||||
Justin Roberts | — | — | ||||||
Robert G. Finizio | — | — | ||||||
| (2) | We grant |
|
|
|
|
|
|
|
| basis over the requisite service period of the entire award. For further information, see “Note 10 – Stockholders’ deficit” of the financial statements included in our most recent Annual Report on Form 10-K. |
| (3) | These individuals resigned from the Board of Directors on December 30, 2022. |
| (4) | Mr. Finizio resigned from the Board of Directors on February 17, 2022. |
| (5) | Mr. Roberts joined the Board of Directors on August 23, 2022. |
| (6) | Mr. Thompson was appointed Executive Chairman of the Board of Directors on September 6, 2022. |
| 34 |
The Board of Directors has appointed an Audit Committee consisting of independent directors. All of the members of the committee must be “independent” of our company and management, as independence is defined in applicable rules of the SEC and the Nasdaq listing standards.
The purpose of the Audit Committee is to assist the oversight of our Board of Directors in the integrity of the financial statements of our company, our company’s compliance with legal and regulatory matters, the independent auditor’s qualifications and independence, and the performance of our company’s independent auditor and any internal audit function. The primary responsibilities of the committee include overseeing our company’s accounting and financial reporting process and audits of the financial statements of our company. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The independent auditor is responsible for auditing the financial statements and expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles.
In this context, the Audit Committee met and held discussions with management and the independent registered public accounting firm. Management represented to the Audit Committee the audited financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee reviewed and discussed the audited financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The independent registered public accounting firm also provided to the Audit Committee the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence. The Audit Committee discussed with the independent registered public accounting firm that firm’s independence.
The Audit Committee discussed with our independent auditor the overall scope and plans for its audit. The Audit Committee meets with the independent auditor, with and without management present, to discuss the results of the independent auditor’s examinations, its evaluations of our company, the internal controls, and the overall quality of the financial reporting. The Audit Committee held fivesix meetings in 2020.2022.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20202022 for filing with the SEC.
The report has been furnished by the Audit Committee of our Board of Directors.
|
| 35 |
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, officers, and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. These regulations require the directors, officers, and persons who own more than 10% of a registered class of our equity securities to furnish us with copies of all Section 16(a) forms they file.
Based solely upon our review of the copies of such forms received by us during the fiscal year ended December 31, 2020,2022, and written representations that no other reports were required, we believe that each person who, at any time during such fiscal year was a director, officer, or persons who own more than 10% of a registered class of our equity securities, complied with all Section 16(a) filing requirements during such fiscal year, except that Mr. FinizioBrian Bernick, Marlan D. Walker, Mark Glickman and Michael Donegan each filed a late Form 4 on December 9, 2022 in connection with the vesting of RSUs and the sale of common stock to cover the tax obligations arising from the same and Mark Glickman, Hugh O’Dowd, Marlan D. Walker and Michael Donegan each filed a late Form 4 on March 8, 202123, 2022 in connection with a giftthe grant of 300,000 shares of common stock made on February 28, 2020.RSUs.
| 36 | ||||||||
|
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS, AND OFFICERS
The following table sets forth information regarding the beneficial ownership of our common stock as of March 24, 2021,April 20, 2023, by the following:
each of our directors and named executive officers;
all of our directors and executive officers as a group; and
each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock.
Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power of that security, including options and warrants that are currently exercisable or exercisable within 60 days of March 24, 2021.April 20, 2023. Shares issuable pursuant to stock options, warrants, and convertible securities are deemed outstanding for computing the percentage of the person holding such options, warrants, or convertible securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o TherapeuticsMD, Inc., 951 Yamato Road, Suite 220, Boca Raton, Florida 33431.
| Shares Beneficially Owned | ||||||||||||
Name of Beneficial Owners | Number | Percent(1) | ||||||||||
Executive Officers and Directors: | ||||||||||||
Robert G. Finizio(2) | 22,512,808 | 5.56 | % | |||||||||
John C.K. Milligan, IV(3) | 8,079,228 | 2.00 | % | |||||||||
Edward Borkowski | 145,167 | * | ||||||||||
Tommy G. Thompson(4) | 1,799,156 | * | ||||||||||
Paul M. Bisaro | 50,000 | * | ||||||||||
J. Martin Carroll(5) | 360,000 | * | ||||||||||
Cooper C. Collins(6) | 710,000 | * | ||||||||||
Karen L. Ling | — | * | ||||||||||
Jules A. Musing(7) | 700,000 | * | ||||||||||
Gail K. Naughton, Ph.D. | — | * | ||||||||||
Angus C. Russell(8) | 443,500 | * | ||||||||||
All executive officers and directors as a group (14 persons)(9) | 34,799,859 | 8.60 | % | |||||||||
5% Stockholders: | ||||||||||||
BlackRock, Inc.(10) | 21,419,273 | 5.33 | % | |||||||||
| Shares Beneficially Owned | ||||||||||||
Name of Beneficial Owners | Number | Percent(1) | ||||||||||
Executive Officers and Directors: | ||||||||||||
Marlan D. Walker(2) | 27,107 | * | ||||||||||
Tommy G. Thompson(3) | 40,687 | * | ||||||||||
Cooper C. Collins(4) | 56,622 | * | ||||||||||
Gail K. Naughton, Ph.D. | — | * | ||||||||||
Justin Roberts | — | * | ||||||||||
Brian Bernick, MD(5)(6) | 65,026 | * | ||||||||||
James D’Arecca(6)(7) | 2,476 | * | ||||||||||
Michael Donegan(8) | 65,753 | * | ||||||||||
Mark A. Glickman(6)(9) | 27,060 | * | ||||||||||
Hugh O’Dowd(6)(10) | 121,666 | 1.2 | % | |||||||||
All executives and directors as a group (5 persons) | 124,416 | 1.2 | % | |||||||||
5% Stockholders: | ||||||||||||
Rubric Capital Management LP(11) | 1,757,191 | 17.3 | % | |||||||||
| * | Represents less than 1% of the outstanding shares of our common stock. |
| (1) |
|
| (2) | Includes (i) |
| (3) | Includes (i) |
|
|
Includes (i) |
|
Includes (i) |
|
|
|
|
| Mr. Bernick (i) holds, together with his spouse as tenants by the entirety, a 70.6% membership interest in the GP, (ii) holds, together with his spouse as tenants by the entirety, a 73% limited partner interest in BF Investment, (iii) holds in the aggregate, with his spouse in their individual capacities, 3.272% limited partner interest in BF Investment, and (iv) serves as the Manager of the GP. |
| (6) | Messrs. Bernick, Glickman, O’Dowd, and D’Arecca left the Company in 2022. Accordingly, the Company does not have beneficial ownership information for these individuals as of April 20, 2023. The information above is based on SEC filings and records of the Company. |
| (7) | Includes 2,476 shares held by Mr. D’Arecca directly. |
| (8) | Includes (i) 61,853 shares held by Mr. Donegan directly and (ii) 3,900 shares issuable to Mr. Donegan upon the exercise of vested stock options. |
| (9) | Includes 27,060 shares held by Mr. Glickman directly. |
| (10) | Includes 121,666 shares held by Mr. O’Dowd directly. |
| (11) | Based solely on the Form 4 filed with the SEC by Rubric Capital Management LP on December 12, 2022. The address of Rubric Capital Management LP is 155 East 44th Street, Suite 1630, New York, NY 10017. |
| 38 |
ADVISORY VOTEON EXECUTIVE COMPENSATION (“SAY-ON-PAY”)
Background
The Dodd-Frank Act enables our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC’s rules.
Summary
Pursuant to Section 14A of the Exchange Act, we are asking our stockholders to provide advisory approval of the compensation of our NEOs, as such compensation is described in the Executive Compensation Discussion and Analysis section the tabular disclosure regarding such compensation, and the accompanying narrative disclosure set forth inof this proxy statement. Our executive compensation program is designed to enable us to attract, motivate, and retain highly qualified executives. This program provides long-term stock-based incentive compensation that focuses our executives’ efforts on building stockholder value by aligning their interests with those of our stockholders. We urge our stockholders to review the Compensation Discussionexecutive-related compensation information and Analysis section included in this proxy statement and the executive-related compensationrelated tables for more information.
It is expected that the next say-on-pay vote will occur at the 20222024 annual meeting of stockholders.
Board Recommendation
Our Board of Directors believes that the information provided within the “Executive Compensation” section of this proxy statement demonstrates our executive compensation program is designed appropriately and is working to ensure our NEOs receive the majority of their compensation based on performance-driven considerations and that management’s interests are aligned with our stockholders’ interests to support long-term value creation.
The following resolution is submitted for a stockholder vote at the annual meeting:
RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers for the fiscal year ended December 31, 2020,2022, as disclosed in the Compensation Discussion and Analysis section, compensation tables and narrative discussion set forth in this proxy statement.
Vote Required
The say-on-pay vote is advisory, and therefore not binding on our company, the Compensation Committee, or our Board of Directors. Although non-binding, the vote will provide information to the Compensation Committee and our Board of Directors regarding investor sentiment about our executive compensation philosophy, policies, and practices, which the Compensation Committee and our Board of Directors will be able to consider when determining executive compensation for the years to come.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” ADOPTION OF THE RESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS FOR THE FISCAL YEAR ENDED DECEMBER 31,
|
| 39 |
APPROVALOF NON-EXECUTIVEAN SATOCKMENDMENTTOTHE OAPTIONMENDEDAND ERXCHANGEESTATED PAROGRAMRTICLESOF INCORPORATION
IntroductionOverview
We are seekingOur Board of Directors has approved the amendment to our Amended and Restated Articles of Incorporation, as amended, subject to stockholder approval, of an option exchange program, or the Non-Executive Option Exchange Program, that would allow current employees, not including advisers, consultants, contractors, named executive officers, or present or past non-employee directors, referred to as Eligible Employees, to exchange significantly out-of-the-money or “underwater” options to purchase shares of our common stock for the issuance of new restricted stock units, or New RSUs, that may be settled for a lesser number of shares (as determined in accordance with the “Exchange Ratio” as defined below) that will be granted under the 2019 Plan. We anticipate that the New RSUs will be granted on or around July 1, 2021, or the Exchange Date, immediately following the close of the program. We would like to offer this program to Eligible Employees because we believe that it will provide a more cost-effective retention and incentive tool than issuing additional equity or paying cash compensation to Eligible Employees.
We believe that, if approved by our stockholders, the Non-Executive Option Exchange Program could permit us to enhance long-term stockholder value by restoring competitive incentives to the participants so they are further motivated to complete and deliver the important strategic and operational initiatives of our company, as exercise prices significantly in excess of market price undermine the effectiveness of equity-denominated awards as employee performance and retention incentives. In addition, the Non-Executive Option Exchange Program will allow us to reduce our equity award “overhang” (that is,increase the number of authorized shares subjectof common stock from 12,000,000 shares to outstanding equity awards relative32,000,000 shares (the “Share Increase”) and recommends unanimously that our stockholders approve the Share Increase. The proposed amendment is reflected in the Charter Amendment attached to this proxy statement as Appendix A. For avoidance of doubt, this Proposal Three will only amend Article IV of our Amended and Restated Articles of Incorporation, as amended, to increase the totalnumber of authorized shares of common stock by 20,000,000. You are encouraged to read the Charter Amendment in its entirety.
The additional 20,000,000 shares of common stock will be part of the existing class of common stock, and, if and when issued, would have the same rights and privileges as the shares of common stock presently issued and outstanding. The Company’s Amended and Restated Articles of Incorporation, as amended, have not been previously amended to increase the number of authorized shares of common stock since July 2020.
Purpose
Our Board of Directors believes that the authorized number of shares of common stock outstanding)should be increased as a matter of good corporate governance to provide sufficient shares for such corporate purposes as may reasonably be determined by the Board of Directors to be necessary and in the best interest of our company and stockholders. These purposes may include, but are not limited to:
raising capital through the cancellationfuture sale of outstandingour common stock optionswhen necessary or appropriate;
expanding our business through the acquisition of other businesses, products, or assets; and
establishing partnerships, collaborations, and/or other strategic relationships with other companies.
Our Board of Directors believes that currentlythese additional shares would provide no meaningful retentionus with needed flexibility to issue shares in the future without potential expense or incentive valuedelay incident to our employees.
Overview
Atobtaining stockholder approval for a particular issuance. Other than in connection with the endPrivate Placement, we do not have any specific plans, arrangements, undertakings or agreements for the proposed increase of 2020,authorized shares in connection with any of the Compensation Committee began considering,foregoing prospective activities. Once authorized, the additional shares of common stock may be issued with input from Meridian, whether an option exchange program would assist with retaining and incentivizing our employees. After a seriesapproval of discussions and after consideration of various design alternatives, in February 2021 our Compensation Committee recommended to our Board and our Board subsequently authorized, that we pursue a stock option exchange program for Eligible Employees.
Under the proposed Non-Executive Option Exchange Program, if approved byof Directors but without further approval from our stockholders, each New RSUunless applicable law, rule or regulation requires stockholder approval for such issuance. Stockholder approval of the Share Increase is required under Nevada law.
Proposed Changes to the Amended and Restated Articles of Incorporation, as Amended
The proposed Share Increase will increase the number of shares of common stock authorized for issuance from 12,000,000 shares to 32,000,000 shares. The Company is currently authorized to issue 22,000,000 shares of capital stock, of which 12,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock, $0.001 par value per share (“preferred stock”) (none of which are currently issued and outstanding). The Share Increase will not change any substantive terms of the common stock or preferred stock or any powers or rights of their respective holders. The common stock will continue to be grantedlisted and traded on the Nasdaq Global Select Market under the 2019 Plansymbol “TXMD.”
If Proposal Three is approved, we intend to amend our Amended and Restated Articles of Incorporation, as amended, in connection with implementing the proposal. A copy of the Charter Amendment is attached to this proxy statement as Appendix A.
| 40 |
Certain Risks Associated with the Charter Amendment
There can be no assurance that the market price per share of our common stock after the Charter Amendment will have a new vesting schedule of three years, with vestingremain constant in equal annual installments,proportion to promote retention. The New RSUs will cover a lesserthe increase in the number of shares of our common stock thanoutstanding before the Eligible OptionsCharter Amendment.
The market price of our common stock will also be based on our performance and other factors, some of which are unrelated to the number of shares outstanding. These factors include the status of the market for our common stock, our reported results of operations in accordance withfuture periods, and general economic, market and industry conditions.
Principal Effects on Outstanding Common Stock
Holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. Upon a liquidation, dissolution or windup of our company, holders of common stock would be entitled to share ratably in any assets for distribution to stockholders after payment of all of the Exchange Ratio as described below. Any Eligible Options exchanged for New RSUs will be cancelledcompany’s obligations, subject to the rights to receive preferential distributions of the holders of any preferred stock then outstanding.
The additional shares of common stock would have rights identical to our common stock currently outstanding. Approval of the Share Increase and any issuance of common stock would not affect the rights of the holders of our common stock currently outstanding, except to the extent that future issuances of common stock would reduce each existing stockholder’s proportionate ownership. If the proposed Share Increase is approved and the netBoard of Directors decides to issue such shares underlyingof common stock, such issuance of common stock would increase the Eligible Options grantedoutstanding number of shares of common stock, thereby causing dilution in excessearnings per share and voting interests of the outstanding common stock. As of the record date, shares underlying the New RSUs will not be returnedof our common stock were issued and outstanding, shares of our common stock were subject to the pool availableoutstanding stock options, warrants, restricted stock awards, or other convertible securities, and shares of our common stock were reserved for issuance under the 2019 Plan.Plan, thereby leaving shares of common stock unassigned and authorized for potential issuance of the current 12,000,000 shares of common stock authorized. If approved, the Share Increase will not change the number of shares of preferred stock authorized for issuance.
UnderAdditionally, the listing rulesissuance of NASDAQadditional shares of common stock could have the effect of making it more difficult for a third party to acquire, or discouraging a third party from attempting to acquire, control of our company. While the issuance of additional shares of common stock may be deemed to have potential anti-takeover effects, including by delaying or preventing a change in control of the company through subsequent issuances of these shares and our 2019 Plan, stockholder approval is required to implement the Non-Executive Option Exchange Program. If our stockholders approveother reasons set forth above, which among other things, could include issuances in one or more transactions that would make a change in control of the company more difficult, and therefore, less likely, this proposal to increase the authorized common stock is not prompted by any specific effort of which we are aware to accumulate shares of our common stock or obtain control of the company. A takeover may be beneficial to independent stockholders because, among other reasons, a potential suitor may offer such stockholders a premium for their shares of common stock as compared to the then-existing market price. Although the issuance of additional shares of common stock could, under certain circumstances, have an anti-takeover effect, this proposal to adopt the Charter Amendment is not in response to any attempt to accumulate common stock or obtain control of the company that we are aware of, nor is it part of a plan by management to recommend a series of similar amendments to the Board of Directors intends to commence the exchange offer as soon as practicable following the annual meeting, but in no event later than 12 months thereafter. If we do not obtain stockholder approval of this proposal, we will not be able to implement the Non-Executive Option Exchange Program and the current terms of the Eligible Options as described below will remain in effect.
Reasons for the Non-Executive Option Exchange Program
We believe that an effective and competitive employee incentive program is imperative for the future growth and success of our company. We rely on our employees to implement our strategic initiatives, expand and develop our business, and satisfy customer needs. Competition for many of theseor stockholders.
|
employees, particularly in the pharmaceutical industry, is intense and many companies use stock options as a means of attracting, motivating, and retaining their best employees. Stock options historically constituted a key part of our hiring, incentive, and retention programs because our Board of Directors believes that equity compensation encourages employees to act like owners of the business, motivating them to work toward our success and rewarding their contributions by allowing them to benefit from increases in the value of our common stock.
When the Compensation Committee approves the grant of a stock option, it establishes the exercise price that the employee must pay to purchase shares of our common stock when the option is exercised. The per share exercise price is set at the closing price of a share of our common stock as reported by NASDAQ on the date the option is granted. Thus, an employee receives value only if the employee exercises an option and sells the purchased shares at a price that exceeds the stock option’s exercise price.
In recent years, the market price of our common stock has been subject to material fluctuations, many of which were outside the control of our company and our employees. For example, our common stock has been subject to large short sale positions, as well as to FDA regulatory hurdles that were eventually overcome. As a result, as of March 24, 2021, 146 Eligible Employees held options to purchase 5,456,500 shares of our common stock with exercise prices ranging from $5.01 per share to $8.92 per share, which is above our common stock’s March 24, 2021 closing price of $1.35. The “out-of-the-money” options are no longer effective as performance and retention incentives. We believe that to enhance long-term stockholder value we need to maintain competitive employee incentive and retention programs. An equity stake in the success of our company is a critical component of these programs. Although we continue to believe that stock options are an important component of our employees’ total compensation, many of our employees view their existing stock options as having little or no value due to the difference between the exercise prices and the current market price of our common stock. As a result, for many employees, these options are ineffective at providing the incentives and retention value that our Board of Directors believes is necessary to motivate our employees to increase long-term stockholder value. We believe the Non-Executive Option Exchange Program will provide us with an opportunity to restore for Eligible Employees an incentive to remain with us and contribute to the future growth and success of our company.
When considering how best to continue to incentivize and reward our employees who have out-of-the-money stock options, the Compensation Committee engaged Meridian to review and evaluate strategies to address this issue. After analyzing all relevant factors, we determined that a program under which Eligible Employees could exchange stock options with an exercise price greater than or equal to a number determined using the Threshold Exercise Price calculation for New RSUs, was the most attractive for a number of reasons, including the following:
|
|
|
|
|
|
Description of the Material Terms of the Non-Executive Option Exchange Program
Implementing the Non-Executive Option Exchange Program. If our stockholders approve this proposal, and our Board of Directors determines to implement the Non-Executive Option Exchange Program, we expect the Non-Executive Option Exchange Program to commence within twelve months following the date of the annual meeting. The Non-Executive Option Exchange Program is currently anticipated to occur in July 2021. If the Non-Executive Option Exchange Program does not commence within this time frame, we would only proceed with an option exchange program after first seeking stockholder approval. Even if the Non-Executive Option Exchange Program is approved by our stockholders, our Board of Directors will retain the authority, in its sole discretion, to terminate or postpone the Non-Executive Option Exchange Program at any time prior to the closing of the tender offer or to exclude certain Eligible Options or Eligible Employees from participating in the Non-Executive Option Exchange Program.
Upon the commencement of the offer, or the Offer Date, Eligible Employees will receive a written offer setting forth the terms and timing of the Non-Executive Option Exchange Program and may voluntarily elect to participate. The written offer will be governed by the tender offer rules of the SEC. At or before the Offer Date, we will file the offer to exchange and other related documents with the SEC as part of a tender offer statement on Schedule TO. Eligible Employees, as well as stockholders and members of the public, will be able to obtain the Offer to Exchange and other documents filed by us with the SEC free of charge from the SEC’s website at www.sec.gov. Pursuant to the SEC tender offer rules, we will give Eligible Employees at least 20 business days to elect to surrender Eligible Options in exchange for a lesser amount of New RSUs in accordance with the Exchange Ratio.
Eligible Options for the Non-Executive Option Exchange Program. To be eligible for exchange under the Non-Executive Option Exchange Program, an option (1) must be outstanding as of the closing of the Non-Executive Option Exchange Program, (2) must be granted on or prior to the date that is 12 months preceding the Offer Date, and (3) must have an exercise price per share greater or equal to the Threshold Exercise Price. As of March 24, 2021, options to purchase 23,714,180 shares of our common stock were outstanding, of which options to purchase 5,456,500 shares would be eligible for exchange under the Non-Executive Option Exchange Program (assuming the Non-Executive Option Exchange Program closes on July 1, 2021 and using a Threshold Exercise Price of $5.01 for the calculation).
Eligibility. The Non-Executive Option Exchange Program will be open to all Eligible Employees. Our named executive officers, past or present advisers, consultants, contractors, former employees, or present or past members of our Board will not be eligible to participate in the Non-Executive Option Exchange Program. To be eligible, an employee must be employed by us at the time the tender offer commences. Additionally, to receive the New RSUs, an Eligible Employee who exchanges Eligible Options must be an employee on the Grant Date of such New RSUs. As of March 24, 2021, there were approximately 146 Eligible Employees in the company who held Eligible Options.
Calculation of Exchange Ratio. The Non-Executive Option Exchange Program is not a one-for-one exchange. The total number of shares of our common stock underlying a New RSU that an Eligible Employee will receive with respect to exchanged Eligible Options will be determined by dividing the number of shares of our common stock underlying the exchanged Eligible Options by the Exchange Ratio and rounding to the nearest whole number.
|
Shortly before the commencement of the Non-Executive Option Exchange Program, our Compensation Committee will determine the Exchange Ratio by assigning an average exchange ratio to each of the pools of outstanding stock options
Although the Exchange Ratio cannot be determined prospectively because the fair market value of our common stock will change prior to commencement of the Non-Executive Option Exchange Program, the table below provides an example of the Exchange Ratio that our Compensation Committee would use if the fair market value of our common stock is $1.33 per share shortly before the commencement of the Non-Executive Option Exchange Program. As illustrated in the table below, the applicable Exchange Ratio will vary based on the exercise price of the Eligible Option.
| ||
| ||
| ||
| ||
| ||
| ||
| ||
In this example, if an Eligible Employee elected to exchange an Eligible Option to purchase 1,000 shares with an exercise price of $5.10 per share, that Eligible Employee would receive 274 New RSUs (that is, 1,000 divided by 3.65, with the result rounded to the nearest whole number, equals 274).
For illustrative purposes only, the following table shows the number of shares of our common stock underlying outstanding Eligible Options as of March 24, 2021, excluding for this purpose, any Eligible Options that expire by their terms on or prior to an assumed closing date of the Non-Executive Option Exchange Program of July 1, 2021, categorized by the exchange ratios in the example above.
Exercise Price Range of Eligible Options | Maximum Number of Shares Underlying Eligible Options | Weighted Average Exercise Price | Weighted Average Remaining Life (in Years) | Exchange Ratio | Maximum New RSUs Granted | |||||||||||||||
$5.01 to $5.50 | 1,812,000 | $ | 5.14 | 5.7 | 3.65 for 1 | 496,441 | ||||||||||||||
$5.51 to $6.00 | 1,174,000 | $ | 5.66 | 7.3 | 2.90 for 1 | 404,810 | ||||||||||||||
$6.01 to $6.50 | 437,000 | $ | 6.33 | 6.5 | 3.55 for 1 | 123,101 | ||||||||||||||
$6.51 to $7.00 | 727,500 | $ | 6.83 | 6.0 | 4.20 for 1 | 173,212 | ||||||||||||||
$7.01 to $8.00 | 283,500 | $ | 7.66 | 4.5 | 7.20 for 1 | 39,369 | ||||||||||||||
$8.01 to $9.00 | 1,022,500 | $ | 8.86 | 4.8 | 8.50 for 1 | 120,295 | ||||||||||||||
Total | 5,456,500 | $ | 6.40 | 6.0 | 4.65 for 1 | 1,357,228 | ||||||||||||||
Election to Participate. Participation in the Non-Executive Option Exchange Program will be voluntary. The Non-Executive Option Exchange Program will not be conditioned on a minimum level of participation. Eligible Employees will be permitted to exchange all or none of their Eligible Options for New RSUs on a grant-by-grant basis.
Vesting of New RSUs. The New RSUs will not be exercisable on the date they are granted, even if the corresponding exchanged Eligible Options had previously become exercisable. The New RSUs will vest and become exercisable in three equal annual installments following the Grant Date, subject to the continuous service of the Eligible Employee and other relevant terms and conditions of our 2019 Plan.
Other Terms and Conditions of the New RSUs. The other terms and conditions of the New RSUs will be set forth in an award agreement to be entered into as of the Grant Date. The shares of our common stock underlying the New RSUs are currently registered on a registration statement filed with the SEC.
|
Treatment of Net Shares and Impact of 2019 Plan. The Eligible Options exchanged for New RSUs will be cancelled. The net shares underlying the Eligible Options in excess of the shares underlying the New RSUs will not be returned to the 2019 Plan.
Accounting Impact and Treatment. The Exchange Ratio will be applied on a grant-by-grant basis and will generally be designed to result in a fair value, for accounting purposes, of the New RSUs that will be approximately 95% of the fair value of the Eligible Options (based on valuation assumptions made shortly before the Non-Executive Option Exchange Program commences). The Exchange Ratio will be established by grouping together Eligible Options with certain exercise prices and assigning an appropriate Exchange Ratio to each grouping, based on the fair value of the Eligible Options (calculated using the Black-Scholes model in compliance with ASC Topic 718) within the relevant grouping. The incremental compensation expense associated with the Non-Executive Option Exchange Program will be measured as the excess, if any, of the fair value of each New RSU granted to participants in the Non-Executive Option Exchange Program, measured as of the date the New RSUs are granted, over the fair value of the Eligible Options surrendered in exchange for the new RSUs, measured immediately prior to the cancellation. We do not expect the incremental compensation expense, if any, to be material. We will recognize any such incremental compensation expense ratably over the vesting period of the New RSUs.
United States Federal Income Tax Consequences. The following is a summary of the anticipated material United States federal income tax consequences of participating in the Non-Executive Option Exchange Program. A more detailed summary of the applicable tax considerations to participants will be provided in the tender offer. We believe the exchange of Eligible Options for New RSUs pursuant to the Non-Executive Option Exchange Program should be treated as a nontaxable exchange, and no income should be recognized for United States federal income tax purposes by us or our employees upon the grant of the New RSUs. However, the Internal Revenue Service is not precluded from adopting a contrary position, and the laws and regulations themselves are subject to change. A more detailed summary of the applicable tax considerations to Eligible Employees will be provided in the tender offer.
Potential Modifications to Terms to Comply with Governmental Requirements. The terms of the Non-Executive Option Exchange Program will be described in a tender offer that we will file with the SEC. Although we do not anticipate that the SEC will require us to modify the terms significantly, it is possible we will need to alter the terms of the Non-Executive Option Exchange Program to comply with comments from the SEC. Changes in the terms of the Non-Executive Option Exchange Program may also be required for tax purposes as the laws and regulations are subject to change.
Effect on Stockholders
We are not able to predict the impact the Non-Executive Option Exchange Program will have on your interests as a stockholder, as we are unable to predict how many participants will exchange their Eligible Options or what the fair market value of our common stock will be on the Grant Date. If the Non-Executive Option Exchange Program is approved, the exchange ratios will result in the issuance of fewer shares subject to the New RSUs than were subject to the exchanged Eligible Options and may result in an incremental compensation expense for financial reporting purposes. In addition, the Non-Executive Option Exchange Program is intended to reduce both our existing stock option overhang and our need to issue supplemental equity awards in the future to remain competitive with our competitors.
|
Vote Required
The affirmative vote of the holders of a majority of the shares of our common stock present or represented and voting at the Annual Meeting is required to approve the Non-Executive Option Exchange Program. If you are both a stockholderAmendment to the Amended and an employee holding Eligible Options, please note that voting to approve the Non-Executive Option ExchangeProgram does not constitute an election to participate in the Non-Executive Option ExchangeProgram.Restated Articles of Incorporation, as amended.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT APPROVAL OF THE CHARTER AMENDMENT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. ON THE BASIS OF THE FOREGOING, OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE CHARTER AMENDMENT AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”
|
|
APPPROVALOF AMENDMENTTO THERAPEUTICSMD, INC. 2019 STOCK INCENTIVERIVATE PLANLACEMENT PROPOSAL
Background and PurposeOverview
On June 20, 2019,
As previously disclosed, on May 1, 2023, we entered into a subscription agreement (the “Purchase Agreement”) with Rubric Capital Management LP (“Rubric”). Pursuant to the Purchase Agreement, we agreed to sell to Rubric, or one or more of its affiliates, up to an aggregate of 5,000,000 shares of our common stock, par value $0.001 per share (the “Shares”), from time to time during the term of the Purchase Agreement, at a purchase price of the five-day volume-weighted average price of our common stock at the time of the sale of such Shares, at an aggregate purchase price of up to $5,000,000 (collectively, the “Private Placement”).
We are asking our stockholders to consider and vote on a proposal to approve the issuance of the Shares (the “Private Placement Proposal”), which may result in a “change of control” of the Company under the applicable rules of Nasdaq. Rubric is currently our principal stockholder and holds approximately 17.3% of our outstanding shares of common stock (based on 10,135,323 shares outstanding as of April 20, 2023). If the Private Placement is approved by our stockholders, Rubric may purchase up to 5,000,000 Shares and hold up to approximately 44.6% of our outstanding shares of common stock following the 2019 Plan. OnPrivate Placement (based on 10,135,323 shares outstanding as of April [●], 2021,20, 2023 and assuming 5,000,000 Shares are issued pursuant to the Private Placement).
The approval of the Private Placement Proposal is critical in order to consummate the Private Placement and obtain the financing necessary to allow us to continue as a going concern.
The Private Placement was approved by our Board of Directors adopted an amendmenton April 24, 2023. Our Board of Directors determined that the Private Placement was advisable and in the best interest of our stockholders, and determined to recommend that stockholders approve the Private Placement Proposal for a number of reasons which are summarized below. In reaching its determination, our Board of Directors also considered potential strategic alternatives and the risks that would be involved with delaying or declining to pursue the Private Placement given our current cash position.
Factors Considered by our Board of Directors in its Recommendation
After careful consideration, our Board of Directors determined that the Purchase Agreement and the transactions contemplated thereby, including the Private Placement, are advisable and in the best interests of the Company and its stockholders, and determined to recommend that our stockholders approve the Private Placement Proposal.
In evaluating the Purchase Agreement and the transactions contemplated thereby, including the Private Placement, our Board of Directors consulted with our senior management and our legal and strategic advisors, among others, and considered a number of factors, including, but not limited to, the 2019 Planfollowing material factors (not necessarily in order of relative importance):
Our current need for cash and the long-term benefit to increaseour financial condition of receiving the maximum numberproceeds from the sale of shares available under the 2019 Plan which requires stockholder approval.Shares, in light of our current cash position and liquidity needs.
The ability of the Company to issue and sell Shares pursuant to the Private Placement from time to time as needed.
Our management’s analysis, based on discussions with our strategic advisors, of the likelihood of securing alternative sources of capital through potential public or private sales of common stock, warrants, or convertible or nonconvertible debt securities and the likely price and other terms and conditions of such sales, as well as the significant risk, cost, and delay of pursuing any alternative.
| 43 |
The recent performance of our stock price on Nasdaq and the significant recent volatility in the capital markets as a whole.
The fact that, as a condition to the closing of the Private Placement and the transactions contemplated by the Purchase Agreement, the Private Placement Proposal must be approved by our stockholders or, to the extent permitted by applicable law, waived by the purchaser.
The terms and conditions of the Purchase Agreement, including, among other things, the representations, warranties, covenants and agreements of the parties, the conditions to closing, and the termination rights of the parties, taken as a whole, which our Board approved subjectof Directors determined were more favorable to the Company and its stockholders than those terms and conditions which could have been negotiated with or offered by other potential strategic partners and/or investors.
Potential risks associated with considering alternatives to the Private Placement, including the potential impact on the price of our common stock and ability to generate sufficient capital to support our ongoing operations.
Potential risks associated with Rubric’s significant ownership percentage following the closing.
Purchase Agreement and Private Placement
As previously disclosed, on April 27, 2023, we entered into the Purchase Agreement for the Private Placement with Rubric as purchaser. Pursuant to the Purchase Agreement, we agreed to sell to Rubric the Shares from time to time during the term of the Purchase Agreement in separate draw downs at the election of the Company. The initial draw down will occur on the third trading day following receipt of stockholder approval an increase of the maximum numberPrivate Placement, and the parties have agreed the initial draw down will consist of shares thata sale of 312,525 Shares at a price per share equal to $3.6797. At our election, we may issue under the 2019 Plan by 22,475,000additional shares which will enable usfrom time to continuetime to grant awardsRubric, up to deserving individualsan aggregate cap of 5,000,000 total shares and remain competitive with our industry peers. As of March 24, 2021, 2,499,815 shares remain available for issuance under the 2019 Plan.$5,000,000. The approvalpurchase price of the proposed amendedShares for any future draw downs will be the five-day volume-weighted average price of our common stock. The effectiveness of the Purchase Agreement and restated 2019 Plan will allow useach draw down is subject to continue to provide such incentives under the 2019 Plan. If the proposal is not approved, we believe we would be at a significant disadvantage againstsatisfaction or waiver of certain conditions, including that our competitors for recruiting, retaining and motivating those individuals who are critical to our success.
If stockholders approve the amendmentPrivate Placement Proposal.
If the Private Placement is approved by our stockholders, following the closing of the Private Placement, Rubric will own up to approximately 44.6% of our common stock (based on 10,135,323 shares outstanding as of April 20, 2023 and assuming 5,000,000 shares are issued pursuant to the 2019 Plan,Private Placement).
The terms of the Purchase Agreement require that the Company seek stockholder approval for the Private Placement at a meeting of the Company’s stockholders to occur no later than 90 days (or 150 days if the proxy statement is reviewed by the SEC) following the date of the Purchase Agreement and it is a condition to effectiveness of the Purchase Agreement that the Company’s stockholders approve Proposal Three relating to the Share Increase and this Proposal Four relating to the Private Placement.
Rubric is entitled to certain registration rights under the terms of the Purchase Agreement. Under the terms of the Purchase Agreement, we will be obligated to file a registration statement to register the Shares for resale within 120 days following the effective date of the Purchase Agreement.
The foregoing description of the terms of Purchase Agreement is only a summary and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is attached to this Proxy Statement as Appendix B.
Why We Need Stockholder Approval
We are seeking stockholder approval in order to comply with Nasdaq Listing Rules 5635(b) and 5635(d).
Under Nasdaq Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control of the Company. This rule does not specifically define when a change in control of a company may be deemed to
| 44 |
occur; however, Nasdaq suggests in its guidance that a change of control would occur, subject to adjustment in the eventcertain limited exceptions, if after a transaction a person or entity will hold 20% or more of stock splits and other similar events, the aggregate number of awards that may be made under the 2019 Plan shall be equal to the sum of (i) 37,475,000 shares of common stock effective as of approval of this amendment (which includes the share increase set forth in this proposal) plus (ii) such additionala company’s pre-transaction total number of shares of outstanding capital stock. Following the initial draw down of 312,525 Shares, Rubric will own approximately 20.4% of our common stock (based on 10,135,323 shares outstanding as of April 20, 2023). Pursuant to the terms of the Purchase Agreement, the Company may issue, and Rubric may purchase, up to 5,000,000 shares of our common stock. Following the Private Placement, Rubric may own up to approximately 44.6% of our common stock (based on 10,135,323 shares outstanding as of April 20, 2023 and assuming 5,000,000 shares are issued pursuant to the Private Placement). If this proposal is equal to (x)approved by our stockholders, the Private Placement may result in a change of control under Nasdaq Listing Rule 5635(b).
Additionally, under Nasdaq Listing Rule 5635(d), stockholder approval is required for a transaction other than a public offering involving the sale, issuance or potential issuance of common stock at a price that is less than the lower of (i) the closing price immediately preceding the signing of the binding agreement or (ii) the average closing price of the common stock for the five trading days immediately preceding the signing of the binding agreement, if the number of shares of common stock reserved for issuance underto be issued equals 20% or more of the 2009 Plancommon stock, or 20% or more of the voting power, outstanding before the issuance. We may issue up to 5,000,000 shares of our common stock to Rubric in connection with the Private Placement, which may exceed 20% of both the voting power and 2012 Plan, collectively referred to as the Prior Plans, that remained available for grant under such plans immediately prior to the date the 2019 Plan was previously approved by the company’s stockholders and (y) the number of shares of common stock subject to awards granted under the Prior Plansoutstanding before such issuance and the 2019 Plan, as amended, which awards expire, terminate orprice per share at the time of issuance may be lower than at the time the Purchase Agreement was entered into.
We are, otherwise surrendered, cancelled, or forfeited withouttherefore, seeking stockholder approval for the sale and issuance of shares. (except as notedthe shares to occur in connection with the Private Placement to satisfy the requirements of Nasdaq Listing Rules 5635(b) and described below)5635(d). In addition,
Dilution and Impact on Existing Stockholders
The issuance of the amendmentshares of our common stock which are the subject of this proposal would have a dilutive effect on current stockholders, in that the percentage ownership of the Company held by such current stockholders will increase the maximum number of shares that may be delivered under the 2019 Plandecline as a result of the exercise of incentive stock options to 37,475,000 sharesissuance. This means also that our existing stockholders will own a smaller interest in the aggregate, subjectCompany as a result of such issuance and therefore have less ability to certain adjustments. As noted in Proposal 3influence significant corporate decisions requiring stockholder approval. Issuance of our common stock pursuant to this Proxy Statement, ifproposal could also have a dilutive effect on book value per share and any future earnings per share. Dilution of equity interests could also cause the Non-Executive Option Exchange Program is approved byprevailing market price for our common stock to decline.
Following the company’s stockholders, the net shares underlying the Eligible Options in excessclosing of the Private Placement, Rubric may own up to approximately 44.6% of our common stock (based on 10,135,323 shares underlyingoutstanding as of April 20, 2023 and assuming 5,000,000 shares are issued pursuant to the New RSUsPrivate Placement). By selling the Shares to Rubric in the Private Placement:
Rubric could influence our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations or the sale of all or substantially all of our assets;
the concentration of voting power could deter or prevent a change in control that might otherwise be beneficial to our stockholders; and
the interests of Rubric may be different than the interests of other stockholders, and Rubric’s increased voting power could enable them to take certain actions that may not be in the best interests of our stockholders.
Consequences if Stockholder Approval is Not Obtained
If we do not obtain the requisite stockholder approval of the Private Placement Proposal, the Purchase Agreement will not be returned toeffective and the 2019 Plan.
Why We Are Seeking Approval ofPrivate Placement will not occur. Accordingly, we would not receive any proceeds from Rubric as payment for the Amendment to the 2019 Plan to Increase our Share Reserve
Equity Based Long-term Incentives are a Critical Part of Our Compensation Strategy. Equity awards have been a key component of annual compensation delivery to a significant portionshares of our employee population. Deliveringcommon stock, such funds will not be available to pursue the activities described below, and we may be unable to continue as a portion of annual compensation in equity aligns employee rewards with the interests of stockholders and with the objective of long-term value creation in a cash-efficient manner.
We Have Limited Capacity to Make Awards under our Existing Share Reserve. We intend to use the additional shares to recruit, retain, and motivate our key personnel. We currently have no meaningful way to provide tailored equity-based compensation grants to attract, retain and reward qualified employees because of the few shares remaining to be granted under the 2019 Plan.
Stockholder approval of the share increase to the 2019 Plan is required (i) for purposes of complying with the stockholder approval requirements for listing our shares on the Nasdaq, and (ii) to comply with the incentive stock options rules under Section 422 of the Code.going concern.
|
Governance HighlightsUse of Proceeds
We intend to use the net proceeds from the Private Placement to support operations and for other general corporate purposes. We may find it necessary or advisable to use the net proceeds for other purposes, and our management will have broad discretion in the application of the 2019 Plannet proceeds.
Interests of Directors and Executive Officers
Minimum Vesting Requirements. Minimum vesting period of one year fromExcept as set out below, our directors and executive officers have no substantial interests, directly or indirectly, in the date of grant for all awards granted under the 2019 Plan,Private Placement except under certain circumstances and an additional exception for up to 5% of the share reserve.
Double Trigger for Vesting of Time-Based Awards Upon a Change in Control. Subject to the terms of an applicable award agreement and certain exceptions, the 2019 Plan provides for vesting of time-based equity awards based on the occurrence of a change in control and accompanying involuntary termination of service, so long as the acquiring corporation following a change in control assumes the awards granted under the 2019 Plan.
Annual Limits on Grants to Employees. The maximum number of shares of stock that may be granted to an employee shall not exceed (i) 3,000,000 shares for stock options and stock appreciation rights in any single fiscal year and (ii) 3,000,000 shares for restricted stock, restricted stock units, performance shares and/or other stock-based awards in any single fiscal year.
Share Counting. Any shares withheld to cover taxes or to satisfy the exercise price of stock options will not be available for future grant.
Dividends on Unvested Awards Not Paid Until Vesting. Dividends on unvested awards will be withheld and paid to participants only after and to the extent the underlying awards have vested.
No Cash-Out or Repricing of Underwater Options. Under no circumstances will any underwater stock options be bought back by the company. In addition, neither the Compensation Committee nor the Board of Directors has the authority to reduce the exercise price of a previously granted stock option under the 2019 Plan through amendment, replacement or exchange for a cash payment in excess of the stock options in-the-money value, unless specifically approved by stockholders, as we are seeking in Proposal 3 of this Proxy Statement.
No excise tax gross-ups in the event of a Change in Control.
Information Regarding Overhang and Dilution
We considered both our total equity “overhang” and our historical and projected annual “burn rate” in developing our share increase to the 2019 Plan and analyzing the impact of using equity as a means of compensation on our stockholders.
Overhang is a measure of potential dilution which we define as the sum of (i) the total number of shares underlying all equity awards outstanding and (ii) the total number of shares available for future award grants, divided by the sum of (a) the total number of shares underlying all equity awards outstanding, (b) the total number of shares available for future awards and (c) the number of shares outstanding. As of March 24, 2021, there were 39,302,771 shares of common stock underlying all equity awards outstanding, 2,499,815 shares of common stock available for future awards, and the number of shares of common stock outstanding as of March 24, 2021 was 402,057,607 shares, or 441,360,378 shares when equity awards outstanding and shares available for grant are included. Accordingly, our overhang as of March 24, 2021 was 9.42%. If the 22,475,000 additional shares of common stock proposed to be authorized for grant under the 2019 Plan are included in the calculation, our overhang on the date of approval of the amendment to the 2019 Plan, May 27, 2021, would be 13.78%. Our review of competitive practices, including the advice of Meridian, our independent compensation consultant, suggests that this level of overhang is competitive with and slightly below the median of similarly situated companies.
|
Burn rate provides a measure of the potential dilutive impact of our equity award program which we calculate by dividing the number of shares subject to equity awards granted during the year by the basic weighted average number of shares outstanding. Set forth below is a table that reflects our burn rate for the 2020, 2019 and 2018 calendar years as well as an average over those years.
Calendar Year | (A) Options | (B) Full-Value | (C) Full-Value | (D) Weighted Average | (E) Burn Rate | (F) Burn Rate | ||||||||||||||||||
| (B) X 1.5 | ((A) + (B)) / (D)
| ((A) + (C)) / D | ||||||||||||||||||||||
2020 | 736,500 | 8,738,563 | 13,107,845 | 275,648,552 | 3.44 | % | 5.02 | % | ||||||||||||||||
2019 | 4,620,501 | 1,240,000 | 1,860,000 | 246,353,318 | 2.38 | % | 2.63 | % | ||||||||||||||||
2018 | 3,264,500 | 1,040,000 | 4,824,500 | 225,026,300 | 1.91 | % | 2.14 | % | ||||||||||||||||
Adjusted Three Year Average Burn Rate Adjusted for Option Equivalents |
| 3.27 | % | |||||||||||||||||||||
Summary of the 2019 Plan
The following is a summary of certain principal features of the 2019 Plan. This summary is qualified in its entirety by reference to the complete text of the 2019 Plan and the amendment attached as Appendix A. Stockholders are urged to read the actual text of the 2019 Plan in its entirety, a copy of which is available as exhibit to our Annual Report on Form 10-K for the year ended December 31, 2020 and is available to any stockholder upon request, and Appendix A.
Purpose
The purpose of the 2019 Plan is to provide a means for us and our subsidiaries and other designated affiliates (the “Related Entities”) to attract key personnel to provide services to us and the Related Entities, as well as to provide a means by which those key persons can acquire and maintain stock ownership, resulting in a strengthening of their commitment to our welfare and the welfare of the Related Entities and promoting the mutuality of interests between participants and our stockholders. A further purpose of the 2019 Plan is to provide participants with additional incentive and reward opportunities designed to enhance our profitable growth and the profitable growth of the Related Entities, and provide participants with annual and long term performance incentives to expend their maximum efforts in the creation of stockholder value.
Shares Available for Awards; Annual Per-Person Limitations
Under the 2019 Plan, the total numberbeneficial ownership of shares of our common stock (the “Shares”) reserved and available for delivery under the plan at any time during the termstock.
Approval of the plan willPrivate Placement Proposal is required to issue the Shares to be equal to shall be equal tosold in the sumPrivate Placement. Justin Roberts is a member of (i) 37,475,000our Board of Directors and is a partner at Rubric, which is participating in the Private Placement. Rubric currently holds approximately 17.3% of our outstanding shares of common stock effective(based on 10,135,323 shares outstanding as of approvalApril 20, 2023) and in connection with the Private Placement, may purchase up to an additional 5,000,000 shares and hold up to approximately 44.6% of this amendment (which includes the share increase set forth in this proposal) plus (ii) such additional number ofour outstanding shares of common stock (based on 10,135,323 shares outstanding as is equal to (x) the number of April 20, 2023 and assuming 5,000,000 shares of common stock reserved for issuance under the Prior Plans that remained available for grant under such plans immediately priorare issued pursuant to the date the 2019 Plan was approved by the company’s stockholders and (y) the number of shares of common stock subject to awards granted under the Prior Plans and the 2019 Plan, as amended, which awards expire, terminate or are otherwise surrendered, cancelled, or forfeited without the issuance of shares.Private Placement).
If any Shares subject to an Award under the 2019 Plan or the Prior Plans are forfeited, expire, or otherwise terminate without issuance of such Shares is settled for cash or otherwise does not result in the issuance of all or a portionVote Required
The approval of the Shares subject to such Award,Private Placement Proposal requires the Shares to which those Awards were subject, will, to the extentaffirmative vote of such forfeiture, expiration, termination, non-issuance, or cash settlement, again be available for delivery with respect to Awards under the 2019 Plan except as noted below. In the event that any option or other Award granted under the 2019 Plan is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by us are satisfied by the tendering of Shares (either actually or by attestation), then the total number of Shares covered by the Award, the shares so tendered or withheld will not again be available for awards under the 2019 Plan. In the event that any withholding tax liabilities arising from an Award other than an option or a stock appreciation right
|
are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by us, the Shares so tendered or withheld will not again be available for Awards under the 2019 Plan. As noted in Proposal 3 of this Proxy Statement, if the Non-Executive Option Exchange Program is approved by the company’s stockholders, the net shares underlying the Eligible Options in excessmajority of the shares underlyingpresent in person or represented by proxy at the New RSUs will not be returnedannual meeting and entitled to the 2019 Plan as addressed in the proposed amendment to the 2019 Plan.
Substitute Awards (as defined in the 2019 Plan) will not reduce the Shares authorized for delivery under the 2019 Plan or authorized for delivery to a participant in any period. Additionally, in the event that a company acquired by us or any subsidiary or with which we or any subsidiary combines has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination, the shares available for delivery pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the 2019 Plan and will not reduce the Shares authorized for delivery under the 2019 Plan; provided, that Awards using such available shares will not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and will only be made to individuals who were not employees or directors of us or our subsidiaries prior to such acquisition or combination.
The 2019 Plan imposes individual limitationsvote on the amount of certain Awards. Under these limitations, no participantsubject matter, assuming a quorum is established at the annual meeting. You may be granted (i) stock optionsvote FOR or stock appreciation rights with respectAGAINST this proposal, or you may indicate that you wish to more than 3,000,000 Shares in any single fiscal year, or (ii) performance shares (including shares of restricted stock, restricted stock units, and other stock based-awards that are subject to satisfaction of performance goals), with respect to more than 3,000,000 Shares, in any single fiscal year, in each case, subject to adjustment in certain circumstances. The maximum amount that may be paid out to any one participant as performance units, with respect to any single 12-month performance period is $1,000,000, and with respect to any performance period that is more than 12 months, $2,000,000.
The aggregate fair market value of SharesABSTAIN from voting on the date of grant underlying incentive stock options that can be exercisable by any individual for the first time during any year cannot exceed $100,000 (or such other amount as specified in Section 422 of the Code). Any excessthis proposal. Abstentions will be treated as a non-qualified stock option.
The maximum number of Shares that may be delivered under the 2019 Plan as a result of the exercise of incentive stock options is 37,475,000 Shares in the aggregate, subject to certain adjustments.
The Compensation Committee is authorized to adjust the limitations on the number of Shares available for issuance under the 2019 Plan and the individual limitations on the amount of certain Awards (other than the $100,000 limitation described above with respect to incentive stock option awards) and is authorized to adjust outstanding Awards (including adjustments to exercise prices of options and other affected terms of Awards) to the extent it deems equitable in the event that a dividend or other distribution (whether in cash, Shares or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange or other similar corporate transaction or event affects the Shares so that an adjustment is appropriate. See the sections called “Acceleration of Vesting; Change in Control” and “Other Adjustments” below for a summary of certain additional adjustment provisions of the 2019 Plan.
Eligibility
The persons eligible to receive Awards under the 2019 Plan are our officers, directors, employees, and consultants who provide services to us or any subsidiary. The foregoing notwithstanding, only employees of us, or any parent or subsidiary of us (as those terms are defined in Sections 424(e) and (f) of the Code, respectively), are eligiblecounted for purposes of receiving any incentive stock options that are intended to comply withdetermining the requirementspresence or absence of Section 422 ofa quorum and will have the Code (“ISOs”). An employee on leave of absence maysame effect as a vote AGAINST this proposal. Each broker non-vote will be considered as still in the employ of us or a subsidiarycounted for purposes of eligibility for participation indetermining the 2019 Plan. Aspresence or absence of March 24, 2021, all eight non-employee directors and approximately 428 employees are eligible to participate ina quorum but will have no effect on the 2019 Plan.
|
Administration
The 2019 Plan is to be administered by the Compensation Committeeoutcome of the Board of Directors, provided, however, that except as otherwise expressly provided in the 2019 Plan, the independent members of the Board of Directors may elect to exercise any power or authority granted to the Compensation Committee under the 2019 Plan. Subject to the terms of the 2019 Plan, the Compensation Committee is authorized to select eligible persons to receive Awards, grant Awards, determine the type, number, and other terms and conditions of, and all other matters relating to, Awards, prescribe Award agreements (which need not be identical for each participant) and the rules and regulations for the administration of the 2019 Plan, construe and interpret the 2019 Plan and Award agreements, correct defects, supply omissions, or reconcile inconsistencies therein, and make all other decisions and determinations as the Compensation Committee may deem necessary or advisable for the administration of the 2019 Plan. Decisions of the Compensation Committee shall be final, conclusive and bindingvote on all persons or entities, including us, any subsidiary or any participant or beneficiary, or any transferee under the 2019 Plan or any other person claiming rights from or through any of the foregoing persons or entities.
Stock Options and Stock Appreciation Rights
The Compensation Committee is authorized to grant (i) stock options, including both ISOs, which can result in potentially favorable tax treatment to the participant, and non-qualified stock options, and (ii) stock appreciation rights, entitling the participant to receive the amount by which the fair market value of a Share on the date of exercise exceeds the grant price of the stock appreciation right. The exercise price per share subject to an option and the grant price of a stock appreciation right are determined by the Compensation Committee. The exercise price per share of an option and the grant price of a stock appreciation right may not be less than 100% of the fair market value of a Share on the date the option or stock appreciation right is granted. An option granted to a person who owns or is deemed to own stock representing 10% or more of the voting power of all classes of stock of us or any parent company (sometimes referred to as a “10% owner”) will not qualify as an ISO unless the exercise price for the option is not less than 110% of the fair market value of a Share on the date the ISO is granted.
For purposes of the 2019 Plan, the term “fair market value” means the fair market value of Shares, Awards or other property as determined by the Compensation Committee or under procedures established by the Compensation Committee. Unless otherwise determined by the Compensation Committee, the fair market value of a Share as of any given date is the closing sales price per Share as reported on the principal stock exchange or market on which Shares are traded on the date as of which such value is being determined (or as of such later measurement date as determined by the Compensation Committee on the date the Award is authorized by the Compensation Committee), or, if there is no sale on that date, then on the last previous day on which a sale was reported. The maximum term of each option or stock appreciation right, the times at which each option or stock appreciation right will be exercisable, and provisions requiring forfeiture of unexercised options or stock appreciation rights at or following termination of employment or service generally are fixed by the Compensation Committee, except that no option or stock appreciation right may have a term exceeding ten years, and no ISO granted to a 10% owner (as described above) may have a term exceeding five years (to the extent required by the Code at the time of grant). Methods of exercise and settlement and other terms of options and stock appreciation rights are determined by the Compensation Committee. Accordingly, the Compensation Committee may permit the exercise price of options awarded under the 2019 Plan to be paid in cash, Shares, other Awards or other property (including loans to participants). As of March 24, 2021, fair market value of a share of our common stock, determined by the last reported sale price per share of common stock on that date was $1.35.
The Compensation Committee may grant stock appreciation rights in tandem with options (“Tandem stock appreciation rights”) under the 2019 Plan. A Tandem stock appreciation right may be granted at the same time as the related option is granted or, for options that are not ISOs, at any time thereafter before exercise or expiration of such option. A Tandem stock appreciation right may only be exercised when the related option would be exercisable and the fair market value of the Shares
|
subject to the related option exceeds the option’s exercise price. Any option related to a Tandem stock appreciation right will no longer be exercisable to the extent the Tandem stock appreciation right has been exercised and any Tandem stock appreciation right will no longer be exercisable to the extent the related option has been exercised.
Restricted Stock and Restricted Stock Units
The Compensation Committee is authorized to grant restricted stock and restricted stock units. Restricted stock is a grant of Shares that are subject to such risks of forfeiture and other restrictions as the Compensation Committee may impose, including time or performance restrictions or both. A participant granted restricted stock generally has all of the rights of a stockholder of us (including voting and dividend rights), unless otherwise determined by the Compensation Committee. An Award of restricted stock units confers upon a participant the right to receive Shares or cash equal to the fair market value of the specified number of Shares covered by the restricted stock units at the end of a specified deferral period, subject to such risks of forfeiture and other restrictions as the Compensation Committee may impose. Prior to settlement, an Award of restricted stock units carries no voting or dividend rights until any applicable vesting or performance conditions are met or other rights associated with Share ownership, although dividend equivalents may be granted, as discussed below.
Dividend Equivalents
The Compensation Committee is authorized to grant dividend equivalents conferring on participants the right to receive, currently or on a deferred basis, cash, Shares, other Awards, or other property equal in value to dividends paid on a specific number of Shares or other periodic payments. Dividend equivalents may be granted alone or in connection with another Award, may be paid currently or on a deferred basis and, if deferred, may be deemed to have been reinvested in additional Shares, Awards or otherwise as specified by the Compensation Committee. Notwithstanding the foregoing, dividend equivalents credited in connection with an unvested award will be subject to restrictions and risk of forfeiture to the same extent as the award with respect to which such dividend equivalents have been credited.
Bonus Stock and Awards in Lieu of Cash Obligations
The Compensation Committee is authorized to grant Shares as a bonus free of restrictions, or to grant Shares or other Awards in lieu of company obligations to pay cash under the 2019 Plan or other plans or compensatory arrangements, subject to such terms as the Compensation Committee may specify.
Other Stock-Based Awards
The Compensation Committee is authorized to grant Awards that are denominated or payable in, valued by reference to, or otherwise based on or related to Shares. The Compensation Committee determines the terms and conditions of such Awards.
Performance Awards
The Compensation Committee is authorized to grant performance Awards to participants on terms and conditions established by the Compensation Committee. The performance criteria to be achieved during any performance period and the length of the performance period will be determined by the Compensation Committee upon the grant of the performance Award. However, a performance period may not be shorter than 12 months nor longer than five years. Performance Awards may be valued by reference to a designated number of Shares (in which case they are referred to as performance shares) or by reference to a designated amount of property including cash (in which case they are referred to as performance units). Performance Awards may be settled by delivery of cash, Shares or other property, or any combination thereof, as determined by the Compensation Committee.
If and to the extent that the Compensation Committee determines that the foregoing provisions of the 2019 Plan are to be applicable to any Award, one or more of the following business criteria for us,
|
on a consolidated basis, and/or for our subsidiaries, or for business or geographical units of us and/or a subsidiary (except with respect to the total stockholder return and earnings per share criteria), are to be used by the Compensation Committee in establishing performance goals for Awards under the 2019 Plan: (1) earnings per share; (2) revenues or margins; (3) cash flow (including operating cash flow, free cash flow, discounted return on investment and cash flow in excess of cost of capital); (4) operating margin; (5) return on assets, sales, investment, capital, or equity; (6) economic value added; (7) direct contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings after interest expense and before extraordinary or special items; operating income or income from operations; income before interest income or expense, unusual items and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans; (9) working capital; (10) management of fixed costs or variable costs; (11) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (12) total stockholder return; (13) debt reduction; (14) market share; (15) entry into new markets, either geographically or by business unit; (16) customer retention and satisfaction; (17) strategic plan development and implementation, including turnaround plans; (18) the fair market value of a Share; and/or (19) such other goals as determined by the Compensation Committee. Any of the above goals may be determined on an absolute or relative basis (e.g., growth in earnings per share) or as compared to the performance of a published or special index deemed applicable by the Compensation Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of companies that are comparable to us.
After the end of each performance period, the Compensation Committee will determine and certify whether the performance goals have been achieved. In determining the achievement of such performance goals, the Compensation Committee may, at the time the performance goals are set, require that those goals be determined by excluding the impact of (i) restructurings, discontinued operations, extraordinary items (as defined pursuant to generally accepted accounting principles), and other unusual or non-recurring charges, (ii) change in accounting standards required by generally accepted accounting principles; or (iii) such other exclusions or adjustments as the Compensation Committee specifies at the time the Award is granted.
The Compensation Committee may, in its discretion, determine that the amount payable as a performance Award will be changed from the amount of any potential Award.
Other Terms of Awards
Awards may be settled in the form of cash, Shares, other Awards, or other property, in the discretion of the Compensation Committee. The Compensation Committee may require or permit participants to defer the settlement of all or part of an Award in accordance with such terms and conditions as the Compensation Committee may establish, including payment or crediting of interest or dividend equivalents on deferred amounts, and the crediting of earnings, gains and losses based on deemed investment of deferred amounts in specified investment vehicles. The Compensation Committee is authorized to place cash, Shares, or other property in trusts or make other arrangements to provide for payment of our obligations under the 2019 Plan. The Compensation Committee may condition any payment relating to an Award on the withholding of taxes and may provide that a portion of any Shares or other property to be distributed will be withheld (or that previously acquired Shares or other property be surrendered by the participant) to satisfy withholding and other tax obligations. Awards granted under the 2019 Plan generally may not be pledged or otherwise encumbered and are not transferable except by will or by the laws of descent and distribution, or to a designated beneficiary upon the participant’s death, except that the Compensation Committee may, in its discretion, permit transfers, subject to any terms and conditions the Compensation Committee may impose pursuant to the express terms of an Award agreement. A beneficiary, transferee, or other person claiming any rights under the 2019 Plan from or through any participant will be subject to all terms and conditions of the 2019 Plan and any Award agreement applicable to such participant, except as otherwise determined by the Compensation Committee, and to any additional terms and conditions deemed necessary or appropriate by the Compensation Committee.
|
Awards under the 2019 Plan generally are granted without a requirement that the participant pay consideration in the form of cash or property for the grant (as distinguished from the exercise), except to the extent required by law. The Compensation Committee may, however, grant Awards in exchange for other Awards under the 2019 Plan, awards under other plans, or other rights to payment from us, and may grant Awards in addition to and in tandem with such other Awards, rights or other awards.
Acceleration of Vesting; Change in Control
In the event of a “change in control,” as defined in the 2019 Plan, and subject to the terms of an applicable award agreement, or to the extent otherwise determined by the Compensation Committee in each particular case, (i) any option or stock appreciation right that was not previously vested and exercisable at the time of the “change in control” will be subject to double trigger vesting such that such awards will become vested and exercisable upon or after a Change of Control on a participant’s involuntary termination of employment; (ii) any restrictions, deferral of settlement and forfeiture conditions applicable to a restricted stock award, restricted stock unit award or any other stock-based award subject only to future service requirements will be deemed fully vested upon or after a Change of Control on a participant’s involuntary termination of employment; and (iii) with respect to any outstanding Award subject to achievement of performance goals and conditions under the 2019 Plan, the Compensation Committee may, in its discretion, consider such Awards to have been earned and payable based on achievement of performance goals or based upon target performance.
Subject to any limitations contained in the 2019 Plan relating to the vesting of Awards in the event of any merger, consolidation or other reorganization in which we do not survive, or in the event of any “change in control,” the agreement relating to such transaction and/or the Compensation Committee may provide for (i) the continuation of the outstanding Awards by us, if we are the surviving entity, (ii) the assumption or substitution for outstanding Awards by the surviving entity or its parent or subsidiary pursuant to the provisions contained in the 2019 Plan, (iii) full exercisability or vesting and accelerated expiration of the outstanding Awards, or (iv) settlement of the value of the outstanding Awards in cash or cash equivalents or other property followed by cancellation of such. The foregoing actions may be taken without the consent or agreement of a participant in the 2019 Plan and without any requirement that all such participants be treated consistently.
Other Adjustments
The Compensation Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (i) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and assets) affecting us, any subsidiary or any business unit, or our financial statements, (ii) in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or (iii) in view of the Compensation Committee’s assessment of our business strategy, any subsidiary or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a participant, and any other circumstances deemed relevant. However, the Compensation Committee may not make any adjustment described in this paragraph if doing so would cause any Award granted under the 2019 Plan to participants designated by the Compensation Committee as “covered employees” and intended to qualify as “performance-based compensation” under Section 162(m) of the Code to otherwise fail to qualify as “performance-based compensation.”
Clawback of Benefits
The Compensation Committee may (i) cause the cancellation of any Award, (ii) require reimbursement of any Award by a participant or beneficiary, and (iii) effect any other right of recoupment of equity or other compensation provided under the 2019 Plan or otherwise in accordance with any of our policies that currently exist or that may from time to time be adopted or modified in the future by us and/or applicable law (each a “Clawback Policy”). In addition, a participant may be required to repay to us certain previously paid compensation, whether provided under the 2019 Plan or an Award agreement or otherwise, in accordance with any Clawback Policy.
|
By accepting an Award, a participant is also agreeing to be bound by any existing or future Clawback Policy adopted by us, or any amendments that may from time to time be made to the Clawback Policy in the future by us in our discretion (including without limitation any Clawback Policy adopted or amended to comply with applicable laws or stock exchange requirements) and is further agreeing that all of the participant’s Award agreements (and/or awards issued under any prior Company plan) may be unilaterally amended by us, without the participant’s consent, to the extent that we in our discretion determine to be necessary or appropriate to comply with any Clawback Policy.
Amendment and Termination
The Board may amend, alter, suspend, discontinue, or terminate the 2019 Plan or the Compensation Committee’s authority to grant Awards without the consent of stockholders or participants or beneficiaries, except that stockholder approval must be obtained for any amendment or alteration if such approval is required by law or regulation or under the rules of any stock exchange or quotation system on which Shares may then be listed or quoted; provided that, except as otherwise permitted by the 2019 Plan or an Award agreement, without the consent of an affected participant, no such Board action may materially and adversely affect the rights of such participant under the terms of any previously granted and outstanding Award. The Compensation Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award agreement relating thereto, except as otherwise provided in the 2019 Plan; provided that, except as otherwise permitted by the 2019 Plan or Award agreement, without the consent of an affected participant, no such Compensation Committee or the Board action may materially and adversely affect the rights of such participant under terms of such Award. The 2019 Plan will terminate at the earliest of (i) such time as no Shares remain available for issuance under the 2019 Plan, (ii) termination of the 2019 Plan by the Board, or (iii) June 20, 2029. Awards outstanding upon expiration of the 2019 Plan will remain in effect until they have been exercised or terminated, or have expired.
Federal Income Tax Consequences of Awards
The 2019 Plan is not qualified under the provisions of section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974.
Nonqualified Stock Options
An optionee generally is not taxable upon the grant of a nonqualified stock option granted under the 2019 Plan. On exercise of a nonqualified stock option granted under the 2019 Plan, an optionee will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the Shares acquired on exercise of the option over the exercise price. If the optionee is an employee of us or any subsidiary, that income will be subject to the withholding of Federal income tax. The optionee’s tax basis in those Shares will be equal to their fair market value on the date of exercise of the option, and his or her holding period for those Shares will begin on that date.
If an optionee pays for Shares on exercise of an option by delivering Shares, the optionee will not recognize gain or loss on the Shares delivered, even if their fair market value at the time of exercise differs from the optionee’s tax basis in them. The optionee, however, otherwise will be taxed on the exercise of the option in the manner described above as if he or she had paid the exercise price in cash. If a separate identifiable stock certificate or other indicia of ownership is issued for that number of Shares equal to the number of Shares delivered on exercise of the option, the optionee’s tax basis in the Shares represented by that certificate or other indicia of ownership will be equal to his or her tax basis in the Shares delivered, and his or her holding period for those Shares will include his or her holding period for the Shares delivered. The optionee’s tax basis and holding period for the additional Shares received on exercise of the option will be the same as if the optionee had exercised the option solely in exchange for cash.
We generally will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income taxable to the optionee, provided that amount constitutes an ordinary and necessary
|
business expense for us and is reasonable in amount, and either the employee includes that amount in income or we timely satisfies its reporting requirements with respect to that amount.
Incentive Stock Options
Under the Code, an optionee generally is not subject to tax upon the grant or exercise of an ISO. In addition, if the optionee holds a Share received on exercise of an ISO for at least two years from the date the option was granted and at least one year from the date the option was exercised (the “Required Holding Period”), the difference, if any, between the amount realized on a sale or other taxable disposition of that Share and the holder’s tax basis in that Share will be long-term capital gain or loss.
If an optionee disposes of a Share acquired on exercise of an ISO before the end of the Required Holding Period, which we refer to as a Disqualifying Disposition, the optionee generally will recognize ordinary income in the year of the Disqualifying Disposition equal to the excess, if any, of the fair market value of the Share on the date the ISO was exercised over the exercise price. If, however, the Disqualifying Disposition is a sale or exchange on which a loss, if realized, would be recognized for Federal income tax purposes, and if the sales proceeds are less than the fair market value of the Share on the date of exercise of the option, the amount of ordinary income recognized by the optionee will not exceed the gain, if any, realized on the sale. If the amount realized on a Disqualifying Disposition exceeds the fair market value of the Share on the date of exercise of the option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the Share exceeds one year.
An optionee who exercises an ISO by delivering Shares acquired previously pursuant to the exercise of an ISO before the expiration of the Required Holding Period for those Shares is treated as making a Disqualifying Disposition of those Shares. This rule prevents “pyramiding” or the exercise of an ISO (that is, exercising an ISO for one Share and using that Share, and others so acquired, to exercise successive ISOs) without the imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which the fair market value of a Share acquired on exercise of an ISO exceeds the exercise price of that option generally will be an adjustment included in the optionee’s alternative minimum taxable income for the year in which the option is exercised. If, however, there is a Disqualifying Disposition of the Share in the year in which the option is exercised, there will be no adjustment with respect to that Share. If there is a Disqualifying Disposition in a later year, no income with respect to the Disqualifying Disposition is included in the optionee’s alternative minimum taxable income for that year. In computing alternative minimum taxable income, the tax basis of a Share acquired on exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that Share for alternative minimum tax purposes in the year the option is exercised.
We are not allowed an income tax deduction with respect to the grant or exercise of an ISO or the disposition of a Share acquired on exercise of an ISO after the Required Holding Period. However, if there is a Disqualifying Disposition of a Share, we generally are allowed a deduction in an amount equal to the ordinary income includible in income by the optionee, provided that amount constitutes an ordinary and necessary business expense for us and is reasonable in amount, and either the employee includes that amount in income or we timely satisfies its reporting requirements with respect to that amount.
Stock Awards
Generally, the recipient of a stock award will recognize ordinary compensation income at the time the Shares are received equal to the excess, if any, of the fair market value of the Shares received over any amount paid by the recipient in exchange for the Shares. If, however, the Shares are not vested when they are received under the 2019 Plan (for example, if the recipient is required to work for a period of time in order to have the right to sell the Shares), the recipient generally will not recognize income until the Shares become vested, at which time the recipient will recognize ordinary
|
compensation income equal to the excess, if any, of the fair market value of the Shares on the date they become vested over any amount paid by the recipient in exchange for the Shares. A recipient may, however, file an election with the Internal Revenue Service, within 30 days of his or her receipt of the Award, to recognize ordinary compensation income, as of the date the recipient receives the Award, equal to the excess, if any, of the fair market value of the Shares on the date the Award is granted over any amount paid by the recipient in exchange for the Shares.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of Shares acquired as Awards will be the amount paid for the Shares plus any ordinary income recognized either when the Shares are received or when the Shares become vested. Upon the disposition of any Shares received as a Share Award under the 2019 Plan, the difference between the sales price and the recipient’s basis in the Shares will be treated as a capital gain or loss and generally will be characterized as long-term capital gain or loss if the Shares have been held for more the one year from the date as of which he or she would be required to recognize any compensation income.
We generally will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income taxable to the recipient, provided that amount constitutes an ordinary and necessary business expense for us, is reasonable in amount, and is not precluded by the deduction limitations imposed by Section 162(m) of the Code, and either the recipient includes that amount in income or we timely satisfies its reporting requirements with respect to that amount.
Stock Appreciation Rights
We may grant stock appreciation rights, separate from any other Award (“Stand-Alone”) stock appreciation rights, or Tandem stock appreciation rights, under the 2019 Plan. Generally, the recipient of a Stand-Alone stock appreciation right will not recognize any taxable income at the time the Stand-Alone stock appreciation right is granted.
With respect to Stand-Alone stock appreciation rights, if the recipient receives the appreciation inherent in the stock appreciation rights in cash, the cash will be taxable as ordinary compensation income to the recipient at the time that the cash is received. If the recipient receives the appreciation inherent in the stock appreciation rights in Shares, the recipient will recognize ordinary compensation income equal to the excess of the fair market value of the Shares on the day they are received over any amounts paid by the recipient for the Shares.
With respect to Tandem stock appreciation rights, if the recipient elects to surrender the underlying option in exchange for cash or Shares equal to the appreciation inherent in the underlying option, the tax consequences to the recipient will be the same as discussed above relating to the Stand-Alone stock appreciation rights. If the recipient elects to exercise the underlying option, the holder will be taxed at the time of exercise as if he or she had exercised a nonqualified stock option (discussed above), i.e., the recipient will recognize ordinary income for Federal tax purposes measured by the excess of the then fair market value of the Shares over the exercise price.
In general, there will be no Federal income tax deduction allowed to us upon the grant or termination of Stand-Alone stock appreciation rights or Tandem stock appreciation rights. Upon the exercise of either a Stand-Alone stock appreciation right or a Tandem stock appreciation right, however, we generally will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income that the employee is required to recognize as a result of the exercise, provided that the deduction is not otherwise disallowed under the Code.
Dividend Equivalents
Generally, the recipient of a dividend equivalent award will recognize ordinary compensation income at the time the dividend equivalent award is received equal to the fair market value of the amount received. We generally will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income that the recipient is required to recognize as a result of the dividend equivalent award, provided that the deduction is not otherwise disallowed under the Code.
|
Section 162 Limitations
Section 162(m) of the Code generally limits our ability to deduct for tax purposes compensation in excess of $1.0 million per year for each of our principal executive officer, our principal financial officer and additional highest compensated officers during any taxable year beginning after December 31, 2016. Compensation resulting from awards under the 2019 Plan will be counted toward the $1.0 million limit.
The 2017 tax reform legislation removed the “performance-based compensation” exception from Code Section 162(m). Accordingly, awards made after November 2, 2017, generally are not eligible for the “performance-based compensation” exception and will not be deductible to the extent that they cause the compensation of the affected executive officers to exceed $1 million in any year. Awards that were made and subject to binding written contracts in effect on November 2, 2017, are “grandfathered” under prior law and can still qualify as deductible “performance-based compensation,” even if paid in future years. While the Compensation Committee considers the deductibility of compensation as one factor in determining executive compensation, the Compensation Committee believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation and to structure a program that we consider to be the most effective in attracting, motivating and retaining key employees.
Section 409A of the Code
The 2019 Plan is intended to comply with Section 409A of the Code to the extent that such section would apply to any Award under the 2019 Plan. Section 409A of the Code governs the taxation of deferred compensation. Any participant that is granted an Award that is deemed to be deferred compensation, such as a grant of restricted stock units that does not qualify for an exemption from Section 409A of the Code, and does not comply with Section 409A of the Code, could be subject to taxation on the Award as soon as the Award is no longer subject to a substantial risk of forfeiture (even if the Award is not exercisable) and an additional 20% tax (and a further additional tax based upon an amount of interest determined under Section 409A of the Code) on the value of the Award.
Importance of Consulting Tax Adviser
The information set forth above is a summary only and does not purport to be complete. In addition, the information is based upon current Federal income tax rules and therefore is subject to change when those rules change. Moreover, because the tax consequences to any recipient may depend on his or her particular situation, each recipient should consult his or her tax adviser as to the Federal, state, local, foreign and other tax consequences of the grant or exercise of an Award or the or the disposition of Shares acquired as a result of an Award.
Equity Compensation Plan Information
Information regarding outstanding equity awards and shares reserved for future issuance under our equity compensation plans as of December 31, 2020 is described above under “Equity Compensation Plan Information”.
New Plan Benefits under 2019 Plan
Our non-employee directors are eligible to receive certain compensation each year, a portion of which is payable in the form of equity awards, as described above under “Director Compensation”. If the amendment to the 2019 Plan is approved, the non-employee director compensation payable in the form of equity awards will be issued under the 2019 Plan, as amended. All other future grants under the 2019 Plan are within the discretion of the Compensation Committee of the Board of Directors and the benefits of such grants are therefore not determinable. No shares of common stock have been issued with respect to the share increase for which stockholder approval is sought under this Proposal 4.proposal.
|
|
RATIFICATIONOF APPOINTMENTOF INDEPENDENT AUDITOR
The Audit Committee of our Board of Directors has selected and appointed Grant Thornton as our independent registered public accounting firm for the 20212023 fiscal year. Grant Thornton has served as our independent registered public accounting firm since March 30, 2015.
Our Audit Committee recommends that stockholders vote in favor of the ratification of the appointment of Grant Thornton to audit the consolidated financial statements of our company for the fiscal year ending December 31, 2021.2023. Although ratification is not required by our bylaws or otherwise, our Board of Directors is submitting the appointment of Grant Thornton to our stockholders for ratification as a matter of good corporate practice. In the event of a negative vote on such ratification, our Audit Committee will reconsider its selection.
We expect that representatives of Grant Thornton will be present at the 2021 Annual Meeting of Stockholders,annual meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.
Aggregate fees billed to our company for the fiscal year ended December 31, 20202022 and 20192021 by Grant Thornton, our independent registered public accounting firm, were as follows:
| 2020 | 2019 | ||||||
Audit Fees | $ | 440,670 | $ | 413,695 | ||||
Audit-Related Fees | $ | — | $ | — | ||||
Tax Fees | $ | 122,867 | $ | 143,753 | ||||
All Other Fees | $ | — | $ | — | ||||
| 2022 ($) | 2021 ($) | ||||||
Audit fees | 560,923 | 539,829 | ||||||
Audit-related fees | 65,000 | — | ||||||
Tax fees | 242,301 | 104,146 | ||||||
All other fees | — | 5,390 | ||||||
Total | 868,224 | 649,365 | ||||||
Audit fees consist of fees associated with the annual audit, including the audit of the effectiveness of internal control over financial reporting for the 2019 fiscal year, the reviews of our annual and quarterly reports, and other filings with the SEC as well as comfort letters and consents. Audit-Related Fees consist of fees for the audit of the financial statements of our former subsidiary vitaCare Prescription Services, Inc. Tax fees included the preparation of our tax returns.returns and other related services. All Other Fees consist of fees associated with consulting and advisory services.
Audit Committee Pre-Approval Policies and Procedures
The charter of our Audit Committee provides that the duties and responsibilities of our Audit Committee include the pre-approval, or adopting procedures for pre-approval, of all audit, audit-related, tax, and other services permitted by law or applicable SEC regulations (including fee and cost ranges) to be performed by our independent auditor. Any pre-approved services that will involve fees or costs exceeding pre-approved levels will also require specific pre-approval by the Audit Committee. Unless otherwise specified by the Audit Committee in pre-approving a service, the pre-approval will be effective for the 12-month period following pre-approval. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Internal Revenue Code and related regulations.
To the extent deemed appropriate, the Audit Committee may delegate pre-approval authority to the Chairperson of the Audit Committee or any one or more other members of the Audit Committee provided that any member of the Audit Committee who has exercised any such delegation must report any such pre-approval decision to the Audit Committee at its next scheduled meeting. The
| 47 |
Audit Committee will not delegate to management the pre-approval of services to be performed by the independent auditor.
|
Our Audit Committee requires that our independent auditor, in conjunction with our Chief Financial Officer, be responsible for seeking pre-approval for providing services to us and that any request for pre-approval must inform the Audit Committee about each service to be provided and must provide detail as to the particular service to be provided.
All of the services provided by Grant Thornton described above were approved by our Audit Committee pursuant to our Audit Committee’s pre-approval policies.
Ratification by Stockholders of the Appointment of Independent Auditor
Ratification of the appointment of Grant Thornton to audit the consolidated financial statements of our company for the fiscal year ending December 31, 20212023 will require the affirmative vote of a majority of the votes cast, assuming that a quorum is present at the meeting.
Board Recommendation
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF GRANT THORNTON, LLP TO AUDIT THE CONSOLIDATED FINANCIAL STATEMENTS OF OUR COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
|
|
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
As more specifically provided in our bylaws, as amended, no business may be brought before an annual meeting of stockholders unless it is specified in the notice of the meeting or is otherwise properly brought before the meeting by or at the direction of our Board of Directors or by a stockholder entitled to vote who has delivered proper notice to us, together with the information required by our bylaws, as amended. Director nominations and stockholder proposals that are intended to be presented by stockholders at the annual meeting of stockholders for the fiscal year ending December 31, 20212023 must be received by us not less than 90 days (by February 26, 2022)March 28, 2024) and not more than 120 days (by JanuaryFebruary 27, 2022)2024) before the anniversary of the prior year’s annual meeting of stockholders, unless we change the date of our 20222024 annual meeting by more than 30 days before or 60 days after such anniversary date, in which case, stockholder proposals must be received not earlier than 120 days prior to the annual meeting and not later than the later to occur of 90 days prior to the annual meeting and ten days following the date on which a public announcement of the date of the annual meeting is first made by us.
Stockholders interested in submitting a proposal for inclusion in our proxy materials for the 20222024 annual meeting may do so by following the procedures set forth in Rule 14a-8 under the Exchange Act and our bylaws, as amended. To be eligible for inclusion in such proxy materials, stockholder proposals must be received not later than December [●], 2021.2023.
Stockholder proposals should be addressed and delivered to our corporate secretary at the address of our executive offices set forth in this proxy statement.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for annual reports, proxy statements, and Notices of Internet Availability of Proxy Materials with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
If you and other stockholders of record with whom you share an address currently receive multiple copies of our annual report, proxy statement, or Notice of Internet Availability of Proxy Materials and would like to participate in our householding program, please contact Broadridge by calling toll-free at 800-542-1061, or by writing to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Alternatively, if you participate in householding and wish to revoke your consent and receive separate copies of our annual report, proxy statement, or Notice of Internet Availability of Proxy Materials, please contact Broadridge as described above. In addition, we will promptly deliver, upon the written or oral request to Broadridge at the address or telephone number above, a separate copy of our annual report, proxy statement, or Notice of Internet Availability of Proxy Materials to a stockholder at a shared address to which a single copy of the documents was delivered.
A number of brokerage firms have instituted householding. If you hold your shares in street name, please contact your bank, broker or other holder of record to request information about householding.
We know of no other matters to be submitted at the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed proxy card to vote the shares they represent as our Board of Directors may recommend.
|
WHERE YOU CAN FIND ADDITIONAL INFORMATION AND INCORPORATION BY REFERENCE
We are subject to the informational requirements of the Exchange Act, and are required to file reports, any proxy statements and other information with the SEC. Copies of any reports, statements or other information that we file with the SEC, including this proxy statement, can also be obtained upon written request or from the SEC’s website on the Internet at www.sec.gov, free of charge. We also maintain a website at www.therapeuticsmd.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
We have not authorized anyone to provide you with information that differs from that contained in this proxy statement. You should not assume that the information contained in this proxy statement is accurate as on any date other than the date of the proxy statement, and the mailing of this proxy statement to our stockholders shall not create any implication to the contrary.
This proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make any such offer or solicitation in such jurisdiction.
This proxy statement incorporates by reference our Annual Report on Form 10-K for the year ended December 31, 20202022 and our Annual Report on Form 10-K for the year ended December 31, 2021, as amended, that we previously filed with the SEC; provided, however, that we are not incorporating by reference Part III thereof and any documents, portions of documents or information deemed to have been furnished and not filed in accordance with SEC rules.
In addition, we are incorporating by reference herein any future filings we make with the SEC under Section 11, 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and prior to the date of the annual meeting. Such documents are considered to be a part of this proxy statement, effective as of the date such documents are filed. In the event of conflicting information in these documents, the information in the latest filed document should be considered correct.
You can obtain any of the documents listed above from the SEC, through the website of the SEC at the address described above or from us by requesting them in writing or by telephone at the following address:
TherapeuticsMD, Inc.
Attention: Corporate Secretary
951 Yamato Road, Suite 220
Boca Raton, Florida 33431
(561) 961-1900
|
First Amendment to the TherapeuticsMD, Inc. 2019 Stock Incentive PlanAmended and Restated Articles of Incorporation, as Amended
WITNESSETH:
WHEREAS, TherapeuticsMD, Inc., a Nevada corporation (the “Company”), adopted on April 29, 2019, and continues to sponsor and maintain the plan known as the “TherapeuticsMD, Inc. 2019 Stock Incentive Plan” (the “Plan”); and
WHEREAS, the Board of Directors of the Company (the “Board”) retained the right in Section 10(e) of the Plan to amend the Plan from time to time; provided that amendments to the Plan must be approved by the Company’s stockholders if and to the extent required by applicable laws or stock exchange requirements (“Stockholder Approval”); and
WHEREAS, the Board, in consultation with legal and financial advisors, has determined that it is advisable and in the best interests of the Company and its stockholders to increase the number of Shares reserved for issuance under the Plan and corresponding Incentive Stock Option limit (the “Share Increase”); and
WHEREAS, the Board has approved the Share Increase under the Plan as set forth below, subject to Stockholder Approval (the “Amendment”) and
WHEREAS, capitalized terms used in this Amendment but not defined herein shall have the meaning given to them in the Plan.
NOW, THEREFORE, the Company agrees that, effective upon receipt of the Stockholder Approval as set forth below, the Plan is amended as set forth below:
1.Amendment to Section 4.1(a) of the Plan. Section 4.1(a) of the Plan is hereby amended and restated in its entirety to read as follows:
(a) Limitation on Overall Number of Shares Available for Delivery Under Plan. Subject to adjustment as provided in Section 10(c) hereof, the total number of Shares reserved and available for delivery under the Plan shall be (i) 37,475,000 Shares (which includes 15,000,000 Shares as of the Effective Date) plus (ii) the number of unallocated Shares available for issuance as of the Effective Date under the Amended & Restated 2012 Equity Incentive Plan (the “2012 Stock Plan”) that are not then subject to outstanding Awards plus (iii) the number of unallocated Shares available for issuance as of the Effective Date under the 2009 Long Term Incentive Compensation Plan (the “2009 Incentive Plan”) that are not then subject to outstanding Awards. Any Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.
2.Amendment to Section 4.1(c)(i) of the Plan. Section 4.1(c)(i) of the Plan is hereby amended by deleting the first sentence of such section and replacing with the following:
(i) If any Awards under this Plan, the 2012 Stock Plan or the 2009 Incentive Plan are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares to which those Awards were subject, shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for delivery with respect to Awards under the Plan, subject to Section 4(c)(iii) below and except as otherwise determined by the Committee.
| A-1 |
3. Amendment to Section 4.1(c)(iv) of the Plan. Section 4.1(c)(iv) of the Plan is hereby deleted in its entirety and the following Section 4.1(d) is added to the Plan to read as follows:
(d) Notwithstanding anything in Section 4(c) to the contrary but subject to adjustment as provided in Section 10(c) hereof, the maximum aggregate number of Shares that may be delivered under the Plan as a result of the exercise of the Incentive Stock Options shall be 37,475,000,000 Shares.
4.Effectiveness. In accordance with Section 10(e) of the Plan, the effectiveness of this Amendment is subject to Stockholder Approval. For the avoidance of doubt, if Stockholder Approval is not obtained, this Amendment shall be void and of no force and effect.
5.Effect on the Plan. This Amendment shall not constitute a waiver, amendment, or modification of any provision of the Plan not expressly referred to herein. Except as expressly amended or modified herein, the provisions of the Plan are and shall remain in full force and effect and are hereby ratified and confirmed. References to the Plan shall be deemed to refer to the Plan as modified by this Amendment, effective upon receipt of the Stockholder Approval.
| A-2 |
|
THERAPEUTICSMD, INC.
951 YAMATO ROAD, SUITE 220
BOCA RATON, FL 33431
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 26, 2021. 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.
During The Meeting - Go to www.virtualshareholdermeeting.com/TXMD2021
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 26, 2021. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
D45421-P55549 KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
| ||
|
|
| ||||||||||
| ||||||||||||
| A-3 | ||||||||||||
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this “Agreement”) is entered into and dated as of April 26, 2023 (the “Effective Date”), by and among TherapeuticsMD, Inc., a Nevada corporation with offices located at 951 Yamato Road, Suite 220, Boca Raton, FL 33431 (the “Company”), and Rubric Capital Management LP (on behalf of certain of its managed or sub-managed funds and accounts, the “Subscriber”, and together with the Company, the “Parties”). Capitalized terms not defined below shall have the meaning as set forth in Section 1.1.
RECITALS
A. The Company and the Subscriber are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the 1933 Act.
B. The Company wishes to issue, sell and deliver to the Subscriber, and the Subscriber desires to purchase and acquire from the Company, from time to time upon the terms and conditions stated in this Agreement, shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at an aggregate purchase price of up to $5,000,000.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Subscriber, severally and not jointly, agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings set forth in this Section 1.1:
“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Affiliate” shall have the meaning ascribed to such term in Rule 405 of the 1933 Act.
“Annovera” means the ANNOVERA (segesterone acetate/ethinyl estradiol vaginal system) product approved for commercialization in the U.S. as of the Effective Date.
“Anti-Terrorism Laws” means any Requirement of Law relating to terrorism or money laundering, including, without limitation, (a) the Money Laundering Control Act of 1986 (i.e., 18 U.S.C. §§ 1956 and 1957), (b) the Currency and Foreign Transactions Reporting Act (31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959) (the “Bank Secrecy Act”), (c) the USA Patriot Act, (d) the laws, regulations and Executive Orders administered by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), (e) the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 and implementing regulations by the United States Department of the Treasury, (f) any law prohibiting or directed against terrorist activities or the financing of terrorist activities (e.g., 18 U.S.C. §§ 2339A and 2339B), or (g) any similar laws enacted in the United States or any other jurisdictions in which the parties to this Agreement operate, as any of the foregoing laws may from time to time be amended, renewed, extended, or replaced and all other present and future legal requirements of any Governmental Authority governing, addressing, relating to, or attempting to eliminate, terrorist acts and acts of war and any regulations promulgated pursuant thereto.
| B-2 | ||||||
|
“Authorized Officer” means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president, secretary, general counsel, or one of its vice presidents (or the equivalent thereof), and such Person’s chief financial officer or treasurer or other substantially comparable title.
“Bijuva” means the BIJUVA (estradiol and progesterone) product approved for commercialization in the U.S. as of the Effective Date.
“Blocked Person” means any Person:
07) Jules A. Musing
03) Paul M. Bisarol
08) Gail K. Naughton, Ph.D.
04) J. Martin Carroll
09) Angus C. Russell
05) Cooper C. Collins
| (a) | that is publicly identified (i) on the most current list of “Specially Designated Nationals and Blocked Persons” published by OFAC or resides, is organized or chartered, or has a place of business in a country or territory subject to OFAC sanctions or embargo program or (ii) as prohibited from doing business with the United States under the International Emergency Economic Powers Act, the Trading With the Enemy Act, or any other Anti-Terrorism Law; | |||||||||
| (b) | that is owned or controlled by, or that owns or controls, or that is acting for or on behalf of, any Person described in clause (a) above; |
| (c) | which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; and |
| (d) | that is affiliated or associated with a Person described in clauses (a), (b) or (c) above. |
“Business Day” means any day other than Saturday, Sunday or any day on which commercial banks in the City of New York, New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”,“non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in the City of New York, New York generally are open for use by customers on such day.
“Contractual Obligation” means, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, license, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.
“Designee” means Rubric Capital Management LP.
“Draw Down” means the transactions contemplated under Section 2.3 of this Agreement.
“Draw Down Amount Requested” means the number of shares of Common Stock requested by the Company in its Draw Down Notice as provided in Section 2.3 hereof.
“Draw Down Pricing Period” means a period of five (5) consecutive Trading Days ending on the Trading Day immediately prior to the Trading Day on which the applicable Draw Down Notice is delivered to the Subscriber.
“Eligible Market” means the Principal Market, the NYSE American, The Nasdaq Global Select Market, The Nasdaq Global Market, The Nasdaq Capital Market or The New York Stock Exchange, Inc.
“Employee Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA, other than a Multiemployer Plan, which is or (if liability to the Company remains) was sponsored, maintained or contributed to by, or required to be contributed by, the Company or any of its ERISA Affiliates.
| B-3 | ||||||||||||||
“Environmental Claim” means any complaint, summons, citation, investigation, notice, directive, notice of violation, order, claim, demand, action, litigation, judicial or administrative proceeding, judgment, letter or other communication from any Governmental Authority or any other Person, involving (a) any actual or alleged violation of any Environmental Law; (b) any Hazardous Material or any actual or alleged Hazardous Materials Activity; (c) injury to the environment, natural resource, any Person (including wrongful death) or property (real or personal) in connection with Hazardous Materials or actual or alleged violations of Environmental Laws; or (d) actual or alleged Releases or threatened Releases of Hazardous Materials either (i) on, at or migrating from any assets, properties or businesses currently or formerly owned or operated by the Company or any of its Subsidiaries or any predecessor in interest, (ii) from adjoining properties or businesses, or (iii) onto any facilities which received Hazardous Materials generated by the Company or any of its Subsidiaries or any predecessor in interest.
“Environmental Laws” means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances, orders, rules, regulations, judgments, decrees, permits, licenses or binding determinations of any Governmental Authorizations, or any other requirements of Governmental Authorities relating to (a) the manufacture, generation, use, storage, transportation, treatment, disposal or Release of Hazardous Materials; or (b) occupational safety and health, industrial hygiene, land use or the protection of the environment, human, plant or animal health or welfare.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.
“ERISA Affiliate” means, as applied to any Person, (a) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (b) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (c) solely for purposes of Section 412 of the Internal Revenue Code, any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (a) above or any trade or business described in clause (b) above is a member.
“ERISA Event” means (a) a “reportable event” within the meaning of Section 4043(e) of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for thirty day notice to the PBGC has been waived by regulation); (b) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (d) [reserved]; (e) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which would constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (f) the imposition of liability on the Company or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (g) the withdrawal of the Company or any of its respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by the Company or any of its respective ERISA Affiliates of notice from any Multiemployer Plan that it is in insolvency pursuant to Section 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (h) [reserved]; (i) [reserved]; (j) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the
| B-4 | ||||||||||||
failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (k) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan on the assets of the Company.
“FDA” means the U.S. Food and Drug Administration or any successor thereto.
“FDA Laws” means all applicable statutes, rules, regulations, standards, guidelines, policies and orders and Requirements of Law administered, implemented, enforced or issued by FDA or any comparable U.S. Governmental Authority.
“Federal Healthcare Program Laws” means collectively, Medicare or Medicaid statutes, Sections 1128, 1128A, 1128B, 1128C or 1877 of the SSA (42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b and 1320a-7c), the civil False Claims Act of 1863 (31 U.S.C. § 3729 et seq.), criminal false claims statutes (e.g., 18 U.S.C. §§ 287 and 1001), the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. § 3801 et seq.), HIPAA, or related regulations or other Requirements of Law that directly govern the business of the Company operating within the health care industry, programs of Governmental Authorities related to FDA products, or relationships among suppliers, distributors, manufacturers and patients, and the pricing and sale thereof.
“GAAP” means United States generally accepted accounting principles in effect as of the date of determination thereof.
“Governmental Authority” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, provincial, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, commissioner, bureau, tribunal, instrumentality, official, ministry, fund, foundation, center, organization, board, unit, body or Person and any court or other tribunal); or (d) regulatory or self-regulatory organization (including the Principal Market or other applicable Eligible Market).
“Governmental Authorization” means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority.
“Hazardous Materials” means, regardless of amount or quantity, (a) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws or that is likely to cause immediately, or at some future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including, without limitation, any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental Law and which is present in the environment in such quantity or state that it contravenes any Environmental Law; (b) petroleum and its refined products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic, including, without limitation, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; (e) any raw materials, building components (including, without limitation, asbestos-containing materials) and manufactured products containing hazardous substances listed or classified as such under Environmental Laws; and (f) any substance or materials that are otherwise regulated under Environmental Law.
“Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.
| B-5 |
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act (Title XIII of the American Recovery and Reinvestment Act of 2009).
“Imvexxy” means the IMVEXXY (estradiol vaginal inserts) product approved for commercialization in the U.S. as of the Effective Date.
“Lien” means any mortgage, deed of trust, lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right or other restrictions of any kind.
“Margin Stock” has the meaning specified in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
“Material Regulatory Liabilities” means (a) (i) any Liabilities arising from the violation of FDA Laws, Public Health Laws, Federal Health Care Program Laws, including FDA Laws and Federal Health Care Program Laws, or necessary to remedy any violation of any terms or conditions applicable to any Registrations, including, but not limited to, withdrawal of approval, recall, revocation, suspension, import detention and seizure of any Product, and (ii) any loss of recurring annual revenues as a result of any loss, suspension or limitation of any Registrations, which, in the case of the foregoing clauses (i) and (ii), individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect or (b) any Material Adverse Effect.
“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA.
“OFAC” has the meaning specified in the definition of “Anti-Terrorism Laws”.
“OFAC Sanctions Programs” means (a) the Requirements of Law and Executive Orders administered by OFAC, including but not limited to, Executive Order No. 13224, and (b) the list of Specially Designated Nationals and Blocked Persons administered by OFAC, in each case, as renewed, extended, amended, or replaced.
“Organizational Documents” means (a) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by-laws, as amended, (b) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (c) with respect to any general partnership, its partnership agreement, as amended, and (d) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended.
“OTCBB” shall mean the over-the-counter electronic bulletin board market.
“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Principal Market” means The Nasdaq Stock Market LLC.
“Proceeding” means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of the Company or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims) or other regulatory body or any mediator or arbitrator, whether pending or, to the knowledge of the Company or any of its Subsidiaries, threatened in writing against the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries.
| B-6 |
“Products” means Annovera, Bijuva and Imvexxy.
“Public Health Laws” means all Requirements of Law applicable to the business of the Company and relating to the procurement, development, clinical and non-clinical evaluation, product approval or licensure, manufacture, production, analysis, distribution, dispensing, importation, exportation, use, handling, quality, sale, labeling, promotion, or post market requirements of any drug, biologic or other product subject to regulation under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. et seq.) and the Public Health Service Act (42 U.S.C. et seq.) and the regulations promulgated by the FDA at Title 21 of the Code of Federal Regulations.
“Registrable Securities” means (a) the Securities, (b) any shares issuable upon any stock split, stock dividend, recapitalization or similar event with respect to such Securities and (c) any other dividend or other distribution with respect to, conversion or exchange of, or in replacement of, such Securities.
“Registrations” shall mean all authorizations, approvals, licenses, permits, certificates, or exemptions of or issued by any Governmental Authority (including pre-market approval applications, pre-market notifications, investigational new drug applications, product recertifications, manufacturing approvals and authorizations, pricing and reimbursement approvals, labeling approvals or their foreign equivalent), and all applications for any of the foregoing; provided that they are required and necessary for the operation of the business of the Company in connection with the use and sale of Products.
“Regulatory Action” means an administrative or regulatory enforcement action, proceeding or investigation, warning letter, untitled letter, Form 483 inspectional observations or other written notice by a Governmental Authority of an FDA violation, recall, seizure, Section 305 notice or other similar written communication, or consent decree, issued by the FDA.
“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater.
“Required Approvals” has the meaning specified in Section 3.1(e))
“Requirements of Law” means, with respect to any Person, collectively, the common law and all federal, state, provincial, local, foreign, multinational or international laws, statutes, codes, treaties, rules and regulations, orders, judgments, writs, injunctions, decrees (including administrative or judicial precedents or authorities) and requirements of, any Governmental Authority, in each case having the force of law and appropriate jurisdiction over and that are applicable to and binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Resale Registration Statement” means any registration statement required to be filed by Section 5.1 hereof, and shall include any preliminary prospectus, final prospectus, exhibit or amendment included in or relating to such registration statements.
“Rule 158” means Rule 158 under the 1933 Act, as amended from time to time, or any similar rule or regulation adopted by the Commission having substantially the same effect.
“SEC Reports” shall mean all reports, schedules, forms, applications and other documents, together with any amendments required to be made with respect thereto, required to be filed by the Company under the 1933 Act and the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof, for the two (2) years preceding the Effective Date (or such shorter period as the Company was required by law or regulation to file such materials).
| B-7 |
“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.
“Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding (including backup withholding), imposed by any Governmental Authority, including all interest, penalties, additions to tax or other liabilities with respect thereto.
“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.
“Transaction Documents” means this Agreement and any other documents, certificates, letters of instruction, or agreements executed or delivered in connection with the transactions contemplated hereby.
“VWAP Price” means for any scheduled Trading Day, the volume weighted average price per Share for such day as reported on the relevant Bloomberg Screen “TXMD <Equity> AQR”, or if such price is not so reported on such Trading Day for any reason or is erroneous, the VWAP Price shall be as reasonably determined by the Parties.
ARTICLE II.
PURCHASE AND SALE
2.1 Purchase and Sale of the Securities. From time to time during the term of this Agreement and subject to the terms and conditions set forth herein, the Subscriber agrees to purchase from the Company, and the Company agrees to sell and issue to the Subscriber, such number of shares of Common Stock in respect of all Draw Downs hereunder up to an aggregate of 5,000,000 shares of Common Stock (the “Securities”) at an aggregate purchase price of up to $5,000,000.
2.2 Settlement Dates. During the term of this Agreement, the Company shall issue and sell to the Subscriber, and the Subscriber shall purchase from the Company, the Securities in respect of each Draw Down. The issuance and sale of the Securities to the Subscriber pursuant to any Draw Down shall occur on the applicable Settlement Date in accordance with Section 2.3(b); provided that all of the conditions precedent thereto set forth in Article VI shall have been fulfilled on or prior to such Settlement Date.
2.3 Draw Down Terms.
(a) From time to time during the term of this Agreement, the Company may, in its sole discretion, issue to the Subscriber a notice that the Company desires to effectuate a Draw Down (the “Draw Down Notice”). The Draw Down Notice shall specify the Draw Down Amount Requested and the average VWAP Price during the Draw Down Pricing Period (the “Purchase Price”).
(b) Each Draw Down shall close (the “Closing”) and be settled on the third Trading Day after the delivery to the Subscriber of the applicable Draw Down Notice (each such date, a “Settlement Date”).
(c) On the Settlement Date for each Draw Down, (i) the Subscriber shall make payment of the Purchase Price for the Securities acquired pursuant to such Draw Down by wire transfer of immediately
| B-8 |
available U.S. federal funds to an account designated in writing by the Company; and (ii) the Company shall deliver to the Subscriber (A) the number of shares of Common Stock as specified in the relevant Draw Down Notice, free and clear of all Liens, except restrictions imposed by applicable securities laws and the provisions of this Agreement, and (B) evidence of the issuance of such Securities, credited to such book entry accounts maintained by the transfer agent of the Company with respect to the Securities as the Subscriber shall have notified the Company no less than three (3) Trading Days prior to such Closing.
(d) Notwithstanding the foregoing, the Parties agree that the first Settlement Date shall occur on the third Trading Day following the receipt of Stockholder Approval and the number of Securities to be issued to the Subscriber on the first Settlement Date shall be 312,525 shares at a price per share of $3.6797.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby represents and warrants as of the Effective Date and as of each Closing (except for representations and warranties that speak as of a specific date, which shall be made as of such date) to the Subscriber, except as set forth in the Schedules delivered herewith:
(a) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its respective obligations hereunder and thereunder. Other than the Required Approvals, the execution and delivery by the Company of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereunder and thereunder have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, or its board of directors or stockholders. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company, and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company, enforceable against the Company, in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.
(b) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Securities) do not and will not (i) conflict with or violate any provision of the Company’s or any of its Subsidiaries’ certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or a Company Subsidiary’s debt or otherwise) or other understanding to which the Company any of its Subsidiaries is a party or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Authority to which the Company or a Company Subsidiary is subject (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations of the Principal Market), or by which any property or asset of the Company or a Company Subsidiary is bound or affected; except in the case of clause (ii) or (iii) above, as would not, reasonably be expected to, (x) have or result in a material adverse effect on the legality, validity, binding effect or enforceability of any Transaction Document, (y) have or result in a material adverse effect on the business operations, properties, assets, condition (financial or otherwise) or liabilities of the Company and its
| B-9 |
Subsidiaries, taken as a whole, or (z) have or result in a material adverse effect on the Company’s authority or ability to perform fully on a timely basis its obligations under any Transaction Document (any of (x), (y) or (z), a “Material Adverse Effect”).
(c) Material Adverse Effect. Since December 31, 2022, other than as disclosed in its SEC Reports, or as otherwise disclosed to the Subscriber, no event, circumstance or change has occurred or has resulted in, either in any case or in the aggregate, a Material Adverse Effect.
(d) Proceedings, etc. There are no Proceedings that (i) relate to any Transaction Document or the transactions contemplated hereby or thereby or (ii) individually or in the aggregate, could materially impair the Company’s and its Subsidiaries’ respective rights, powers or remedies with respect to applicable Products or would otherwise reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in violation of or in default with respect to any final judgments, writs, injunctions, decrees, rules, laws or regulations of any Governmental Authority having appropriate jurisdiction except to the extent such violation or default could not reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any Company Subsidiary is required to obtain any consent, waiver, authorization, permit or order of, give any notice to, or make any filing or registration with, any Governmental Authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing by the Company of a Notice of Sale of Securities on Form D with the Commission under Regulation D and state and applicable Blue Sky filings, (ii) any filings required in order to comply with the rules and regulations of the Principal Market, (iii) the receipt of the Stockholder Approval (as defined below) and (iv) the filing of a Current Report on Form 8-K, or the disclosure required thereby in another filing, with the Commission (collectively, but excluding the foregoing clauses (i) through (iv), the “Required Approvals”). All Required Approvals have been obtained or will be effected on or prior to the first Closing, and neither the Company nor any Company Subsidiary are aware of any facts or circumstances which might prevent the Company or any Company Subsidiary from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents. The Company is not in violation of any material requirements of the Principal Market and the issuance of the Securities as contemplated hereby will not violate any rules of the Principal Market or give the Principal Market any cause to take any action to delist the Common Stock.
(f) Issuance of the Securities. The issuance of the Securities is duly authorized and, upon issuance in accordance with the terms of the Transaction Documents, the Securities will be validly issued free from all preemptive or similar rights, taxes, Liens (other than Liens under the 1933 Act and applicable Blue Sky laws) and charges with respect to the issue thereof. Subject to the accuracy of the representations and warranties of the Subscriber in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.
(g) Capitalization. As of the applicable Effective Date, the number of shares and type of all authorized, issued and outstanding capital stock of the Company has been set forth in the SEC Reports. Without limiting the foregoing, as of the Effective Date, immediately prior to the issuance of the Securities, the authorized capital stock of the Company consists of (i) 12,000,000 shares of Common Stock, of which 10,259,971 shares are issued and outstanding, 103,495 shares are reserved for issuance pursuant to issued and outstanding options, 99,544 shares are reserved for issuance pursuant to issued and outstanding warrants, 138,560 shares are reserved for issuance pursuant to securities (other than the aforementioned options) exercisable or exchangeable for, or convertible into, shares of Common Stock, 300,232 shares are reserved for issuance under the Company’s 2019 Stock Incentive Plan, and 96,010 shares are reserved for issuance under the Company’s 2020 Employee Stock Purchase Plan; and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share, of which no shares are outstanding. Other than as stated in the immediately preceding sentence, the Company does not have any outstanding securities that are exercisable or exchangeable for, or convertible into, shares of Common Stock. All of such outstanding shares of
| B-10 |
Common Stock are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. No securities of the Company are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities. The Company does not have any stock appreciation rights or “phantom stock” or similar plans or agreements currently outstanding except as disclosed above. The Securities (i) will be, when issued, duly authorized and validly issued, fully paid and nonassessable and issued in compliance with all applicable federal and state securities laws, (ii) will be issued free and clear of all Liens, except for those imposed by the provisions of this Agreement, the 1933 Act and any applicable securities laws, and (iii) will not be subject to preemptive rights of any other stockholders of the Company.
(h) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Subscriber to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement as a result of an agreement entered into by the Company.
(i) Private Placement; No Integrated Offering; No General Solicitation; No Disqualification Events. Assuming in part the accuracy of the Subscriber’s representations and warranties set forth in Section 3.2(c)-(g), (i) no registration under the 1933 Act is required for the offer and sale of the Securities by the Company to the Subscriber under the Transaction Documents, and (ii) the issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Principal Market. Assuming in part the accuracy of the Subscriber’s representations and warranties set forth in Section 3.2, neither the Company, the Company Subsidiaries, any of their respective Affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise or cause this offering of the Securities to require approval of stockholders of the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. Neither the Company, the Company Subsidiaries nor their Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under the 1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale, nor any other Person covered by Rule 506(d) (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is or has been subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has determined that no Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Subscriber a copy of any disclosures provided thereunder. No Person has been or will be paid (directly or indirectly) remuneration for solicitation of Subscriber or potential purchasers in connection with the sale of any Regulation D Securities.
(j) Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including any distribution under a rights agreement, or similar arrangement or plan) or other similar anti-takeover provision under the Company’s articles of incorporation and bylaws, each as amended, that is or could become applicable to the Subscriber as a
| B-11 |
result of the Subscriber and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Subscriber’s ownership of the Securities. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement now in effect relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any Company Subsidiary.
(k) Transfer Taxes. On each Settlement Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold to the Subscriber hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.
(l) Investment Company Status. Neither the Company nor any Company Subsidiary is, and upon consummation of the sale of the Securities, will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(m) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon any Subscriber’s request.
(n) Payment of Taxes. All U.S. federal and material state and local income tax returns and other material reports of the Company and its Subsidiaries required to be filed by any of them have been timely filed, all such tax returns are true, complete and correct in all material respects, and all U.S. federal and material state and local Taxes shown as due and payable on such tax returns and all assessments, fees and other governmental charges upon the Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable, except to the extent such violation or default could not reasonably be expected to result in a Material Adverse Effect. The Company knows of no proposed Tax assessment against the Company or any of its Subsidiaries which is not being actively contested by the Company or such Subsidiary in good faith and by appropriate proceedings; provided, such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.
(o) Environmental Matters. In each case of the following sub-clauses (a)-(d), except as any such failure or exception to the applicable representation and warranty would not reasonably be expected to result in a Material Adverse Effect:
| a. | No Environmental Claim has been asserted against the Company or any predecessor in interest nor has the Company received notice of any threatened or pending Environmental Claim against the Company or any predecessor in interest. |
| b. | There has been no Release of Hazardous Materials and there are no Hazardous Materials present in violation of Environmental Law at any of the properties currently owned or operated by the Company. |
| c. | The operation of the business of, and each of the properties owned or operated by Company is in compliance with all Environmental Laws. |
| d. | The Company holds and is in compliance with Governmental Authorizations required under any Environmental Laws in connection with the operations carried on by it and the properties owned or operated by it. |
(p) No Defaults. Neither the Company nor any of its Subsidiaries (a) is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in
| B-12 |
any of its Contractual Obligations, and (b) no condition exists which, with the giving of notice or the lapse of time or both, could constitute such a default, except, in each case of the foregoing subclauses (a)-(b), where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.
(q) Margin Stock. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Securities issued to the Company will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such Margin Stock or for any purpose that violates, or is inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.
(r) Employee Benefit Plans. No ERISA Event has occurred or is reasonably expected to occur that would reasonably be expected to result in a Material Adverse Effect.
(s) Compliance with Statutes, etc. Each of the Company and its Subsidiaries is in compliance with (i) its Organizational Documents and (ii) all Requirements of Law in respect of the conduct of its business and the ownership of its property, except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(t) Intellectual Property.
| a. | Each of the Company and its Subsidiaries own, or hold licenses or rights in, all trademarks, trade secrets, trade names, copyrights, and patents, and licenses that are necessary to the conduct of its business as currently conducted. |
| b. | To the best of the Company’s knowledge and except as would not reasonably be material to the Company, taken as a whole, there is no opposition, interference, reexamination, derivation or other post-grant proceeding, injunction, claim, suit, action, subpoena, hearing, inquiry, investigation (by the International Trade Commission or otherwise), complaint, arbitration, mediation, demand, decree or other dispute, disagreement, proceeding or claim (collectively, “Disputes”) that is pending or currently threatened in writing, that challenges the scope, validity, enforceability, ownership, or inventorship of the Product Patents. Company and its Subsidiaries have not received any written notice that there is any, and to the knowledge of the Authorized Officers of the Company and its Subsidiaries there is no, Person who is or claims to be an inventor under any of the Product Patents who is not a named inventor thereof. |
| c. | To the best of the Company’s knowledge and except as would not reasonably be material to the Company, taken as a whole, there is no past, pending or threatened, and no event has occurred or circumstance exists that (with or without notice or lapse of time, or both) could reasonably be expected to give rise to or serve as a basis for any, action, suit, or proceeding, or any investigation or written claim by any Person that claims or alleges that the manufacture, use, marketing, sale, offer for sale, importation or distribution of any Product, once marketed, does or could infringe on any patent or other intellectual property rights of any other Person or constitute misappropriation of any other Person’s trade secrets or other intellectual property rights anywhere in the world. |
(u) Insurance. Each of the Company and its Subsidiaries (i) maintains insurance to such extent and against such risks, as is customary with companies in the same or similar businesses, (ii) is covered by workmen’s compensation insurance in the amount required by applicable law, (iii) maintains commercial general liability insurance, which shall include product liability insurance, in the amount customary with companies in the same or similar business against claims for personal injury or death on properties owned, occupied or controlled by it, and (iv) maintains such other insurance as may be required by any Governmental Authority.2
| 2 | Company to confirm insurance coverage remains in place. |
| B-13 |
(v) PATRIOT ACT and FCPA. To the extent applicable, the Company is in compliance in all material respects with (i) the laws, regulations and Executive Orders administered by OFAC, and (ii) the Bank Secrecy Act, as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act) of 2001 (the “PATRIOT Act”). Neither the Company nor any of their officers, directors, employees, agents or shareholders acting on the Company’s behalf shall use the proceeds received from the issuance of the Securities to make any payments, directly or indirectly (including through any third party intermediary), to any Foreign Official in violation of the United States Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”). Neither the Company nor any Affiliates of the Company that are controlled by the Company, is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the Anti-Terrorism Laws. Neither the Company, nor any Affiliates of the Company that are controlled by the Company, or their respective agents acting or benefiting in any capacity in connection with the Securities or other transactions hereunder, is a Blocked Person. Neither the Company, nor any of its agents acting in any capacity in connection with the Securities or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to any OFAC Sanctions Programs.
(w) Use of Proceeds. The proceeds from the sale of the Securities shall be used solely for general corporate purposes and shall not be used for any other purpose.
(x) Regulatory Compliance.
| a. | Each of the Company and its Subsidiaries have all necessary Registrations from the FDA, or any other Governmental Authority required to conduct their respective businesses as currently conducted, except where the failure to have all such Registrations would not reasonably be expected to, individually or in the aggregate, result in Material Regulatory Liabilities. Each of such Registrations is valid and subsisting in full force and effect, except such Registrations that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability. To the knowledge of the Company and its Subsidiaries, neither the FDA nor any comparable Governmental Authority is considering limiting, suspending, or revoking such Registrations or changing the marketing classification or labeling of any Products under such Registrations. To the knowledge of the Company and its Subsidiaries, there is no known false or materially misleading information or significant omission in any Product application or other written notification, submission or report to the FDA or any comparable Governmental Authority that was not corrected by subsequent submission, and all such applications, notifications, submissions and reports provided by the Company and its Subsidiaries were true, complete, and correct in all material respects as of the date of submission or subsequent submission to FDA or any comparable Governmental Authority. The Company and its Subsidiaries have not failed to fulfill and perform their material obligations which are due under each such Registration, and, no event has occurred or condition or state of facts exists which would constitute a breach or default under any such Registration, in each case that would reasonably be expected to cause the revocation, termination or suspension or material limitation of any such Registration, except where the failure to have all such Registrations could not reasonably be expected to, individually or in the aggregate, result in any Material Regulatory Liability. To the knowledge of the Company and its Subsidiaries, any third party that develops, researches, manufactures, commercializes, distributes, sells or markets Products pursuant to an agreement with the Company or its Subsidiaries (a “Company Partner”) is in compliance with all Registrations from the FDA and any comparable Governmental Authority insofar as they pertain to Products, and each such Company Partner is in compliance with applicable Public Health Laws, except where the failure to so be in compliance would not reasonably be expected to, individually or in the aggregate, result in Material Regulatory Liabilities. |
| B-14 |
| b. | Each of the Company and its Subsidiaries is in compliance, and has been in compliance, with all Public Health Laws, except to the extent that any such non-compliance, individually or in the aggregate, could not reasonably be expected to result in Material Regulatory Liabilities. |
| c. | To the extent applicable, all Products designed, developed, investigated, manufactured, prepared, assembled, packaged, tested, labeled, distributed, sold, marketed or delivered by or on behalf of the Company or any of its Subsidiaries, that are subject to the jurisdiction of the FDA have been and are being designed, developed, investigated, manufactured, prepared, assembled, packaged, tested, labeled, distributed, sold, marketed or delivered in compliance in all material respects with the Public Health Laws, except where such non-compliance, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability. To the knowledge of the Company and its Subsidiaries, there are no defects in the design or technology embodied in any Products that are reasonably expected to prevent the safe and effective performance of any such Product for its intended use (other than such limitations specified in the applicable package insert), except for such defects that would not reasonably be expected to, individually or in the aggregate, result in Material Regulatory Liabilities or other Liabilities. None of the Products has been the subject of any products liability or warranty action against Company or its Subsidiaries, except such action that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability. |
| d. | Neither the Company nor any of its Subsidiaries is currently subject to any Regulatory Action, except such Regulatory Actions that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability, and, to the knowledge of the Company and its Subsidiaries, no such Regulatory Action has been threatened by a Governmental Authority in writing. In addition, and without limitation on the foregoing, neither the Company nor any of its Subsidiaries has received any written notice from the FDA alleging material non-compliance with any Public Health Law, except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability. |
| e. | Neither the Company nor any of its Subsidiaries has received any written notice from the FDA alleging material noncompliance with any Public Health Law, including without limitation any Form FDA 483, notice of inspectional observation, notice of adverse finding, notice of violation, warning letters, untitled letters or other notices from the FDA, except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability, and (z) to the knowledge of the Company and its Subsidiaries, no Company Partner has received any written notice from the FDA alleging material noncompliance with any Public Health Law, including without limitation any Form FDA 483, notice of inspectional observation, notice of adverse finding, notice of violation, warning letters, untitled letters or other notices from the FDA relating to such Company Partner’s work for the Company or such Subsidiary, except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability. |
(y) Health Care Regulatory Laws.
| a. | Neither the Company nor its Subsidiaries, nor, to their knowledge, any officer, director, managing employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001) thereof, is a party to, or bound by, any written order, individual integrity agreement, corporate integrity agreement or other formal written agreement with any Governmental Authority concerning their compliance with Federal Health Care Program Laws, except such agreements that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability. |
| B-15 |
| b. | None of the Company and its Subsidiaries, nor, to their knowledge, any officer, director, managing employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001) thereof, except for the following that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability: (w) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Federal Health Care Program; (x) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the SSA; (y) has been listed on the U.S. General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; or (z) to the knowledge of the Company and its Subsidiaries, is the target or subject of any current or potential investigation relating to any of the foregoing or any Federal Health Care Program-related offense. None of the Company and its Subsidiaries, nor, to their knowledge, any officer, director, managing employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001) thereof has been debarred, excluded, disqualified or suspended from participation in any Federal Health Care Program or under any FDA Laws (including 21 U.S.C. § 335a). |
| c. | To the knowledge of the Company and its Subsidiaries, no person has filed or has threatened to file against the Company or any of its Subsidiaries, an action relating to any FDA Law, Public Health Law or Federal Health Care Program Law under any whistleblower statute, including without limitation, under the False Claims Act of 1863 (31 U.S.C. § 3729 et seq.), except where such filing or action that, individually or in the aggregate, could not reasonably be expected to result in a Material Regulatory Liability. |
| d. | Each of the Company and its Subsidiaries is in compliance in all material respects with HIPAA, and the provisions of all business associate agreements (as such term is defined by HIPAA) to which it is a party, and has implemented reasonably adequate policies, procedures and training designed to assure continued compliance and to detect non-compliance, except where the failure to implement such policies, procedures, and training would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. |
(z) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) of the 1934 Act and listed on the Principal Market. The registration of the Common Stock under the 1934 Act has not been terminated and the Common Stock has not been delisted from the Principal Market, and the Company has taken no action with the Principal Market designed to, or which to the knowledge of the Company is reasonably likely to have the effect of, terminating the registration of the Common Stock under the 1934 Act or delisting the Common Stock from the Principal Market, nor has the Company received any notification that the Commission or the Principal Market is contemplating terminating such registration or listing, except as disclosed in its SEC Reports. Except as disclosed in its SEC Reports, the Company is in compliance in all material respects with the listing and maintenance requirements of the Principal Market applicable to it for the continued trading of its Common Stock on the Principal Market.
3.2 Representations and Warranties of the Subscriber. The Subscriber hereby represents and warrants as of the Effective Date and as of each Closing (except for representations and warranties that speak as of a specific date, which shall be made as of such date) to the Company as follows:
(a) Organization; Authority. The Subscriber is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by the Subscriber of the Transaction Documents to which it is a party has been duly authorized by all necessary action on the part of the Subscriber. Each of the Transaction Documents to which the Subscriber is a party has been duly executed by the Subscriber and, when delivered by the Subscriber in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Subscriber, enforceable against it in accordance with its terms, except as
| B-16 |
such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(b) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Subscriber and the consummation by the Subscriber of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Subscriber’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Subscriber is a party or by which any property or asset of the Subscriber is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Authority to which the Subscriber is subject (including, without limitation, foreign, federal and state securities laws and regulations); except in the case of clause (ii) or (iii) above, as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of the Subscriber to perform its obligations thereunder.
(c) Investment Intent. The Subscriber is acquiring the Securities as principal for its own account for investment purposes and not with a view to distributing or reselling such Securities or any part thereof in violation of applicable securities laws, without prejudice, however, to the Subscriber’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by the Subscriber to hold the Securities for any period of time. Notwithstanding the foregoing, the Subscriber understands that the Securities have not been registered under the 1933 Act, and therefore the Securities may not be sold, assigned or transferred unless pursuant to (i) an effective registration statement under the 1933 Act with respect thereto or (ii) an available exemption from the registration requirements of the 1933 Act. The Subscriber has been advised or is aware of the provisions of Rule 144 promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”) as in effect from time to time, which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions.
(d) Subscriber Status. At the time the Subscriber was offered the Securities, it was, and at the Effective Date it is, an “accredited investor” as defined in Rule 501(a) under the 1933 Act.
(e) Experience of the Subscriber. The Subscriber, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Subscriber is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(f) General Solicitation. The Subscriber is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the Subscriber’s knowledge, any other general solicitation or general advertisement.
(g) Access to Data. The Subscriber has received and reviewed information about the Company and has had an opportunity to discuss the Company’s business, management and financial affairs with its management. The Subscriber acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary
| B-17 |
to make an informed investment decision with respect to the investment. In deciding to enter into this Agreement and the transactions contemplated hereby, the Subscriber has not relied upon any representations and warranties other than the express representations and warranties contained herein. The foregoing, however, does not limit or modify the representations and warranties made by the Company in this Agreement or any other provision in this Agreement or the right of the Subscriber to rely thereon. The Subscriber has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Securities.
(h) Transfer or Resale. The Subscriber understands that: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Subscriber shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Subscriber, reasonably satisfactory to the Company as to such counsel and to the form of opinion, to the effect that such Securities may be sold, assigned or transferred without registration under the applicable requirements of the 1933 Act; provided, however, that no such opinion shall be required to sell, assign or otherwise transfer all or any portion of such Securities to an Affiliate of the holder of the Securities, or (C) the Subscriber provides the Company with assurance reasonably satisfactory to the Company that such Securities can be sold, assigned or transferred pursuant to Rule 144 or to an accredited investor in a private transaction exempt from the registration requirements of the 1933 Act; (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.
(i) Reliance on Exemptions. The Subscriber understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Subscriber’s compliance with, the representations, warranties, agreements, acknowledgements and understandings of such Subscriber set forth herein in order to determine the availability of such exemptions and the eligibility of the Subscriber to acquire the Securities.
(j) No Governmental Review. The Subscriber understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(k) Legends. The Subscriber understands that the certificates or other instruments representing the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE HOLDER, IN A FORM REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust Company (“DTC”), if (i) such Securities are registered for resale under the 1933 Act and the holder has delivered to the Company a
| B-18 |
representation that such Securities have been sold pursuant to such registration statement, or (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, reasonably satisfactory to the Company as to such counsel and to the form of opinion, to the effect that such sale, assignment or transfer of the Securities may be made (or was made, as applicable under Rule 144) without registration under the applicable requirements of the 1933 Act; provided, however, that O’Melveny & Myers LLP shall be deemed reasonably satisfactory to the Company; provided, further, that no such opinion shall be required to sell, assign or otherwise transfer all or any portion of such Securities to an Affiliate of the holder of the Securities. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with such issuance.
The Company acknowledges and agrees that the Subscriber shall not make nor has made any representations or warranties with respect to the transactions contemplated hereby or by any other Transaction Document other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Pledge. The Company acknowledges and agrees that the Subscriber may from time to time pledge or grant a security interest in some or all of the Securities in connection with a bona fide margin agreement secured by the Securities and, if required under the terms of such agreement, the Subscriber may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the Subscriber’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.
4.2 Integration. The Company shall not, and shall use its reasonable best efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the 1933 Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the 1933 Act of the sale of the Securities to the Subscriber or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of the Principal Market.
4.3 Listing of Additional Shares Notification. To the extent the Company has not done so prior to the date of this Agreement, the Company shall promptly submit to the Principal Market a listing of additional shares notification with respect to the Securities.
4.4 Form D and Blue Sky. The Company shall file a Form D with respect to the Securities as required under Regulation D. The Company shall, on or before each Settlement Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities for sale to the Subscriber at each Settlement Date pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Subscriber on or prior to the Settlement Date. Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable federal, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Securities to the Subscriber.
4.5 Indemnification. In consideration of the Subscriber’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Subscriber and all of their shareholders, partners, members, officers, directors, employees and investors and any of the foregoing Persons’ agents or other representatives (including, without
| B-19 |
limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents, or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of the Transaction Documents, or (ii) the status of the Subscriber as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents. For the avoidance of doubt, clauses (a) and (b) of the preceding sentence are intended to apply, and shall apply, to direct claims asserted by the Subscriber against the Company as well as any third party claims asserted by an Indemnitee (other than the Subscriber) against the Company. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN ANY TRANSACTION DOCUMENT, THE COMPANY SHALL HAVE NO OBLIGATION TO ANY INDEMNITEE HEREUNDER WITH RESPECT TO (I) ANY INDEMNIFIED LIABILITIES TO THE EXTENT SUCH INDEMNIFIED LIABILITIES ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL ORDER SUBJECT TO NO FURTHER APPEAL, OF THAT INDEMNITEE OR ANY OF ITS AFFILIATES OR (II) ANY SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES RELATING TO ANY TRANSACTION DOCUMENT OR ARISING OUT OF ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE CLOSING).
4.6 Stockholder Approval. As soon as practicable following the Effective Date, the Company shall call an annual meeting of stockholders of the Company (the “Stockholder Meeting”), which Stockholder Meeting shall be held no later than ninety (90) days (or 150 days, if the Proxy Statement is reviewed by the SEC) after the Effective Date. The Company shall provide each stockholder entitled to vote at the Stockholder Meeting a proxy statement meeting the requirements of Section 14 of the 1934 Act (the “Proxy Statement”) soliciting each such stockholder’s affirmative vote at the Stockholder Meeting for approval of the transactions contemplated hereby in accordance with Nasdaq Listing Rule 5635 (including without limitation Nasdaq Listing Rule 5635(b)) (the “Stockholder Approval”).
ARTICLE V.
REGISTRATION RIGHTS
5.1 The Company shall: (a) file a Resale Registration Statement (the “Mandatory Registration Statement”) with the Commission on or before the date 120 days following written requests therefore by the Subscriber (the “Filing Date”) to register all of the Registrable Securities on Form S-3 under the 1933 Act (providing for shelf registration of such Registrable Securities under Commission Rule 415), with such selling holders as the Subscriber may designate. In the event that Form S-3 is not available for the registration of the Registrable Securities, the Company shall register the resale of the Registrable Securities on Form S-1; and (b) use its commercially reasonable efforts to cause such Mandatory Registration Statement to be declared effective within 45 days following the Filing Date (or, in the event the staff of the Commission reviews and has written comments to the Mandatory Registration Statement, within 120 days following the Filing Date), such efforts to include, without limiting the generality of the foregoing, preparing and filing with the Commission any financial statements or other information that is required to be filed prior to the effectiveness of such Mandatory Registration Statement.
| B-20 |
5.2 For each registration statement covering the Registrable Securities, the Company shall provide to the Subscriber, without charge, at least one conformed copy of such registration statement and any amendments thereto (including financial statements and schedules, documents incorporated or deemed to be incorporated therein by reference, and all exhibits), such documents to be provided promptly after their filing with the Commission.
5.3 For each registration statement covering the Registrable Securities, the Company shall promptly deliver to the Subscriber, without charge, as many copies of the prospectus and each amendment or supplement thereto as it may reasonably request; and the Company hereby consents to the use of each such prospectus and each amendment or supplement thereto by the Subscriber in connection with the offer and sale of the Registrable Securities covered by such prospectus and any amendment or supplement thereto.
5.4 In connection with each registration statement covering the Registrable Securities, the Company shall, prior to any public offering of Registrable Securities, use its commercially reasonable efforts to (i) register or qualify or cooperate with the Subscriber in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities laws of such jurisdictions within the United States as the Subscriber reasonably requests in writing and (ii) keep each such registration or qualification (or exemption therefrom) effective during the period that the registration statement is effective and perform or do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of those Registrable Securities covered by the registration statement; provided, however, that the Company shall not be required (i) to qualify generally to do business in any jurisdiction where it is not then so qualified, (ii) to take any action that would subject it to general service of process in any jurisdiction where it is not then so subject or (iii) to subject the Company to any material tax in any jurisdiction where it is not then so subject.
5.5 In connection with each registration statement covering the Registrable Securities, the Company shall use its commercially reasonable efforts to cause all Registrable Securities relating to such registration statement to be listed or quoted on the OTCBB or any securities exchange, quotation system or other market on which similar securities issued by the Company are then listed or quoted.
5.6 In connection with each registration statement covering the Registrable Securities, the Company shall comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the 1933 Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of such registration statement.
5.7 In connection with each registration statement covering the Registrable Securities, the Subscriber shall be required to furnish to the Company information regarding the Subscriber and the distribution of such Registrable Securities as is required by law to be disclosed in the registration statement, and the Company may exclude from such registration the Registrable Securities if the Subscriber fails to furnish such information within a reasonable time prior to the filing of such registration statement or any supplemented prospectus and/or amended registration statement.
5.8 All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company, whether or not a registration statement becomes effective and whether or not any Registrable Securities are sold pursuant to such registration statement. Such fees and expenses shall include, without limitation, (A) all registration and filing fees (including, without limitation, fees and expenses with respect to filings required to be made with the Commission and in compliance with state securities laws, including fees and disbursements of counsel for the Subscriber in connection with state qualifications of the Registrable Securities and any determination of the eligibility of the Registrable Securities for investment under the laws of such
| B-21 |
jurisdictions), (B) printing expenses (including, without limitation, expenses of printing certificates for the Registrable Securities and of printing prospectuses), (C) messenger, telephone and delivery expenses, (D) fees and disbursements of counsel for the Company, (v) 1933 Act liability insurance, if the Company so desires such insurance, and (E) fees and expenses of all other persons or entities retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company’s independent public accountants (including any costs associated with the delivery by independent public accountants of a comfort letter or comfort letters). In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses incurred in connection with the listing or quoting of the Registrable Securities on the OTCBB or any securities exchange, quotation system or other market on which Registrable Securities are required to be listed or quoted.
ARTICLE VI.
CLOSING DELIVERABLES
6.1 Closing Deliverables of the Company. Except as specified below, at each Settlement Date:
(a) Representations and Warranties; Certificates. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Settlement Date as though made at that time (except for representations and warranties that speak as of a specific date which shall be true and correct as of such specified date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Settlement Date. The Subscriber shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Settlement Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Subscriber, in the form attached hereto as Exhibit A. In addition, the Subscriber shall have received a certificate, executed by the Secretary or other applicable officer of the Company, dated as of the Settlement Date, as to the resolutions consistent with Section 3.1(a) as adopted by the Company’s Board of Directors in a form reasonably acceptable to the Subscriber and the incumbency and specimen signature of each officer of the Company who may sign this Agreement and the other Transaction Documents, in the form attached hereto as Exhibit B.
(b) Amended Bylaws. An amendment to the Bylaws of the Company, adopted and approved by the Board of Directors of the Company, which renders the provisions of Nevada’s acquisition of controlling interest statutes (NRS 78.378 through 78.3793, inclusive) not applicable to the consummation of any transaction contemplated hereby.
(c) Transaction Documents. The Company shall have duly executed and delivered to the Subscriber each of the Transaction Documents to which it is a party.
ARTICLE VII.
MISCELLANEOUS
7.1 Fees and Expenses. The Company shall reimburse the Designee or its designee(s) (in addition to any other expense amounts paid to the Subscriber prior to the date of this Agreement) for all reasonable and documented actual costs and expenses incurred in connection with the transactions contemplated by the Transaction Documents (including all reasonable and documented fees and disbursements of third-party diligence consultants and legal counsel in connection therewith and documentation and implementation of the transactions contemplated by the Transaction Documents) on or prior to the Effective Date, up to an amount of $25,000 plus out-of-pocket expenses, which amount shall be paid by the Company on the Effective Date. The Company shall pay, and hold the Subscriber harmless against, any liability, loss or expense (including, without limitation, reasonable
| B-22 |
attorney’s fees and out-of-pocket expenses) arising in connection with any claim relating to any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for any Persons engaged by the Subscriber) relating to or arising out of the transactions contemplated hereby as a result of an agreement entered into by the Company. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Subscriber.
7.2 Entire Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written agreements between the Subscriber, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Subscriber makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Subscriber, and any amendment to this Agreement made in conformity with the provisions of this Section 7.2 shall be binding on the Subscriber. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The Company has not, directly or indirectly, made any agreements with the Subscriber relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, the Subscriber has not made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to the Transaction Documents.
7.3 Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (a) upon delivery, when delivered personally; (b) upon confirmation of delivery, when sent by electronic mail; or (c) upon delivery or refusal of delivery when sent via a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses, facsimile numbers and email addresses for such communications shall be:
| If to the Company: | TherapeuticsMD, Inc. 951 Yamato Road, Suite 220 Boca Raton, FL 33431 Attention: Chief Executive Officer mwalker@TherapeuticsMD.com | |
| With a copy (for information purposes only) to: | DLA Piper LLP (US) 200 South Biscayne Boulevard Suite 2500 Miami, FL 33131 Attention: Joshua M. Samek, Esq. Joshua.samek@dlapiper.com | |
| If to the Subscriber: | Rubric Capital Management LP 155 E 44th Street New York, NY 10017 Attention: Brian Kleinhaus; Michael Nachmani Email: Brian@rubriccapital.com; Michael@rubriccapital.com | |
or such other address as may be designated in writing hereafter, in the same manner, by such Person by two (2) Business Days’ prior notice to the other party in accordance with this Section 7.3. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication,
| B-23 |
or (ii) provided by a courier or overnight courier service shall be rebuttable evidence of personal service or receipt from a nationally recognized overnight delivery service in accordance with clause (a) or (c) above, respectively.
7.4 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.
7.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. Neither Party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, provided that (i) the Subscriber may assign any rights or obligations hereunder to an Affiliate and the Company may assign any rights or obligations hereunder to the surviving or acquiring entity in the event of a change of control. Notwithstanding anything to the contrary herein, the Securities may be pledged to any Person in connection with a bona fide margin account or other loan or financing arrangement secured by such Securities.
7.6 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnitee is an intended third party beneficiary of Section 4.5 and may enforce the provisions of such Sections directly against the parties with obligations thereunder.
7.7 Governing Law; Venue; Waiver of Jury Trial. This Agreement and the Securities shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement and the Securities shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York (except for matters governed by corporate law in the State of Nevada). The Company and the Subscriber, by acceptance thereof, agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Securities (whether brought against any such party or its respective affiliates, directors, officers, stockholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. The Company and the Subscriber, by acceptance thereof, hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement) and hereby irrevocably waives and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. THE COMPANY AND THE SUBSCRIBER, BY ACCEPTANCETHEREOF, HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
7.8 Survival. The representations, warranties, agreements and covenants contained herein shall survive the Effective Date and each Settlement Date.
7.9 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when
| B-24 |
counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) filed of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature page were an original thereof.
7.10 Severability. If any provision of a Transaction Document is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid, or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of the Transaction Document so long as the Transaction Document as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof or thereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid, or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
7.11 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever the Subscriber exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Subscriber may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
7.12 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Company and the Subscriber, by acceptance thereof, will be entitled to specific performance under the Transaction Documents. Any Person having any rights under any provision of any Transaction Document shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of the Transaction Document and to exercise all other rights granted by law. Furthermore, the Company and the Subscriber, by acceptance thereof, recognize that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the other parties. Each of such parties therefore agrees that the other parties shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of showing economic loss and without any bond or other security being required.
7.13 Payment Set Aside. To the extent that the Company makes a payment or payments to the Subscriber hereunder or pursuant to any of the other Transaction Documents or the Subscriber enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company or any Company Subsidiary by a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
7.14 Further Assurances. The Company and the Subscriber, by acceptance thereof, shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and
| B-25 |
deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
7.15 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.
7.16 Assignment of Registration Rights. The rights of the Subscriber hereunder shall be assignable by the Subscriber to any transferee of the Subscriber of all or a portion of the Registrable Securities if: (i) the Subscriber agrees in writing with the transferee or assignee to assign such rights and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (A) the name and address of such transferee or assignee and (B) the securities with respect to which such registration rights are being transferred or assigned, and (iii) the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
| B-26 |
IN WITNESS WHEREOF, the Subscriber and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
| THERAPEUTICSMD, INC. | ||
| By: | /s/ Marlan Walker | |
| Name: Marlan Walker | ||
| Title: Chief Executive Officer | ||
[Signature Page to Subscription Agreement]
| B-27 |
IN WITNESS WHEREOF, the Subscriber and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.
| SUBSCRIBER: | ||
| RUBRIC CAPITAL MANAGEMENT LP, AS MANAGER OR SUB-MANAGER ON BEHALF OF CERTAIN OF ITS FUNDS OR ACCOUNTS | ||
| By: | /s/ Michael Nachmani | |
| Name: Michael Nachmani | ||
| Title: Authorized Signatory | ||
[Signature Page to Subscription Agreement]
| B-28 |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V15480-P92933 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THERAPEUTICSMD, INC. For All Withhold All Except For All To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the The Board of Directors recommends you vote FOR number(s) of the nominee(s) on the line below. the following: 1. To elect directors to serve until the next annual meeting of stockholders or until their successors are duly elected and qualified. Nominees: 01) Tommy G. Thompson The Board of Directors recommends you vote FOR the 02) Cooper C. Collins following proposal: 03) Gail K. Naughton, Ph.D. 04) Justin Roberts 4. To approve, pursuant to Nasdaq Rules 5635(b) and 5635(d), the issuance of up to 5,000,000 shares of common stock to be sold in one or more private The Board of Directors recommends you vote FOR the For Against Abstain placements to Rubric Capital Management LP, or one or following proposal: more of its affiliates. 2. To approve, on a non-binding advisory basis, the The Board of Directors recommends you vote FOR the compensation of our named executive officers for the following proposal: fiscal year ended December 31, 2022. 5. To ratify the appointment of Grant Thornton LLP, an independent registered public accounting firm, as the For Against Abstain independent auditor of the company for the fiscal year The Board of Directors recommends you vote FOR the following proposal: ending December 31, 2023. 3. To approve an amendment to the Amended and Restated 6. To transact such other business as may properly come Articles of Incorporation, as amended, to increase before the meeting or any adjournment thereof. the number of authorized shares of common stock, $0.001 par value per share, from 12,000,000 shares to 32,000,000 shares. 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. For Against Abstain For Against Abstain Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date THERAPEUTICSMD, INC. 951 YAMATO ROAD, SUITE 220 BOCA RATON, FL 33431 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 on June , 2023. 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. During The Meeting—Go to www.virtualshareholdermeeting.com/TXMD2023 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE—1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on June , 2023. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
D45422-P55549
V15481-P92933THERAPEUTICSMD, INC.
2021 2022 and 2023 Annual Meeting of Stockholders
May 27, 2021, June , 2023, 8:00 a.m. Eastern Time
This proxy is solicited by the Board of Directors
The undersigned stockholder of THERAPEUTICSMD, INC., a Nevada corporation, hereby acknowledges receipt of the notice of Annual Meeting of Stockholders and proxy statement and hereby appoints Robert G. FinizioMarlan Walker and James C. D’AreccaMichael Donegan and each of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2021combined 2022 and 2023 Annual Meeting of Stockholders of THERAPEUTICSMD, INC., to be held on Thursday, May 27, 2021,, June , 2023, at 8:00 a.m. Eastern Time, virtually at www.virtualshareholdermeeting.com/TXMD2021TXMD2023 and at any adjournment or adjournments thereof, and to vote all shares of common stock which the undersigned would be entitled to vote if then and there virtually present on the matters set forth on the reverse side of this proxy card.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
Continued and to be signed on reverse side
