evok-def14a_20180426.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

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 under §240.14a-12

Evoke Pharma, 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 computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

(3)

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):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

(3)

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(4)

Date Filed:

 

 

 

 


 

 

420 Stevens Avenue, Suite 370

Solana Beach, CA 92075

NOTICE OF ANNUAL MEETING OF

STOCKHOLDERS AND PROXY STATEMENT

Dear Stockholder:

The annual meeting of stockholders of Evoke Pharma, Inc. will be held at the office of Latham & Watkins LLP, located at 12670 High Bluff Drive, San Diego, CA 92130 on April 26, 2018 at 8:30 a.m., local time, for the following purposes:

 

 

1.

To elect two directors for a three-year term to expire at the 2021 annual meeting of stockholders;

 

 

2.

To consider and vote upon the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018;  

 

 

3.

To consider and vote upon the approval of the amendment and restatement of our 2013 Equity Incentive Award Plan; and

 

 

4.

To transact such other business as may be properly brought before the meeting or any adjournment or postponement thereof.

 

The foregoing items of business are more fully described in the attached proxy statement, which forms a part of this notice and is incorporated herein by reference. Our board of directors has fixed the close of business on February 28, 2018 as the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting or any adjournment or postponement thereof.

Accompanying this notice is a proxy card. Whether or not you expect to attend our annual meeting, please complete, sign and date the enclosed proxy card and return it promptly, or complete and submit your proxy via phone or the internet in accordance with the instructions provided on the enclosed proxy card. If you plan to attend our annual meeting and wish to vote your shares personally, you may do so at any time before the proxy is voted.

All stockholders are cordially invited to attend the meeting.

 

 

By Order of the Board of Directors,

 

 

David A. Gonyer, R.Ph.

President, Chief Executive Officer and Director

Solana Beach, California

March 16, 2018

Your vote is important. Please vote your shares whether or not you plan to attend the meeting.

 

 


 

 

TABLE OF CONTENT

 

 

 

Page

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

1

PROPOSAL 1:  ELECTION OF DIRECTORS

4

PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTANTS

12

PROPOSAL 3: APPROVAL OF AMENDMENT AND RESTATEMENT OF 2013 EQUITY
INCENTIVE AWARD PLAN

13

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

24

EXECUTIVE COMPENSATION AND OTHER INFORMATION

25

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

33

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

34

STOCKHOLDER PROPOSALS

34

ANNUAL REPORT

34

OTHER MATTERS

35

APPENDIX A:AMENDED AND RESTATED EVOKE PHARMA, INC. 2013 EQUITY
INCENTIVE AWARD PLAN

A-1

 

 

 

 

 

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420 Stevens Avenue, Suite 370

Solana Beach, California 92075

 

PROXY STATEMENT FOR THE 2018 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON THURSDAY, APRIL 26, 2018

The board of directors of Evoke Pharma, Inc. is soliciting the enclosed proxy for use at the annual meeting of stockholders to be held on April 26, 2018 at 8:30 a.m., local time, at the office of Latham & Watkins LLP, located at 12670 High Bluff Drive, San Diego, California 92130. If you need directions to the location of the annual meeting, please contact us at (858) 345-1494.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on April 26, 2018.

This proxy statement and our annual report are available electronically at http://www.proxydocs.com/EVOK.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Why did you send me this proxy statement?

We sent you this proxy statement and the enclosed proxy card because our board of directors is soliciting your proxy to vote at the 2018 annual meeting of stockholders. This proxy statement summarizes information related to your vote at the annual meeting. All stockholders who find it convenient to do so are cordially invited to attend the annual meeting in person. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card.

We intend to begin mailing this proxy statement, the attached notice of annual meeting and the enclosed proxy card on or about March 16, 2018 to all stockholders of record entitled to vote at the annual meeting. Only stockholders who owned our common stock on February 28, 2018 are entitled to vote at the annual meeting. On this record date, there were 15,493,368 shares of our common stock outstanding. Common stock is our only class of stock entitled to vote.

What am I voting on?

There are three proposals scheduled for a vote:

Proposal 1: To elect two directors for a three-year term to expire at the 2021 annual meeting of stockholders;

  

 

Cam L. Garner

 

 

 

 

  

 

Scott L. Glenn

Proposal 2: Ratification of the appointment of BDO USA, LLP as our independent registered public accountants for the year ending December 31, 2018; and

Proposal 3: Approval of the amendment and restatement of our 2013 Equity Incentive Award Plan.  

How many votes do I have?

Each share of our common stock that you own as of February 28, 2018 entitles you to one vote.


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How do I vote by proxy?

With respect to the election of directors, you may either vote “For” all of the nominees to the board of directors or you may “Withhold” your vote for any nominee you specify. With respect to each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting.

Stockholders of Record: Shares Registered in Your Name

If you are a stockholder of record, there are several ways for you to vote your shares. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure that your vote is counted.

 

 

 

By Mail: You may vote using your proxy card by completing, signing, dating and returning the proxy card in the self-addressed, postage-paid envelope provided. If you properly complete your proxy card and send it to us in time to vote, your proxy (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your shares, as permitted, will be voted as recommended by our board of directors. If any other matter is presented at the annual meeting, your proxy (one of the individuals named on your proxy card) will vote in accordance with his or her best judgment. As of the date of this proxy statement, we knew of no matters that needed to be acted on at the meeting, other than those discussed in this proxy statement.

 

 

 

Via the Internet: You may vote at www.proxypush.com/EVOK, 24 hours a day, seven days a week. Have your proxy card available when you enter the website and use the Company Number and Account Number shown on your proxy card. Votes submitted through the Internet must be received by 11:59 p.m., Eastern Time, on April 25, 2018.

 

 

 

By Telephone: You may vote using a touch-tone telephone by calling 1-855-686-4811, 24 hours a day, seven days a week. Have your proxy card available when you call and use the Company Number and Account Number shown on your proxy card. Votes submitted by telephone must be received by 11:59 p.m., Eastern Time, on April 25, 2018.

 

 

 

In Person: You may still attend the meeting and vote in person even if you have already voted by proxy. To vote in person, come to the annual meeting and we will give you a ballot at the annual meeting.

Beneficial Owners: Shares Registered in the Name of a Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than directly from us. Simply complete and mail the proxy card to ensure that your vote is counted. You may be eligible to vote your shares electronically over the Internet or by telephone. A large number of banks and brokerage firms offer Internet and telephone voting. If your bank or brokerage firm does not offer Internet or telephone voting information, please complete and return your proxy card in the self-addressed, postage-paid envelope provided. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

May I revoke my proxy?

If you give us your proxy, you may revoke it at any time before it is exercised. You may revoke your proxy in any one of the three following ways:

 

 

 

you may send in another signed proxy with a later date,

 

 

 

you may notify our corporate secretary, Matthew J. D’Onofrio, in writing before the annual meeting that you have revoked your proxy, or

 

 

 

you may vote in person at the meeting.

What constitutes a quorum?

The presence at the annual meeting, in person or by proxy, of holders representing a majority of our outstanding common stock as of February 28, 2018, or 7,746,685 shares, constitutes a quorum at the meeting, permitting us to conduct our business.

What vote is required to approve each proposal?

Proposal 1: Election of Directors. The two nominees who receive the most “For” votes (among votes properly cast in person or by proxy) will be elected. Only votes “For” or “Withheld” will affect the outcome.

Proposal 2: Ratification of Independent Registered Public Accounting Firm. The ratification of the appointment of BDO USA, LLP must receive “For” votes from the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the annual meeting.

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Proposal 3: Approval of the Amendment and Restatement of our 2013 Equity Incentive Award Plan. The approval of the amendment and restatement of our 2013 Equity Incentive Award Plan must receive “For” votes from the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the annual meeting.

Voting results will be tabulated and certified by Mediant Communications LLC.

What is the effect of abstentions and broker non-votes?

Shares of common stock held by persons attending the annual meeting but not voting, and shares represented by proxies that reflect abstentions as to a particular proposal, will be counted as present for purposes of determining the presence of a quorum. Abstentions are treated as shares present in person or by proxy and entitled to vote, so abstaining has the same effect as a negative vote for purposes of determining whether our stockholders have ratified the appointment of BDO USA, LLP as our independent registered public accounting firm, and the amendment and restatement of our 2013 Equity Incentive Award Plan.  However, because the election of directors is determined by a plurality of votes cast, abstentions will not be counted in determining the outcome of such a proposal.

Shares represented by proxies that reflect a “broker non-vote” will be counted for purposes of determining whether a quorum exists. A “broker non-vote” occurs when a nominee holding shares for a beneficial owner has not received instructions from the beneficial owner and does not have discretionary authority to vote the shares for certain non-routine matters. With regard to the election of directors and the approval of the amendment and restatement of our 2013 Equity Incentive Award Plan, broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote. However, ratification of the appointment of BDO USA, LLP is considered a routine matter on which a broker or other nominee has discretionary authority to vote. As a result, broker non-votes will be counted for purposes of this proposal.

Who is paying the costs of soliciting these proxies?

We will pay all of the costs of soliciting these proxies. Our directors, officers and other employees may solicit proxies in person or by telephone, fax or email. We will not pay our directors, officers or other employees any additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses. Our costs for forwarding proxy materials will not be significant.  

How do I obtain an Annual Report on Form 10-K?

If you would like a copy of our annual report on Form 10-K for the fiscal year ended December 31, 2017 that we filed with the Securities and Exchange Commission, or SEC, we will send you one without charge. Please write to:

 

Evoke Pharma, Inc.

420 Stevens Avenue, Suite 370

Solana Beach, CA 92075

Attn: Corporate Secretary

All of our SEC filings are also available free of charge in the investor relations section of our website at www.evokepharma.com.

How can I find out the results of the voting at the annual meeting?

Preliminary voting results will be announced at the annual meeting. Final voting results will be published in our current report on Form 8-K to be filed with the SEC within four business days after the annual meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.

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PROPOSAL 1
ELECTION OF DIRECTORS

Our board of directors is divided into three classes, with one class of our directors standing for election each year, generally for a three-year term. The current term of the company’s Class II directors, Cam L. Garner and Scott L. Glenn, will expire at the 2018 annual meeting.

The nominees for Class II director for election at the 2018 annual meeting are Cam L. Garner and Scott L. Glenn.  If both of Messrs. Garner and Glenn are elected at the 2018 annual meeting, such individuals will be elected to serve for a term of three years that will expire at our 2021 annual meeting of stockholders and until such individual’s successor is elected and qualified.

If no contrary indication is made, proxies in the accompanying form will be voted for the nominees, or in the event that any nominee is not a candidate or is unable to serve as a director at the time of the election (which is not currently expected), for any nominee who is designated by our board of directors to fill the vacancy.  Messrs. Garner and Glenn are currently members of our board of directors.

All of our directors bring to the board of directors significant leadership experience derived from their professional experience and service as executives or board members of other corporations and/or venture capital firms. The process undertaken by the nominating and corporate governance committee in recommending qualified director candidates is described below under “Director Nominations Process.”  Certain individual qualifications and skills of our directors that contribute to the board of directors’ effectiveness as a whole are described in the following paragraphs.

Information Regarding Directors

The information set forth below as to the directors and nominees for director has been furnished to us by the directors and nominees for director:

Nominees for Election to the Board of Directors

For a Three Year Term Expiring at the

2021 Annual Meeting of Stockholders (Class II)

 

 

 

 

 

 

 

 

 

Name

  

 

Age

 

  

Present Position with Evoke Pharma, Inc.

Cam L. Garner

  

 

69

 

  

 

Chairman of the Board of Directors

Scott L. Glenn

 

 

67

 

 

 

Director

 

Cam L. Garner is one of our co-founders and has served as Chairman of our board of directors since June 2007. Mr. Garner has co-founded specialty pharmaceutical companies Zogenix, Inc., Cadence Pharmaceuticals, Inc., Somaxon Pharmaceuticals, Inc., Elevation Pharmaceuticals, Inc., DJ Pharma, Verus Pharmaceuticals, Inc., Xcel Pharmaceuticals, Inc., Meritage Pharma, Inc., Oncternal Therapeutics, Inc., Kalyra Pharmaceuticals, Inc., OrPro Therapeutics, Inc., Alastin Skincare, Inc. and Zavante Therapeutics, Inc.  He currently serves as Chairman of Zogenix, OrPro Therapeutics and Zavante Therapeutics, Inc.  Mr. Garner served as Chairman of Xcel Pharmaceuticals until it was acquired in March 2005 by Valeant Pharmaceuticals International, DJ Pharma until it was sold to Biovail in 2000, Elevation Pharmaceuticals until it was acquired by Sunovion Pharmaceuticals Inc. in September 2012, Cadence Pharmaceuticals until it was acquired by Mallinckrodt plc in March 2014, and Meritage Pharma until it was acquired by Shire plc in February 2015.  Mr. Garner was Chief Executive Officer of Dura Pharmaceuticals, Inc. from 1989 to 1995 and its Chairman and Chief Executive Officer from 1995 until it was sold to Elan in November 2000.  He also serves on the board of directors of Adigica Health, Inc., Aegis Therapeutics, Inc. and Neurelis Pharmaceuticals.  Mr. Garner earned his B.A. in Biology from Virginia Wesleyan College and an M.B.A. from Baldwin-Wallace College. As one of our co-founders and having served as our Chairman since June 2007, Mr. Garner’s extensive knowledge of our business and history, experience as a board member of multiple publicly-traded and privately-held companies, and expertise in developing, financing and providing strong executive leadership to numerous biopharmaceutical companies contributed to our board of directors’ conclusion that he should serve as a director of our company.

Scott L. Glenn is one of our co-founders and has served as a member of our board of directors since June 2007.  Since he founded it in 1999, Mr. Glenn has been the Managing Partner of Windamere Venture Partners.  Mr. Glenn is the past founder of Prometheus Laboratories, Inc., Santarus, Inc., DexCom Inc., Cadence Pharmaceuticals, NovaCardia Inc., Somaxon Pharmaceuticals, SpineWave, SkinMedica, Inc. and Conception Technologies, Inc., and currently serves on the board of directors of Alastin Skincare, Inc., Oncternal Therapeutics and Precision IBD, Inc.  Prior to Mr. Glenn’s involvement in venture capital, he was the President and Chief Executive Officer of Quidel Corporation.  Prior to Quidel, Mr. Glenn held various management positions, including Division General Manager with Allergan, Inc.  Mr. Glenn holds a B.S. in Finance and Accounting from California State University at Fullerton.  As one of our co-founders and having served on our board since June 2007, Mr. Glenn’s extensive knowledge of our business and history, experience as a board member of multiple publicly-traded and privately-held

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companies, and expertise in developing, financing and providing strong executive leadership to numerous biopharmaceutical companies contributed to our board of directors’ conclusion that he should serve as a director of our company.

Members of the Board of Directors Continuing in Office

Term Expiring at the

2019 Annual Meeting of Stockholders (Class III)

 

 

 

 

 

 

 

Name

  

Age

 

  

Present Position with Evoke Pharma, Inc.

Malcolm R. Hill, Pharm.D.

  

 

61

  

  

Director

Ann D. Rhoads

  

 

52

  

  

Director

Malcolm R. Hill, Pharm.D. has served as a member of our board of directors since June 2007. Dr. Hill has more than 30 years of academic and pharmaceutical industry experience in new product assessment and clinical trial design and execution, with a special emphasis in gastroenterology, respiratory medicine, and drug delivery systems. Since June 2016, Dr. Hill has served as the Chief Development Officer at PvP Biologics, a biotechnology company.   Prior to joining PvP Biologics, Dr. Hill was Chief Scientific Officer at Meritage Pharma from 2008 through February 2015 focusing on novel treatments for eosinophilic esophagitis, when it was acquired by Shire.  Prior to joining Meritage, Dr. Hill was Senior Vice President of Research and Development at Verus Pharmaceuticals, Inc. where he was responsible for various development-stage programs.  Dr. Hill was a member of the senior management team at Dura Pharmaceuticals, Inc., where he served as a vice president and corporate officer. Dr. Hill was a Partner at ProPharmaCon, LLC, a product development and regulatory consulting company for clients with pharmaceutical products in every stage of the development cycle.  Dr. Hill’s academic career includes his position at the National Jewish Medical and Research Center, and he has also served as an assistant professor in the Schools of Medicine and Pharmacy at the University of Colorado. Dr. Hill has published more than 80 articles on the topics of clinical pharmacology and pharmacokinetics and the treatment of pediatric asthma and related conditions. Dr. Hill earned his Pharm.D. from the University of Southern California and completed a post-doctoral program at the Veterans Administration Medical Center, San Diego, as well as a research fellowship in the Schools of Medicine and Pharmacy at the University of Florida Health Sciences Center. Dr. Hill’s experience as a founder of a private pharmaceutical firms, strong background in clinical and product development and substantial knowledge of the pharmaceutical industry contributed to our board of directors’ conclusion that he should serve as a director of our company.

Ann D. Rhoads has served as a member of our board of directors since June 2013. Ms. Rhoads was Executive Vice President and Chief Financial Officer of Zogenix, Inc., a publicly-traded pharmaceutical company, and served in that capacity from March 2010 to January 2017. From 2000 through the end of 2009, Ms. Rhoads served as the Chief Financial Officer of Premier, Inc., a healthcare supply management company. From 1998 to 2000, she was Vice President, Strategic Initiatives at Premier, Inc., and from 1993 to 1998, she was a Vice President of The Sprout Group, an institutional venture capital firm. Ms. Rhoads holds a B.S. in Finance from the University of Arkansas and an M.B.A. from the Harvard Graduate School of Business Administration. Ms. Rhoads also serves on the board of directors of Globus Medical Inc., Iridex Corporation and previously served on the board of directors of Novellus Systems, Inc. from 2003 until 2012. Ms. Rhoads’ experience as the chief financial officer of a publicly-traded pharmaceutical company, and as a member of the board of directors of a publicly-traded company, brings to our board of directors and the committees of our board of directors valuable financial skills and expertise, which qualify her to serve as an “audit committee financial expert” on our audit committee, and significant executive management experience and leadership skills, as well as a strong understanding of corporate governance principles, all of which contributed to our board of directors’ conclusion that she should serve as a director of our company.

Term Expiring at the

2020 Annual Meeting of Stockholders (Class I)

 

 

 

 

 

 

 

Name

  

Age

 

  

Present Position with Evoke Pharma, Inc.

Todd C. Brady, M.D., Ph.D.

  

 

46

  

  

Director

Kenneth J. Widder, M.D.

  

 

65

  

  

Director

David A. Gonyer, R.Ph.

 

 

54

 

 

President, Chief Executive Officer and Director

 

Todd C. Brady, M.D., Ph.D., has served as a member of our board of directors since June 2007. Dr. Brady currently serves as Chief Executive Officer, President, and Director of Aldeyra Therapeutics, Inc., a publicly-traded biotechnology company. Dr. Brady was appointed President and Chief Executive Officer of Aldeyra Therapeutics in 2012, having been a member of the board of directors since 2005. Prior to Aldeyra, Dr. Brady served as Entrepreneur in Residence at Domain Associates, LLC, a leading healthcare venture capital firm, where he was a Principal from 2004 to 2013. Dr. Brady also serves on the board of directors of Spring Bank Pharmaceuticals, Inc., a publicly-traded biotechnology company.  Dr. Brady holds an M.D. from Duke University Medical School, a Ph.D. from Duke University Graduate School, and an A.B. from Dartmouth College.  Dr. Brady’s extensive knowledge of our business and history, experience as a board member of multiple companies, and expertise in strategic development contributed to our board of directors’ conclusion that he should serve as a director of our company.

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Kenneth J. Widder, M.D. has served as a member of our board of directors since June 2007. Dr. Widder has more than 35 years of experience working with biomedical companies.  Dr. Widder was a General Partner with Latterell Venture Partners from 2007 until September 2016, and serves on the boards of directors of Quidel Corporation, a publicly-traded diagnostic company, OrphoMed Inc., Sydnexis, Inc., Vision of Children, and the San Diego Museum of Art. Dr. Widder has founded seven companies and was Chairman and Chief Executive Officer of five of these companies. His last company, Sytera Inc., merged with Sirion Therapeutics, an ophthalmology specialty pharmaceutical company.  Prior to Sytera, Dr. Widder co-founded and was the initial Chief Executive Officer of NovaCardia, Inc., a company acquired by Merck & Co., Inc.  Prior to NovaCardia, Dr. Widder founded and was Chairman and Chief Executive Officer of Santarus, Inc., which was acquired by Salix Pharmaceuticals in 2013.  Additionally, Dr. Widder was Chairman and Chief Executive Officer of Converge Medical, Inc., a medical device company developing a suture-less anastamosis system for vein grafts in coronary bypass surgery.  Dr. Widder started his career as a founder, Chairman and Chief Executive Officer of Molecular Biosystems, where he was responsible for the development and approval of Albunex and Optison, the first two ultrasound contrast agents to be approved in the United States.  Dr. Widder is an inventor on over 30 patents and patent applications and has authored or co-authored over 25 publications.  Dr. Widder holds an M.D. from Northwestern University and trained in pathology at Duke University.  Dr. Widder’s extensive knowledge of our business and history, experience as a board member of multiple publicly-traded and privately-held companies and expertise in developing and financing contributed to our board of directors’ conclusion that he should serve as a director of our company.

David A. Gonyer, R.Ph. is one of our co-founders and has served as our President and Chief Executive Officer and as a member of our board of directors since March 2007. From January 2004 to March 2007, Mr. Gonyer served as Vice President, Strategic and Product Development of Medgenex, Inc., a subsidiary of Victory Pharma, Inc., a biopharmaceutical company focused on acquiring, developing and marketing products to treat pain and related conditions. From April 2000 to December 2004, Mr. Gonyer was a founder and Vice President of Sales and Marketing at Xcel Pharmaceuticals, Inc., a specialty pharmaceutical company focused on neurological disorders. From December 1996 to April 2000, Mr. Gonyer served as Director of Marketing at Elan/Dura Pharmaceuticals, Inc. From 1987 to 1996, Mr. Gonyer held a broad range of management positions in commercial operations, alliance/partnership management, and regional sales at Eli Lilly & Company. Mr. Gonyer served as a member of the board of directors of Signal Genetics, Inc., a publicly-traded, commercial stage, molecular diagnostic company focused on providing innovative diagnostic services prior to its merger with miRagen Therapeutics in February 2017 and Neurelis, Inc., a privately held neurological specialty pharmaceutical company. Mr. Gonyer is a Registered Pharmacist and holds a B.Sc. in Pharmacy from Ferris State University School of Pharmacy. As one of our co-founders and having served as our Chief Executive Officer since March 2007, Mr. Gonyer’s extensive knowledge of our business, as well as 31 years of experience in the pharmaceutical industry, including executive leadership in several pharmaceutical companies, contributed to our board of directors’ conclusion that he should serve as a director of our company.

Board Independence

Our board of directors has determined that all of our directors are independent directors within the meaning of the applicable Nasdaq Stock Market LLC, or Nasdaq, listing standards, except for David A. Gonyer, our President and Chief Executive Officer.  

Board Leadership Structure

Our board of directors is currently led by its chairman, Cam L. Garner. Our board of directors recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as the company continues to grow. We separate the roles of chief executive officer and chairman of the board in recognition of the differences between the two roles. The chief executive officer is responsible for setting the strategic direction for the company and the day-to-day leadership and performance of the company, while the chairman of the board of directors provides guidance to the chief executive officer and presides over meetings of the full board of directors. We believe that this separation of responsibilities provides a balanced approach to managing the board of directors and overseeing the company.

The Board’s Role in Risk Oversight

Our board of directors has responsibility for the oversight of the company’s risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our board to understand the company’s risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk.

The audit committee reviews information regarding liquidity and operations, and oversees our management of financial risks. Periodically, the audit committee reviews our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the audit committee includes direct communication with our external auditors, and discussions with management regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures. The compensation committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive risk-taking. The nominating and corporate governance committee manages risks

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associated with the independence of the board, corporate disclosure practices, and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered by our board as a whole.

Board of Directors Meetings

During 2017, our board of directors met five times. In that year, each director attended at least 78% of the total number of meetings held during such director’s term of service by the board of directors and each committee of the board of directors on which such director served.

Committees of the Board of Directors

We have three standing committees: the audit committee, the compensation committee and the nominating and corporate governance committee. Each of these committees has a written charter approved by our board of directors. A copy of each charter can be found under the Corporate Governance section of our website at www.evokepharma.com.

Audit Committee

The audit committee’s main function is to oversee our accounting and financial reporting processes, internal systems of control, independent registered public accounting firm relationships and the audits of our financial statements. This committee’s responsibilities include, among other things:

 

selecting and engaging our independent registered public accounting firm;

 

evaluating the qualifications, independence and performance of our independent registered public accounting firm;

 

approving the audit and non-audit services to be performed by our independent registered public accounting firm;

 

reviewing the design, implementation, adequacy and effectiveness of our internal controls and our critical accounting policies;

 

discussing with management and the independent registered public accounting firm the results of our annual audit and the review of our quarterly unaudited financial statements;

 

reviewing, overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

 

reviewing with management and our auditors any earnings announcements and other public announcements regarding our results of operations;

 

preparing the report that the SEC requires in our annual proxy statement;

 

reviewing and approving any related party transactions and reviewing and monitoring compliance with our code of conduct and ethics; and

 

reviewing and evaluating, at least annually, the performance of the audit committee and its members including compliance of the audit committee with its charter.

The members of our audit committee are Ms. Rhoads, Mr. Glenn and Dr. Widder. Ms. Rhoads serves as the chairperson of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq Capital Market. Our board of directors has determined that Ms. Rhoads is an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq rules and regulations. Our board of directors has determined each of Ms. Rhoads, Mr. Glenn and Dr. Widder is independent under the applicable rules of the SEC and the Nasdaq Capital Market.  The audit committee met four times during 2017.  The audit committee is governed by a written charter that satisfies the applicable standards of the SEC and The Nasdaq Capital Market.  The charter is available to stockholders on our website at www.evokepharma.com.

Compensation Committee

Our compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and recommends corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives and recommends to our board of directors the compensation of these officers based on such evaluations. The compensation committee also recommends to our board of directors the issuance of stock options and other awards under our equity plan. The compensation committee reviews and evaluates, at least annually, the performance of the compensation committee and its members, including compliance by the compensation committee with its charter.

The members of our compensation committee are Mr. Garner, Dr. Brady and Ms. Rhoads. Mr. Garner serves as the chairman of the committee. Our Board has determined that each of Mr. Garner, Dr. Brady and Ms. Rhoads is independent under

7


 

the applicable rules and regulations of the Nasdaq Capital Market, and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act.  The compensation committee met four times during 2017.  The compensation committee is governed by a written charter, which the compensation committee reviews and evaluates at least annually.  The charter is available to stockholders on our website at www.evokepharma.com.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our board of directors concerning governance matters.  

The members of our nominating and corporate governance committee are Drs. Brady, Hill and Widder. Dr. Brady serves as the chairman of the committee. Our board has determined that each of Drs. Brady, Hill and Widder is independent under the applicable rules and regulations of the Nasdaq Capital Market relating to nominating and corporate governance committee independence. The nominating and corporate governance committee met one time during 2017. The nominating and corporate governance committee is governed by a written charter that is available to stockholders on our website at www.evokepharma.com.

Report of the Audit Committee of the Board of Directors

The audit committee oversees the company’s financial reporting process on behalf of our board of directors. Management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the audit committee reviewed the audited financial statements in the company’s annual report with management, including a discussion of any significant changes in the selection or application of accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and the effect of any new accounting initiatives.

We have reviewed and discussed with BDO USA, LLP our audited financial statements. We discussed with BDO USA, LLP the overall scope and plans of their audits. We met with BDO USA, LLP, with and without management present, to discuss results of its examinations, and the overall quality of the company’s financial reporting.

We have reviewed and discussed with BDO USA, LLP matters required to be discussed pursuant to the Public Company Accounting Oversight Board Auditing Standard 1301 “Communications with Audit Committees.” We have received from BDO USA, LLP the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding BDO USA, LLP’s communications with the Audit Committee concerning independence. We have discussed with BDO USA, LLP matters relating to its independence, including a review of both audit and non-audit fees, and considered the compatibility of non-audit services with BDO USA, LLP’s independence.  The audit committee is not employed by the company, nor does it provide any expert assurance or professional certification regarding the company’s financial statements.  The audit committee relies, without independent verification, on the accuracy and integrity of the information provided and representations made by management and the company’s independent registered public accounting firm.

In reliance on the reviews and discussions referred to above, the audit committee has recommended to the company’s board of directors that the audited financial statements be included in our annual report for the year ended December 31, 2017. The audit committee and the company’s board of directors also have recommended, subject to stockholder approval, the ratification of the appointment of BDO USA, LLP as the company’s independent registered public accounting firm for 2018.

This report of the audit committee is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.

The foregoing report has been furnished by the audit committee.

 

Respectfully submitted,

The Audit Committee of the Board of Directors

Ann D. Rhoads (Chairperson)

Scott L. Glenn

Kenneth J. Widder, M.D.

 

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Compensation Committee Interlocks and Insider Participation

Mr. Garner, Dr. Brady and Ms. Rhoads served on our compensation committee during 2017. None of the members of our compensation committee has ever been one of our officers or employees. None of our executive officers currently serves, or has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

Director Nomination Process

Director Qualifications

In evaluating director nominees, the nominating and corporate governance committee will consider, among other things, the following factors:

 

personal and professional integrity, ethics and values;

 

experience in corporate management, such as serving as an officer or former officer of a publicly-held company;

 

development or commercialization experience in large pharmaceutical companies;

 

experience as a board member or executive officer of another publicly-held company;

 

strong finance experience;

 

diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;

 

diversity of background and perspective, including with respect to age, gender, race, place of residence and specialized experience;

 

conflicts of interest; and

 

practical and mature business judgment.

The nominating and corporate governance committee’s goal is to assemble a board of directors that brings to the company a variety of perspectives and skills derived from high quality business and professional experience. Moreover, the nominating and corporate governance committee believes that the background and qualifications of the board of directors, considered as a group, should provide a significant mix of experience, knowledge and abilities that will allow the board of directors to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.

Other than the foregoing criteria for director nominees, the nominating and corporate governance committee has not adopted a formal policy with respect to a fixed set of specific minimum qualifications for its candidates for membership on the board of directors. The nominating and corporate governance committee may consider such other facts, including, without limitation, diversity, as it may deem are in the best interests of the company and its stockholders. The nominating and corporate governance committee does, however, believe it is appropriate for at least one, and, preferably, several, members of our board of directors to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that a majority of the members of our board of directors be independent as required under the Nasdaq qualification standards. The nominating and corporate governance committee also believes it is appropriate for our President and Chief Executive Officer to serve as a member of our board of directors. Our directors’ performance and qualification criteria are reviewed annually by the nominating and corporate governance committee.

Identification and Evaluation of Nominees for Directors

The nominating and corporate governance committee identifies nominees for director by first evaluating the current members of our board of directors willing to continue in service. Current members with qualifications and skills that are consistent with the nominating and corporate governance committee’s criteria for board of directors service and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of our board of directors with that of obtaining a new perspective or expertise.

If any member of our board of directors does not wish to continue in service or if our board of directors decides not to re-nominate a member for re-election, the nominating and corporate governance committee may identify the desired skills and experience of a new nominee in light of the criteria above, in which case, the nominating and corporate governance committee would generally poll our board of directors and members of management for their recommendations. The nominating and corporate governance committee may also review the composition and qualification of the boards of directors of our competitors, and may seek input from industry experts or analysts. The nominating and corporate governance committee reviews the qualifications, experience and background of the candidates. Final candidates are interviewed by the members of the nominating and corporate governance committee and by certain of our other independent directors and executive management. In making its determinations, the nominating and corporate governance committee evaluates each individual in the context of our board of directors as a whole, with the objective of assembling a group that can best contribute to the success of our company and represent

9


 

stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the nominating and corporate governance committee makes its recommendation to our board of directors. To date, the nominating and corporate governance committee has not utilized third-party search firms to identify director candidates. The nominating and corporate governance committee may in the future choose to do so in those situations where particular qualifications are required or where existing contacts are not sufficient to identify an appropriate candidate.

The nominating and corporate governance committee evaluates nominees recommended by stockholders in the same manner as it evaluates other nominees. We have not received director candidate recommendations from our stockholders and do not have a formal policy regarding consideration of such recommendations. However, any recommendations received from stockholders will be evaluated in the same manner that potential nominees suggested by board members, management or other parties are evaluated. We do not intend to treat stockholder recommendations in any manner different from other recommendations.

Under our amended and restated bylaws, stockholders wishing to suggest a candidate for director should write to our corporate secretary and provide such information about the stockholder and the proposed candidate as is set forth in our amended and restated bylaws and as would be required by SEC rules to be included in a proxy statement. In addition, the stockholder must include the consent of the candidate and describe any arrangements or undertakings between the stockholder and the candidate regarding the nomination. In order to give the nominating and corporate governance committee sufficient time to evaluate a recommended candidate and/or include the candidate in our proxy statement for the 2019 annual meeting, the recommendation should be received by our corporate secretary at our principal executive offices in accordance with our procedures detailed in the section below entitled “Stockholder Proposals.”

Director Attendance at Annual Meetings

Although our company does not have a formal policy regarding attendance by members of our board of directors at our annual meeting, we encourage all of our directors to attend. Six of the seven board members attended the 2017 annual meeting of stockholders.

Communications with our Board of Directors

Stockholders seeking to communicate with our board of directors should submit their written comments to our corporate secretary at Evoke Pharma, Inc., 420 Stevens Avenue, Suite 370, Solana Beach, California 92075. The corporate secretary will forward such communications to each member of our board of directors; provided that, if in the opinion of our corporate secretary it would be inappropriate to send a particular stockholder communication to a specific director, such communication will only be sent to the remaining directors (subject to the remaining directors concurring with such opinion).

Corporate Governance

Our company’s Code of Business Conduct and Ethics, Corporate Governance Guidelines, Audit Committee Charter, Compensation Committee Charter and Nominating and Corporate Governance Committee Charter are available, free of charge, on our website at www.evokepharma.com. Please note, however, that the information contained on the website is not incorporated by reference in, or considered part of, this proxy statement. We will also provide copies of these documents, as well as our company’s other corporate governance documents, free of charge, to any stockholder upon written request to Evoke Pharma, Inc., Attention: Corporate Secretary, 420 Stevens Avenue, Suite 370, Solana Beach, California 92075.

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Director Compensation

The following table sets forth information for the year ended December 31, 2017 regarding the compensation awarded to, earned by or paid to our non-employee directors who served on our board of directors during 2017.  Employees of our company who also serve as a director do not receive additional compensation for their performance of services as a director.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director

 

Fees Earned or Paid in Cash ($)

 

 

Option

Awards  ($) (1)

 

All Other

Compensation ($)

 

Total

($)

 

Cam Garner

 

 

47,500

 

 

 

77,888

 

(2)

 

 

 

125,388

 

Todd C. Brady, M.D., Ph.D.

 

 

41,000

 

 

 

70,618

 

(3)

 

 

 

111,618

 

Scott L. Glenn

 

 

38,750

 

 

 

67,503

 

(4)

 

 

 

106,253

 

Malcolm R. Hill, Pharm.D.

 

 

36,750

 

 

 

65,426

 

(5)

 

 

 

102,176

 

Ann D. Rhoads

 

 

47,500

 

 

 

75,811

 

(6)

 

 

 

123,311

 

Kenneth J. Widder, M.D.

 

 

40,500

 

 

 

70,618

 

(7)

 

 

 

111,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts listed represent the aggregate grant date fair value amount computed as of the grant date for each option awarded during 2017 in accordance with Accounting Standards Board Accounting Standards Codification Topic 718, or ASC 718.  Assumptions used in the calculation of these amounts are included in Note 6 to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2017.  As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.  Our directors will only realize compensation to the extent the trading price of our common stock is greater than the exercise price of such stock options.

(2)

Represents options to purchase 37,500 shares of our common stock granted to Mr. Garner for service as a member of our Board of Directors.  The shares subject to this award vest on the first anniversary of the grant date, provided Mr. Garner continues to provide services to us through such date.

(3)

Represents options to purchase 34,000 shares of our common stock granted to Dr. Brady for service as a member of our Board of Directors.  The shares subject to this award vest on the first anniversary of the grant date, provided Dr. Brady continues to provide services to us through such date.  

(4)

Represents options to purchase 32,500 shares of our common stock granted to Mr. Glenn for service as a member of our Board of Directors.  The shares subject to this award vest on the first anniversary of the grant date, provided Mr. Glenn continues to provide services to us through such date.  

(5)

Represents options to purchase 31,500 shares of our common stock granted to Dr. Hill for service as a member of our Board of Directors.  The shares subject to this award vest on the first anniversary of the grant date, provided Dr. Hill continues to provide services to us through such date.  

(6)

Represents options to purchase 36,500 shares of our common stock granted to Ms. Rhoads for service as a member of our Board of Directors.  The shares subject to this award vest on the first anniversary of the grant date, provided Ms. Rhoads continues to provide services to us through such date.  

(7)

Represents options to purchase 34,000 shares of our common stock granted to Dr. Widder for service as a member of our Board of Directors.  The shares subject to this award vest on the first anniversary of the grant date, provided Dr. Widder continues to provide services to us through such date.  

The table below shows the aggregate numbers of option awards (exercisable and unexercisable) held as of December 31, 2017 by each non-employee director who was serving as of December 31, 2017.  

 

 

 

 

 

 

 

 

 

Director

 

Options Exercisable at

December 31, 2017

 

 

Options Unexercisable at

December 31, 2017

 

Cam Garner

 

 

56,500

 

 

 

37,500

 

Todd C. Brady, M.D., Ph.D.

 

 

55,000

 

 

 

34,000

 

Scott L. Glenn

 

 

53,500

 

 

 

32,500

 

Malcolm R. Hill, Pharm.D.

 

 

52,500

 

 

 

31,500

 

Ann D. Rhoads

 

 

57,500

 

 

 

36,500

 

Kenneth J. Widder, M.D.

 

 

55,000

 

 

 

34,000

 

 

 

 

 

 

 

 

 

 

Effective January 2017, our board of directors approved an updated compensation program for our non-employee directors.  Under this restated program, the annual cash retainer for each non-employee director was increased to $35,000 for his or her services, the additional annual cash retainer payable to the chair of our board of directors was decreased to $7,500 and the annual cash retainer payable to the chair of the audit committee was increased to $10,000.  The other cash retainers remained unchanged from the program in effect during 2016, where the chair of the compensation committee receives an additional annual cash retainer of $5,000 and the chair of the nominating and corporate governance committee receives an additional annual cash retainer of $3,500. Audit committee members receive an additional cash retainer of $3,750, compensation committee members receive an additional annual cash retainer of $2,500 and nominating and corporate governance committee members receive an additional

11


 

annual cash retainer of $1,750. Each non-employee director who is newly elected or appointed to the board of directors will receive an initial grant of options to purchase 18,000 shares of our common stock, vesting in three equal annual installments on each of the first three anniversaries of the date of grant, upon such election or appointment to the board of directors.  In addition, non-employee directors will receive annual grants of options on the date of each annual meeting of stockholders as follows:  each non-employee director, options to purchase 30,000 shares; chair of our board of directors, an additional grant of options to purchase 5,000 shares; chair of the audit committee, an additional grant of options to purchase 5,000 shares; chair of the compensation committee and chair of the nominating and corporate governance committee, an additional grant of options to purchase 2,500 shares; member of the audit committee, an additional grant of options to purchase 2,500 shares; and member of the compensation committee and the nominating and corporate governance committee, an additional grant of options to purchase 1,500 shares.  All of the annual grants will vest on the first anniversary of the date of grant.   In addition, the annual grants to be awarded on the date of the 2018 annual meeting of stockholders will be subject to the exercisability restrictions described in Proposal 3 below under the amended and restated 2013 Equity Incentive Award Plan.  Specifically, the options will not be exercisable prior to the first to occur of (1) the date on which the Company receives marketing approval from the U.S. Food and Drug Administration of Gimoti (metoclopramide nasal spray), or FDA Approval, (2) the second anniversary of the date of this grant, or (3) immediately prior to the consummation of a change in control (as defined in the Restated Plan).  The Administrator may, in its sole discretion, remove the exercisability restrictions applicable to this Award in connection with or following a participant’s death, disability, or Termination of Service.  

Vote Required; Recommendation of the Board of Directors

If a quorum is present and voting at the annual meeting, the two nominees receiving the highest number of votes will be elected to our board of directors. Votes withheld from any nominee, abstentions and broker non-votes will be counted only for purposes of determining a quorum. Broker non-votes will have no effect on this proposal as brokers or other nominees are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF CAM L. GARNER AND SCOTT L. GLENN PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE ON YOUR PROXY CARD.

PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

The audit committee has selected BDO USA, LLP as the company’s independent registered public accountants for the year ending December 31, 2018 and has further directed that management submit the selection of independent registered public accountants for ratification by the stockholders at the annual meeting. BDO USA, LLP has audited the company’s financial statements for the years ended December 31, 2013 through December 31, 2017. Representatives of BDO USA, LLP are expected to be present at the annual meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.

Stockholder ratification of the selection of BDO USA, LLP as the company’s independent registered public accountants is not required by Delaware law, the company’s amended and restated certificate of incorporation, or the company’s amended and restated bylaws. However, the audit committee is submitting the selection of BDO USA, LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether to retain the firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of different independent registered public accountants at any time during the year if the audit committee determines that such a change would be in the best interests of the company and its stockholders.

 

The following table represents aggregate fees billed to us for services related to the years ended December 31, 2017 and 2016, by BDO USA, LLP as our independent registered public accounting firm:

  

 

Fiscal Years Ended

December 31,

 

 

2017

 

 

2016

 

 

Audit Fees(1)

 

$

186,656

 

 

$

138,596

 

 

Audit Related Fees(2)

 

 

 

 

 

Tax Fees(3)

 

 

 

 

 

All Other Fees

 

 

 

 

 

 

 

$

186,656

 

 

$

138,596

 

 

 

 

 

 

 

 

 

 

 

 

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(1)

Audit Fees consist of fees billed for professional services performed by BDO USA, LLP for the audit of our annual financial statements, the quarterly review of our financial statements and related services that are normally provided in connection with statutory and regulatory filings or engagements.

(2)

Audit Related Fees consist of fees billed by BDO USA, LLP for assurance and related services that are reasonably related to the performance of the audit of our financial statements. There were no such fees incurred during 2017 or 2016.

(3)

Tax Fees consist of fees for professional services, including tax consulting and compliance performed by BDO USA, LLP.  There were no such fees incurred during 2017 or 2016.

The audit committee has considered whether the provision of non-audit services is compatible with maintaining the independence of BDO USA, LLP, and has concluded that the provision of such services is compatible with maintaining the independence of our auditors.

Pre-Approval Policies and Procedures

Our audit committee has established a policy that all audit and permissible non-audit services provided by our independent registered public accounting firm will be pre-approved by the audit committee, and all such services were pre-approved in accordance with this policy during the fiscal years ended December 31, 2017 and 2016. These services may include audit services, audit-related services, tax services and other services. The audit committee considers whether the provision of each non-audit service is compatible with maintaining the independence of our auditors. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Our independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.

Vote Required; Recommendation of the Board of Directors

The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote at the meeting will be required to ratify the selection of BDO USA, LLP. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. The approval of Proposal 2 is a routine proposal on which a broker or other nominee has discretionary authority to vote. Accordingly, no broker non-votes will likely result from this proposal.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO RATIFY THE SELECTION OF BDO USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018. PROXIES SOLICITED BY OUR BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.

PROPOSAL 3
APPROVAL OF AMENDMENT AND RESTATEMENT OF
2013 EQUITY INCENTIVE AWARD PLAN

Introduction

Our stockholders are being asked to approve an amendment and restatement of our 2013 Equity Incentive Award Plan, or the 2013 Plan.  The amended and restated 2013 Plan is referred to herein as the “Restated Plan.”  Our board of directors approved the Restated Plan on February 7, 2018, subject to stockholder approval. If the Restated Plan is not approved by our stockholders, the Restated Plan (and all Contingent Options granted under the Restated Plan, as described below) will terminate, the existing 2013 Plan will continue in full force and effect, and we may continue to grant awards under the 2013 Plan, subject to its terms, conditions and limitations, using the shares available for issuance thereunder.

Overview of Proposed Amendments

Increase in Share Reserve.  We strongly believe that an employee equity compensation program is a necessary and powerful incentive and retention tool that benefits all stockholders. As of January 1, 2018, a total of 2,386,425 shares of our common stock were reserved under the 2013 Plan, the aggregate number of shares of common stock subject to awards under the 2013 Plan was 2,013,624 and a total of 372,801 shares of common stock remained available under the 2013 Plan for future issuance.  In addition, the 2013 Plan contains an “evergreen provision” that allows for an annual increase in the number of shares available for issuance under the 2013 Plan on January 1 of each year during the ten year term of the 2013 Plan. The annual increase in the number of shares under the 2013 Plan is equal to the least of:

 

4% of our outstanding capital stock on the last day of the immediately preceding calendar year;

 

300,000 shares; and

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an amount determined by our board of directors.

 

The automatic increases pursuant to the evergreen provision of the 2013 Plan on each of January 1, 2014, 2015, 2016, 2017 and 2018 were 243,870 shares, 244,484 shares, 288,071 shares, 300,000 shares and 300,000 shares, respectively, and these increases are included in the total number of shares reserved for issuance under the 2013 Plan as of January 1, 2018 set forth above.   Notwithstanding the foregoing, the number of shares of stock that may be issued or transferred pursuant to awards under the 2013 Plan may not exceed an aggregate of 4,786,425 shares, which may be adjusted for changes in our capitalization and certain corporate transactions, as described below under the heading “Adjustments.”  

Pursuant to the Restated Plan, an additional 1,500,000 shares are reserved for issuance under the Restated Plan and the evergreen provision will provide that, commencing on January 1, 2019, and on each January 1 thereafter during the ten-year term of the Restated Plan, the aggregate number of shares available for issuance under the Restated Plan shall be increased by that number of shares of our common stock equal to the least of:

 

 

4% of our outstanding capital stock on the last day of the immediately preceding calendar year;

 

an amount determined by our board of directors.

There will be no limit on the number of shares that may become available for issuance under the Restated Plan pursuant to the foregoing evergreen provisions.  However, the number of shares of stock that may be issued or transferred pursuant to incentive stock options, or ISOs, under the Restated Plan may not exceed an aggregate of 8,000,000 shares.  All of the foregoing share numbers may be adjusted for changes in our capitalization and certain corporate transactions, as described below under heading “Adjustments.”

Incentive Stock Option Limit.  The number of shares of stock that may be issued or transferred pursuant to incentive stock options, or ISOs, under the Restated Plan may not exceed an aggregate of 8,000,000 shares.

Contingent Options.  On February 7, 2018, our compensation committee granted to all 7 of our employees, including the executive officers of the company, stock options, or the Contingent Options, to purchase an aggregate of 680,000 shares of our common stock under the Restated Plan, which awards were granted out of the proposed share reserve increase and are subject to stockholder approval.  The Contingent Options vest in equal monthly installments over four years, with vesting commencing on January 1, 2018; provided that in no event will the Contingent Options be exercisable prior to the first to occur of (1) the date on which the Company receives FDA Approval, (2) the second anniversary of the date of this grant, or (3) immediately prior to the consummation of a change in control (as defined in the Restated Plan).  The Administrator may, in its sole discretion, remove the exercisability restrictions applicable to these Awards in connection with or following a participant’s death, disability, or termination of service. These exercisability restrictions are described in more detail below under “—Exercisability Restrictions.”  These Contingent Options are described in more detail below under “—New Plan Benefits.”

After giving effect to the Continent Options, and assuming approval of this proposal, as of February 28, 2018, a total of 1,192,801 shares remained available for issuance under the Restated Plan.   In the event stockholder approval of the Restated Plan is not obtained, all of the Contingent Options will automatically be forfeited, the Restated Plan will terminate and the original 2013 Plan in effect prior to the adoption of the Restated Plan will continue in full force and effect.

Unless the Restated Plan and the Contingent Options are authorized and approved by our stockholders, the number of shares available for issuance under the 2013 Plan will be too limited to effectively achieve its purpose as a powerful incentive and retention tool for employees, directors and consultants that benefits all of our stockholders.  The requested increase will enable us to continue our policy of equity ownership by employees, directors and consultants as an incentive to contribute to our success.  Without sufficient stock options to effectively attract, motivate and retain employees, we would be forced to consider cash replacement alternatives to provide a market-competitive total compensation package necessary to attract, retain and motivate the individual talent critical to the future success of our company. These cash replacement alternatives would then reduce the cash available for product development, operations and other purposes. Our equity incentive program is broad-based. As of February 28, 2018, all of our 7 employees had received grants of equity awards and all 6 of our non-employee directors had received grants of equity awards.  None of our approximately 10 consultants have received grants of equity awards.

All of the foregoing share numbers may be adjusted for changes in our capitalization and certain corporate transactions, as described below under the heading “Adjustments.”  

Exercisability Restrictions.  The Contingent Options, and all stock options granted under the Restated Plan to our non-employee directors on the date of the Annual Meeting pursuant to our non-employee director compensation program, will be subject to the exercisability restrictions in the Restated Plan and will not be exercisable prior to the first to occur of (1) the FDA Approval, (2) the second anniversary of the date of grant, or (3) the date of a change in control (as defined in the Restated Plan). The Administrator of the Restated Plan may, in its sole discretion, remove the exercisability restrictions applicable to any award in connection with or following a participant’s death, disability, or termination of employment or service, or a change in control, or otherwise.

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Extension of Term.  The term of the Restated Plan will also be extended so that the Restated Plan will terminate in February 2028.

Removal of Section 162(m) Provisions. Section 162(m) of the Internal Revenue Code, or the Code, prior to the Tax Cuts and Jobs Act of 2017 (the “TCJA”), allowed performance-based compensation that met certain requirements to be tax deductible regardless of amount.  This qualified performance-based compensation exception was repealed as part of the TCJA.  We have removed certain provisions from the Restated Plan which were otherwise required for awards to qualify as performance-based compensation under the Section 162(m) exception prior to its repeal, including, without limitation, a limit on the number of awards that may be granted to an individual in any calendar year.  Awards granted prior to November 2, 2017 may be grandfathered under the old law subject to certain limited transition relief.

The Restated Plan is not being amended in any material respect other than to reflect the changes described above.

Equity Incentive Awards Are Critical to Long-Term Stockholder Value Creation

The table below presents information about the number of shares that were subject to outstanding equity awards under our equity incentive plans and the shares remaining available for issuance under the 2013 plan, each at January 1, 2018 (except as noted below), and the requested increase in shares authorized for issuance under the Restated Plan. Prior to the adoption of the Restated Plan, the 2013 Plan and our Employee Stock Purchase Plan were the only equity incentive plans we currently have in place pursuant to which awards could still be granted.   Two of our executives and a board member still hold outstanding stock options and/or restricted stock awards granted under our 2007 Equity Incentive Plan, but no additional awards may be granted under that plan.

  

 

Number

of Shares

 

 

As a % of Shares

Outstanding (1)

 

 

Dollar

Value (2)

 

2007 Equity Incentive Award Plan

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding

 

 

118,000

 

 

 

0.08

%

 

$

266,680

 

Weighted average exercise price of outstanding options

 

$

0.40

 

 

 

 

 

 

 

 

 

Weighted average remaining term of outstanding options

 

3.1 years

 

 

 

 

 

 

 

 

 

Restricted shares outstanding

 

 

45,000

 

 

 

0.62

%

 

$

101,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013 Plan

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding

 

 

2,013,624

 

 

 

13.06

%

 

$

4,550,790

 

Weighted average exercise price of outstanding options

 

$

3.58

 

 

 

 

 

 

 

 

 

Weighted average remaining term of outstanding options

 

8.06 years

 

 

 

 

 

 

 

 

 

Shares remaining available for grant under  2013 Plan (3)

 

 

372,801

 

 

 

0.05

%

 

$

164,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restated Plan

 

 

 

 

 

 

 

 

 

 

 

 

Proposed increase in shares available for issuance under

   Restated Plan (over existing share reserve under 2013 Plan)

   (as of February 7, 2018)(4)

 

 

1,500,000

 

 

 

9.73

%

 

$

3,390,000

 

Contingent options outstanding

 

 

680,000

 

 

 

4.41

%

 

$

1,536,800

 

Weighted average exercise price of outstanding Contingent

   Options

 

$

2.43

 

 

 

 

 

 

 

 

 

Weighted average remaining term of outstanding Contingent

   Options

 

10 years

 

 

 

 

 

 

 

 

 

Shares remaining available for grant assuming approval

   of the Restated Plan (as of February 7, 2018) (4)

 

 

1,192,801

 

 

 

7.74

%

 

$

2,695,730

 

 

(1)   Based on 15,413,610 shares of our common stock outstanding as of December 31, 2017.

(2)   Based on the closing price of our common stock on December 31, 2017, of $2.26 per share.

(3)   Does not include possible future increases to the share reserve under the evergreen provision of the 2013 Plan.

(4)   Does not include possible future increases to the share reserve under the evergreen provision of the Restated Plan.  

In determining whether to approve the Restated Plan, including the requested increase to the share reserve under the Restated Plan over the share reserve under the existing 2013 Plan, our board of directors considered the following:

 

The shares to be initially reserved for issuance under the Restated Plan represent an increase of 1,500,000 shares from the aggregate number of shares reserved for issuance under the 2013 Plan.  

 

In determining the size of the share reserve under the Restated Plan, our board of directors considered the number of equity awards granted by our company during the past three calendar years. In calendar years 2015, 2016 and 2017, our

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annual equity burn rates (calculated by dividing the number of shares subject to equity awards granted during the year by the weighted-average number of shares outstanding during the applicable year) under our equity plans were 5.46%, 2.55% and 5.75%, respectively (excludes 703,500 options surrendered by our employees and 527,624 options granted in exchange for such surrendered options to our employees pursuant to the stock option exchange we completed on February 5, 2016).  

 

We expect the proposed aggregate share reserve under the Restated Plan to provide us with enough shares for awards for approximately three to four years, assuming we continue to grant awards consistent with our current practices and historical usage, as reflected in our historical burn rate, assuming we receive the maximum annual evergreen increases under the Restated Plan during its ten-year term, and further dependent on the price of our shares and hiring activity during the next few years, forfeitures of outstanding awards, and noting that future circumstances may require us to change our current equity grant practices. We cannot predict our future equity grant practices, the future price of our shares or future hiring activity with any degree of certainty at this time, and the share reserve under the Restated Plan could last for a shorter or longer time.

 

In fiscal years 2015, 2016 and 2017, the end of year overhang rate (calculated by dividing (1) the sum of the number of shares subject to equity awards outstanding at the end of the calendar year plus shares remaining available for issuance for future awards at the end of the calendar year by (2) the number of shares outstanding at the end of the calendar year) was 16.08%, 15.72%, and 14.88%, respectively. If the Restated Plan is approved, we expect our overhang at the end of 2018 will be approximately 25.95% (excluding the 191,934 shares that were available for issuance under the Employee Stock Purchase Plan as of January 1, 2018, and excluding any possible future increases to the share reserve under the Restated Plan pursuant to the evergreen provision).

In light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the extremely competitive labor markets in which we compete, our board of directors has determined that the size of the share reserve under the Restated Plan is reasonable and appropriate at this time. Our board of directors will not create a subcommittee to evaluate the risk and benefits for issuing shares under the Restated Plan.

Stockholder Approval Requirement

Stockholder approval of the Restated Plan is necessary in order for us to (1) meet the stockholder approval requirements of Nasdaq, and (2) grant ISOs thereunder.  Specifically, approval of the Restated Plan will constitute approval pursuant to the stockholder approval requirements of Section 422 of the Code relating to ISOs.

If the Restated Plan is not approved by our stockholders, the Restated Plan will terminate the existing 2013 Plan will continue in full force and effect, and we may continue to grant awards under the 2013 Plan, subject to its terms, conditions and limitations, using the shares available for issuance thereunder.

Summary of the Restated Plan

The principal features of the Restated Plan are summarized below, but the summary is qualified in its entirety by reference to the Restated Plan itself, which is attached as Appendix A to this proxy statement.

Purpose

The purpose of the Restated Plan is to promote our success and enhance our value by linking the individual interests of the members of the board of directors and our employees and consultants to those of our stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to our stockholders. The Restated Plan is further intended to provide us flexibility in our ability to motivate, attract, and retain the services of members of the board of directors, our employees and our consultants upon whose judgment, interest, and special effort the successful conduct of our operation is largely dependent.

Securities Subject to the Restated Plan

As of January 31, 2018, a total of 2,386,425 shares of our common stock were authorized for issuance under the 2013 Plan and will be reserved for issuance under the Restated Plan.  In addition, an additional 1,500,000 shares were added to the share reserve under the Restated Plan. In addition, commencing on January 1, 2019 and on each January 1 thereafter during the ten-year term of the Restated Plan, the aggregate number of shares available for issuance under the Restated Plan shall be increased by that number of shares of our common stock equal to the least of:

 

4% of our outstanding capital stock on the last day of the immediately preceding calendar year; or

 

an amount determined by our board of directors.

There will be no limit on the number of shares that may become available for issuance under the Restated Plan pursuant to the foregoing evergreen provisions. The number of shares of stock that may be issued or transferred pursuant to incentive stock

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options, or ISOs, under the Restated Plan may not exceed an aggregate of 8,000,000 shares.  All of the foregoing share numbers may be adjusted for changes in our capitalization and certain corporate transactions, as described below under the heading “Adjustments.”

To the extent that an award lapses, expires, is forfeited or is settled for cash, any shares subject to the award will, to the extent of such lapse, expiration, forfeiture or cash settlement, be available for future grant or sale under the Restated Plan.  In addition, shares of common stock which are delivered by the holder or withheld by us in payment of the grant or exercise price or tax withholding obligation of any award under the Restated Plan will again be available for future grant or sale under the Restated Plan. If any shares of restricted stock are forfeited by a participant or repurchased by us pursuant to the Restated Plan, such shares shall again be available for future grant or sale under the Restated Plan. Any shares subject to a Stock Appreciation Right, or a SAR, that are not issued in connection with the stock settlement of the SAR on exercise thereof shall again be available for the grant of an award pursuant to the Restated Plan.  The payment of dividend equivalents in cash in conjunction with any outstanding awards shall not be counted against the shares of stock available for issuance under the plan.

Administration

The compensation committee of our board of directors administers the Restated Plan (except with respect to any award granted to non-employee directors, which must be administered by our full board of directors). To administer the Restated Plan, our compensation committee must consist solely of at least two members of our board of directors, each of whom is a “non-employee director” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Subject to the terms and conditions of the Restated Plan, our compensation committee has the authority to select the persons to whom awards are to be made, to determine the type or types of awards to be granted to each person, the number of awards to grant, the number of shares to be subject to such awards, and the terms and conditions of such awards, and to make all other determinations and decisions and to take all other actions necessary or advisable for the administration of the Restated Plan. Our compensation committee is also authorized to establish, adopt, amend or revise rules relating to administration of the Restated Plan. Our board of directors may at any time revest in itself the authority to administer the Restated Plan.

Eligibility

Options, SARs, restricted stock and other awards under the Restated Plan may be granted to individuals who are our officers or employees or are the officers or employees of any of our subsidiaries. Such awards may also be granted to our non-employee directors and consultants, but only employees may be granted ISOs. As of February 28, 2018, there were 6 non-employee directors, 7 employees and approximately 10 consultants who would have been eligible for awards under the Restated Plan had it been in effect on such date. The sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of awards granted to a non-employee director as compensation for services as a non-employee director during any calendar year under the Restated Plan may not exceed $400,000. The board of directors may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the board of directors may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee directors.

The closing share price per share for our common stock on the Nasdaq Capital Market on February 28, 2018 was $1.95

Awards

The Restated Plan provides that our compensation committee (or the board of directors, in the case of awards to non-employee directors) may grant or issue stock options, SARs, restricted stock, restricted stock units, dividend equivalents, stock payments and performance awards, or any combination thereof. Our compensation committee (or the board of directors, in the case of awards to non-employee directors) will consider each award grant subjectively, considering factors such as the individual performance of the recipient and the anticipated contribution of the recipient to the attainment of our long-term goals. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.  

 

Nonqualified stock options, or NQSOs, provide for the right to purchase shares of our common stock at a specified price which may not be less than the fair market value of a share of common stock on the date of grant, and usually will become exercisable (at the discretion of our compensation committee or our board of directors, in the case of awards to non-employee directors) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of performance targets established by our compensation committee (or our board of directors, in the case of awards to non-employee directors). NQSOs may be granted for any term specified by our compensation committee (or our board of directors, in the case of awards to non-employee directors).

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ISOs are designed to comply with the provisions of the Code and are subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, must expire within a specified period of time following the optionee’s termination of employment, and must be exercised within the ten years after the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) more than 10% of the total combined voting power of all classes of our capital stock, the Restated Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must expire upon the fifth anniversary of the date of its grant.

 

Restricted stock may be granted to participants and made subject to such restrictions as may be determined by our compensation committee (or our board of directors, in the case of awards to non-employee directors). Typically, restricted stock may be forfeited for no consideration if the conditions or restrictions are not met, and it may not be sold or otherwise transferred to third parties until restrictions are removed or expire. Recipients of restricted stock, unlike recipients of options, may have voting rights and may receive dividends, if any, prior to the time when the restrictions lapse.

 

Restricted stock units may be awarded to participants, typically without payment of consideration or for a nominal purchase price, but subject to vesting conditions including continued employment or on performance criteria established by our compensation committee (or our board of directors, in the case of awards to non-employee directors). Like restricted stock, restricted stock units may not be sold or otherwise transferred or hypothecated until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

 

SARs granted under the Restated Plan typically provide for payments to the holder based upon increases in the price of our common stock over the exercise price of the SAR. There are no restrictions specified in the Restated Plan on the exercise of SARs or the amount of gain realizable therefrom. Our compensation committee (or the board of directors, in the case of awards to non-employee directors) may elect to pay SARs in cash or in common stock or in a combination of both.

 

Dividend equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares covered by the stock options, SARs or other awards held by the participant.

 

Performance awards may be granted by our compensation committee on an individual or group basis. Generally, these awards will be based upon the attainment of specific performance goals that are established by our compensation committee and relate to one or more performance criteria on a specified date or dates determined by our compensation committee. Performance awards may be paid in cash or in shares of common stock.

 

Stock payments may be authorized by our compensation committee (or our board of directors, in the case of awards to non-employee directors) in the form of common stock or an option or other right to purchase common stock as part of a deferred compensation arrangement, made in lieu of all or any part of compensation, including bonuses, that would otherwise be payable to employees, consultants or members of our board of directors.

Exercisability Restrictions

All of the Contingent Options and all stock options granted under the Restated Plan to our non-employee directors on the date of the Annual Meeting pursuant to our non-employee director compensation program will be subject to the restrictions on exercisability set forth in the Restated Plan that provided that in no event will stock options or stock appreciation rights be exercisable prior to the first to occur of (1) the date on which the Company receives FDA Approval, (2) the second anniversary of the date of grant, or (3) immediately prior to the consummation of a change in control (as defined in the Restated Plan). The Administrator of the Restated Plan may, in its sole discretion, remove the exercisability restrictions applicable to any award in connection with or following a participant’s death, disability, or termination of employment or service, or otherwise.

Performance-Based Compensation

The compensation committee may grant to eligible recipients restricted stock, dividend equivalents, stock payments, restricted stock units, cash bonuses and other stock-based awards that are paid, vest or become exercisable upon the attainment of company performance criteria relating to our performance, the performance of a division, business unit or an individual, and may include but are not limited to the following: operating or other costs and expenses, improvements in expense levels, cash flow (including, but not limited to, operating cash flow and free cash flow), return on assets, return on capital, stockholders’ equity, return on stockholders’ equity, total stockholder return, return on sales, gross or net profit or operating margin, working capital, net earnings (either before or after interest, taxes, depreciation and amortization), gross or net sales or revenue, net income (either before or after taxes), adjusted net income, operating earnings, earnings per share of stock, adjusted earnings per share of stock,

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price per share of stock, regulatory body approval for commercialization of a product, capital raised in financing transactions or other financing milestones, market recognition (including but not limited to awards and analyst ratings), financial ratios, implementation or completion of critical projects, market share, economic value, comparisons with various stock market indices, and implementation, completion or attainment of objectively determinable objectives relating to research, development, regulatory, commercial or strategic milestones or development. These performance criteria may be measured in absolute terms or as compared to performance in an earlier period or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.

The compensation committee may provide that one or more adjustments will be made to one or more of the performance goals established for any performance period. Such adjustments may include one or more of the following: items related to a change in accounting principle, items relating to financing activities, expenses for restructuring or productivity initiatives, other non-operating items, items related to acquisitions, items attributable to the business operations of any entity acquired by us during the performance period, items related to the disposal of a business or segment of a business, items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards, items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period, any other items of significant income or expense which are determined to be appropriate adjustments, items relating to unusual or extraordinary corporate transactions, events or developments, items related to amortization of acquired intangible assets, items that are outside the scope of our core, on-going business activities, items related to acquired in-process research and development, items relating to changes in tax laws, items relating to major licensing or partnership arrangements, items relating to asset impairment charges, items relating to gains and losses for litigation, arbitration or contractual settlements, or items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.

Forfeiture, Recoupment and Clawback Provisions

Pursuant to its general authority to determine the terms and conditions applicable to awards under the Restated Plan, the compensation committee has the right to provide, in an award agreement or otherwise, that an award shall be subject to the provisions of any recoupment or clawback policies implemented by us, including, without limitation, any recoupment or clawback policies adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder.

Adjustments

If there is any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares of our common stock or the share price of our common stock other than an equity restructuring (as defined in the Restated Plan), the plan administrator will make such equitable adjustments, if any, as the plan administrator in its discretion may deem appropriate to reflect such change with respect to (1) the aggregate number and type of shares that may be issued under the Restated Plan (including, but not limited to, adjustments of the number of shares available under the plan and the maximum number of shares which may be subject to one or more awards to a participant pursuant to the plan during any calendar year), (2) the number and kind of shares, or other securities or property, subject to outstanding awards, (3) the number and kind of shares, or other securities or property, for which automatic grants are to be subsequently made to new and continuing non-employee directors, (4) the terms and conditions of any outstanding awards (including, without limitation, any applicable performance targets or criteria with respect thereto), and (5) the grant or exercise price per share for any outstanding awards under the Restated Plan.. If there is any equity restructuring, (1) the number and type of securities subject to each outstanding award and the grant or exercise price per share for each outstanding award, if applicable, will be proportionately adjusted, and (2) the plan administrator will make proportionate adjustments to reflect such equity restructuring with respect to the aggregate number and type of shares that may be issued under the Restated Plan (including, but not limited to, adjustments of the number of shares available under the plan and the maximum number of shares which may be subject to one or more awards to a participant pursuant to the plan during any calendar year). Adjustments in the event of an equity restructuring will not be discretionary. To the extent that any awards are grandfathered from the changes to Section 162(m) of the Code made by the TCJA, then we will take into consideration any impact that making such adjustment may have on the continued grandfathering of such awards. The plan administrator also has the authority under the Restated Plan to take certain other actions with respect to outstanding awards in the event of a corporate transaction, including provision for the cash-out, termination, assumption or substitution of such awards.

Corporate Transactions

In the event of a change in control where the acquirer does not assume or substitute awards granted under the Restated Plan, awards issued under the Restated Plan will be subject to accelerated vesting such that 100% of the awards will become vested and exercisable or payable, as applicable. Under the Restated Plan, a change in control is generally defined as:

 

a transaction or series of related transactions (other than an offering of our stock to the general public through a registration statement filed with the Securities and Exchange Commission, or SEC) whereby any person or entity or related group of persons or entities (other than us, our subsidiaries, an employee benefit plan maintained by us or any of

19


 

 

our subsidiaries or a person or entity that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, us) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the total combined voting power of our securities outstanding immediately after such acquisition;

 

during any two-year period, individuals who, at the beginning of such period, constitute our board of directors together with any new director(s) whose election by our board of directors or nomination for election by our stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of our board of directors;

 

our consummation (whether we are directly or indirectly involved through one or more intermediaries) of (1) a merger, consolidation, reorganization, or business combination or (2) the sale or other disposition of all or substantially all of our assets in any single transaction or series of transactions or (3) the acquisition of assets or stock of another entity, in each case other than a transaction:

 

o

which results in our voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into our voting securities or the voting securities of the person that, as a result of the transaction, controls us, directly or indirectly, or owns, directly or indirectly, all or substantially all of our assets or otherwise succeeds to our business (we or such person being referred to as a successor entity)) directly or indirectly, at least a majority of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction; and

 

o

after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the successor entity; provided, however, that no person or group is treated as beneficially owning 50% or more of combined voting power of the successor entity solely as a result of the voting power held in us prior to the consummation of the transaction; or

 

our stockholders approve a liquidation or dissolution of the company.

Amendment and Termination of the Restated Plan  

Our compensation committee or board of directors may terminate, amend or modify the Restated Plan. However, stockholder approval of any amendment to the Restated Plan will be obtained to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, or for any amendment to the Restated Plan that increases the number of shares available under the Restated Plan or that may be issued to an individual in any calendar year. If not terminated earlier by our compensation committee or board of directors, the Restated Plan will terminate in February 2028 on the tenth anniversary of the date of its initial approval by our board of directors.

Repricing Permitted

Our compensation committee (or the board of directors, in the case of awards to non-employee directors) has the authority, without the approval of our stockholders, to authorize the amendment of any outstanding award to reduce its price per share and to provide that an award will be canceled and replaced with the grant of an award having a lesser price per share. Our compensation committee (or the board of directors, in the case of awards to non-employee directors) also has the authority, without the approval of our stockholders, to amend any outstanding award to increase the price per share or to cancel and replace an award with the grant of an award having a price per share that is greater than or equal to the price per share of the original award.

Securities Laws

The Restated Plan is intended to conform with all provisions of the Securities Act of 1933, as amended, and the Exchange Act, and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b−3. The Restated Plan will be administered, and options will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.

Federal Income Tax Consequences Associated with the Restated Plan

The federal income tax consequences of the Restated Plan under current federal income tax law are summarized in the following discussion which deals with the general tax principles applicable to the Restated Plan and is intended for general information only. The following discussion of federal income tax consequences does not purport to be a complete analysis of all of the potential tax effects of the Restated Plan. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. Foreign, state and local tax laws, and employment, estate and gift tax considerations are not discussed, and may vary depending on individual circumstances and from locality to locality.

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Stock Options and Stock Appreciation Rights.   A Restated Plan participant generally will not recognize taxable income and we generally will not be entitled to a tax deduction upon the grant of a stock option or stock appreciation right. The tax consequences of exercising a stock option and the subsequent disposition of the shares received upon exercise will depend upon whether the option qualifies as an “incentive stock option” as defined in Section 422 of the Code. The Restated Plan permits the grant of options that are intended to qualify as incentive stock options as well as options that are not intended to so qualify; however, incentive stock options generally may be granted only to our employees and employees of our parent or subsidiary corporations, if any. Upon exercising an option that does not qualify as an incentive stock option when the fair market value of our stock is higher than the exercise price of the option, a Restated Plan participant generally will recognize taxable income at ordinary income tax rates equal to the excess of the fair market value of the stock on the date of exercise over the purchase price, and we (or our subsidiaries, if any) generally will be entitled to a corresponding tax deduction for compensation expense, in the amount equal to the amount by which the fair market value of the shares purchased exceeds the purchase price for the shares. Upon a subsequent sale or other disposition of the option shares, the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares.

Upon exercising an incentive stock option, a Restated Plan participant generally will not recognize taxable income, and we will not be entitled to a tax deduction for compensation expense. However, upon exercise, the amount by which the fair market value of the shares purchased exceeds the purchase price will be an item of adjustment for alternative minimum tax purposes. The participant will recognize taxable income upon a sale or other taxable disposition of the option shares. For federal income tax purposes, dispositions are divided into two categories: qualifying and disqualifying. A qualifying disposition generally occurs if the sale or other disposition is made more than two years after the date the option was granted and more than one year after the date the shares are transferred upon exercise. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition generally will result.

Upon a qualifying disposition of incentive stock option shares, the participant will recognize long term capital gain in an amount equal to the excess of the amount realized upon the sale or other disposition of the shares over their purchase price. If there is a disqualifying disposition of the shares, then the excess of the fair market value of the shares on the exercise date (or, if less, the price at which the shares are sold) over their purchase price will be taxable as ordinary income to the participant. If there is a disqualifying disposition in the same year of exercise, it eliminates the item of adjustment for alternative minimum tax purposes. Any additional gain or loss recognized upon the disposition will be recognized as a capital gain or loss by the participant.

We will not be entitled to any tax deduction if the participant makes a qualifying disposition of incentive stock option shares. If the participant makes a disqualifying disposition of the shares, we should be entitled to a tax deduction for compensation expense in the amount of the ordinary income recognized by the participant.

Upon exercising or settling a stock appreciation right, a Restated Plan participant will recognize taxable income at ordinary income tax rates, and we should be entitled to a corresponding tax deduction for compensation expense, in the amount paid or value of the shares issued upon exercise or settlement. Payments in shares will be valued at the fair market value of the shares at the time of the payment, and upon the subsequent disposition of the shares the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares.

 

Restricted Stock and Restricted Stock Units.  A Restated Plan participant generally will not recognize taxable income at ordinary income tax rates and we generally will not be entitled to a tax deduction upon the grant of restricted stock or restricted stock units. Upon the termination of restrictions on restricted stock or the payment of restricted stock units, the participant will recognize taxable income at ordinary income tax rates, and we should be entitled to a corresponding tax deduction for compensation expense, in the amount paid to the participant or the amount by which the then fair market value of the shares received by the participant exceeds the amount, if any, paid for them. Upon the subsequent disposition of any shares, the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares. However, a Restated Plan participant granted restricted stock that is subject to forfeiture or repurchase through a vesting schedule such that it is subject to a “risk of forfeiture” (as defined in Section 83 of the Code) may make an election under Section 83(b) of the Code to recognize taxable income at ordinary income tax rates, at the time of the grant, in an amount equal to the fair market value of the shares of common stock on the date of grant, less the amount paid, if any, for such shares. We will be entitled to a corresponding tax deduction for compensation, in the amount recognized as taxable income by the participant. If a timely Section 83(b) election is made, the participant will not recognize any additional ordinary income on the termination of restrictions on restricted stock, and we will not be entitled to any additional tax deduction.

 

Dividend Equivalents, Stock Payment Awards and Cash-Based Awards.  A Restated Plan participant will not recognize taxable income and we will not be entitled to a tax deduction upon the grant of dividend equivalents, stock payment awards or cash-based awards until cash or shares are paid or distributed to the participant. At that time, any cash payments or the fair market value of shares that the participant receives will be taxable to the participant at ordinary

21


 

 

income tax rates and we should be entitled to a corresponding tax deduction for compensation expense. Payments in shares will be valued at the fair market value of the shares at the time of the payment, and upon the subsequent disposition of the shares, the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares.

 

Section 409A of the Internal Revenue Code.  Certain types of awards under the Restated Plan may constitute, or provide for, a deferral of compensation under Section 409A. Unless certain requirements set forth in Section 409A are complied with, holders of such awards may be taxed earlier than would  otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% federal income tax (and, potentially, certain interest penalties). To the extent applicable, the Restated Plan and awards granted under the Restated Plan will be structured and interpreted to comply with Section 409A and the Department of Treasury regulations and other interpretive guidance that may be issued pursuant to Section 409A.

 

Section 162(m) Limitation.  In general, under Section 162(m), income tax deductions of publicly-held corporations may be limited to the extent total compensation (including base salary, annual bonus, stock option exercises and non-qualified benefits paid) for certain executive officers exceeds $1 million (less the amount of any “excess parachute payments” as defined in Section 280G of the Code) in any one year. Prior to the TCJA, covered employees generally consisted of our Chief Executive Officer and each of the next three highest compensated officers serving at the end of the taxable year other than our Chief Financial Officer, and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation.  As part of the TCJA, the ability to rely on this exemption was, with certain limited exceptions, eliminated; in addition, the definition of covered employees was expanded to generally include all named executive officers.  Certain awards under the 2013 Plan granted prior to November 2, 2017 may be grandfathered from the changes made by the TCJA under certain limited transition relief, however, for grants after that date and any grants which are not grandfathered, we will no longer be able to take a deduction for any compensation in excess of $1 million that is paid to a covered employee.  There is no guarantee that we will be able to take a deduction for any compensation in excess of $1 million that is paid to a covered employee under the 2013 Plan or the Restated Plan.

New Plan Benefits

As of December 31, 2017, each of our named executive officers and the other groups identified below had been granted the following stock options under the 2013 Plan:

 

Stock Options

Granted

 

 

 

 

 

 

David A. Gonyer

  President, Chief Executive Officer and Director(1)

 

 

440,687

 

Matthew J. D'Onofrio

Executive Vice President , Chief Business Officer,

  Secretary and Treasurer(2)

 

 

338,187

 

Marilyn R. Carlson, D.M.D., M.D.

  Chief Medical Officer(3)

 

 

258,750

 

All Executive Officers as a Group (3 persons)(4)

 

 

1,037,624

 

All Non-Executive Directors as a Group (6 persons)(5)

 

 

536,000

 

All Non-Executive Employees as a Group (4 persons)(6)

 

 

440,000

 

 

 

 

 

 

(1)

Excludes 174,250 options that were surrendered by Mr. Gonyer pursuant to the stock option exchange we completed on February 5, 2016.  The stock option exchange is described below under “Executive Compensation and Other Information – Narrative Disclosure to Compensation Tables – Equity Compensation.”

(2)

Excludes 164,250 options that were surrendered by Mr. D’Onofrio pursuant to the stock option exchange we completed on February 5, 2016.

(3)

Excludes 145,000 options that were surrendered by Dr. Carlson pursuant to the stock option exchange we completed on February 5, 2016.

(4)

Excludes 483,500 options that were surrendered by all executive officers as a group pursuant to the stock option exchange we completed on February 5, 2016.

(5)

Our non-employee directors as a group will be eligible to receive automatic grants under the Restated Plan, as described above under “Director Compensation.”  The automatic grants to be granted to our non-employee directors on the date of the annual meeting of stockholders in 2018 will vest as provided in our non-employee director compensation program, as described above under “Director Compensation,” but will not be exercisable prior to the first to occur of (1) FDA Approval, (2) the second anniversary of the date of grant, or (3) immediately prior to the consummation of a change in control (as defined in the Restated Plan), subject to the exceptions described above.

22


 

(6)

Excludes 220,000 options that were surrendered by our non-executive employees as a group pursuant to the stock option exchange we completed on February 5, 2016.

 

 

On February 7, 2018, our compensation committee granted to all 7 of our employees an aggregate of 680,000 Contingent Options under the Restated Plan, subject to obtaining stockholder approval of the Restated Plan. The Contingent Options vest in equal monthly installments over four years, with vesting commencing on January 1, 2018; provided that in no event will the Contingent Options be exercisable prior to the first to occur of (1) FDA Approval, or (2) the second anniversary of the date of grant, or (3) immediately prior to the consummation of a change in control (as defined in the Restated Plan), subject to exceptions described above.

 

The following table sets forth information pertaining to the Contingent Options.  In the event stockholder approval of the Restated Plan is not obtained, all of the Contingent Options will be automatically forfeited.

 

 

 

Contingent

Options Granted

 

David A. Gonyer

  President, Chief Executive Officer and Director

 

 

225,000

 

Matthew J. D'Onofrio

  Executive Vice President, Chief Business Officer

  Secretary and Treasurer

 

 

150,000

 

Marilyn R. Carlson

  Chief Medical Officer

 

 

125,000

 

All Executive Officers as a Group (3 persons)

 

 

500,000

 

All Non-Executive Directors as a Group (6 persons)

 

 

All Non-Executive Employees as a Group (4 persons)

 

 

180,000

 

 

All other future grants under our 2013 Plan and the Restated Plan are within the discretion of our board of directors or the compensation committee and the benefits of such grants are, therefore, not determinable.

 

Vote Required; Recommendation of the Board of Directors

 

The affirmative vote of the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the annual meeting is required to approve the Restated Plan.

 

Our board of directors unanimously recommends that the stockholders vote FOR the approval of the amendment and restatement of the 2013 Equity Incentive Award Plan.

 

 

23


 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of our common stock as of February 28, 2018 by:

 

each of our named executive officers;

 

each of our directors;

 

all of our executive officers and directors as a group; and

 

each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock.

The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power. Applicable percentage ownership is based on 15,493,368 shares of common stock outstanding on February 28, 2018. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of February 28, 2018 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.

Unless otherwise indicated, the address of each beneficial owner listed below is c/o Evoke Pharma, Inc., 420 Stevens Avenue, Suite 370, Solana Beach, CA 92075.  We believe, based on information provided to us that each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

  

 

 

 

 

 

 

 

 

 

 

Beneficial Ownership

 

Name of Beneficial Owner

 

Number of Shares

 

 

Percent of Total

 

5% or Greater Stockholders

 

 

 

 

 

 

 

 

Funds affiliated with LVP GP III, LLC(1)

 

 

1,588,579

 

 

 

10.3

%

   1 Embarcadero Center, Suite 4050

 

 

 

 

 

 

 

 

   San Francisco, CA 94111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Officers and Directors

 

 

 

 

 

 

 

 

David A. Gonyer, R.Ph.(2)

 

 

609,656

 

 

 

3.86

%

Matthew J. D'Onofrio(3)

 

 

454,509

 

 

 

2.89

%

Marilyn R. Carlson, D.M.D., M.D.(4)

 

 

174,894

 

 

 

1.12

%

Cam L. Garner(5)

 

 

392,105

 

 

 

2.52

%

Todd C. Brady, M.D., Ph.D.(6)

 

 

59,000

 

 

*

 

Scott L. Glenn (7)

 

 

94,355

 

 

*

 

Malcolm R. Hill, Pharm.D.(8)

 

 

71,750

 

 

*

 

Ann D. Rhoads(9)

 

 

57,500

 

 

*

 

Kenneth J. Widder, M.D.(10)

 

 

55,000

 

 

*

 

All executive officers and directors as a group (9 persons)(11)

 

 

1,968,769

 

 

 

11.94

%

 

 

 

 

 

 

 

 

 

 

*

Less than 1%

(1)

Includes 1,472,867 shares held by LVP Life Science Ventures III, L.P., 73,641 shares held by LVP III Associates, L.P., 36,821 shares held by LVP III Partners, L.P., and 5,250 shares held by LVPMC, LLC. LVP GP III, LLC is the general partner of LVP Life Science Ventures III, L.P., LVP III Associates, L.P. and LVP III Partners, L.P. Patrick F. Latterell, Stephen M. Salmon and James N. Woody, the members of LVPMC, LLC and LVP GP III, LLC, share voting and investment power with respect to these shares. Each member disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. Information regarding these shares is based in part on the Schedule 13G filed by these entities with the SEC on February 12, 2015 and a Form 3 filed by these entities with the SEC on February 24, 2017. The address for LVP GP III, LLC is 2603 Camino Ramon, Suite 200, San Ramon, California 94583.

(2)

Includes 297,013 shares Mr. Gonyer has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(3)

Includes 228,786 shares Mr. D’Onofrio has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(4)

Includes 146,357 shares Dr. Carlson has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

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(5)

Includes (a) 235,605 shares held by Garner Investments, L.L.C., of which Mr. Garner is the managing member, (b) 100,000 shares held by The Garner Family Foundation of which Mr. Garner is Director, Secretary and Chief Financial Officer, and (c) 56,500 shares that Mr. Garner has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(6)

Includes 55,000 shares Mr. Brady has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(7)

Includes (a) 25,250 shares held by Glenn Holdings, L.P., of which Mr. Glenn is the General Partner, (b) 15,605 shares held by Windamere III, LLC, of which Mr. Glenn is the Managing Member, and (c) 53,500 shares that Mr. Glenn has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(8)

Includes 52,500 shares that Dr. Hill has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(9)

Includes 57,500 shares that Ms. Rhoads has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(10)

Includes 55,000 shares that Dr. Widder has the right to acquire pursuant to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

(11)

Includes 1,002,156 shares of common stock subject to outstanding options which are immediately exercisable within 60 days of February 28, 2018.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Our Executive Officers

The following table sets forth certain information about our executive officers as of February 28, 2018:

 

 

 

 

 

 

 

Name

  

Age

 

  

Position

David A. Gonyer, R.Ph.

  

 54

 

  

  

President, Chief Executive Officer and Director

Matthew J. D’Onofrio

  

 48

 

  

  

Executive Vice President, Chief Business Officer, Secretary & Treasurer

Marilyn R. Carlson, D.M.D., M.D.

  

 70

 

  

  

Chief Medical Officer

The biography of David A. Gonyer, R.Ph., can be found under “Proposal 1 – Election of Directors.”

Matthew J. D’Onofrio is one of our co-founders and has served as our Executive Vice President, Chief Business Officer, Secretary and Treasurer since 2010 and as our Executive Vice President, Corporate Development, Secretary and Treasurer since March 2007. Mr. D’Onofrio has over 26 years of experience in both large and small pharmaceutical firms. Prior to founding Evoke, Mr. D’Onofrio was Vice President, Business Development for Victory Pharma, a specialty pharmaceutical company based in San Diego. Mr. D’Onofrio was previously Director and Head of West Coast Business Development at Vertex Pharmaceuticals, Incorporated, a biotechnology company, directing partnership efforts associated with the La Jolla research facility as well as other corporate assets. Mr. D’Onofrio also held various commercial roles of increasing responsibility over a decade at Eli Lilly & Company, including significant experience in worldwide corporate business development.  Mr. D’Onofrio earned a B.S. in Chemistry from San Diego State University and an M.B.A. from the University of Southern California.

Marilyn R. Carlson, D.M.D., M.D., has served as our Chief Medical Officer since December 2013.  Dr. Carlson has worked closely with Evoke as an outside consultant since the company was founded in 2007.  Dr. Carlson has been the key clinical and regulatory expert for Evoke through the entire development of Gimoti™, including all clinical trials conducted in support of the drug for patients with gastroparesis. She has also participated in all of Evoke's meetings with the U.S. Food & Drug Administration, or FDA. Prior to joining Evoke, in 2012 Dr. Carlson helped found Agility Clinical, Inc., a contract research organization focused on the support of virtual companies, start-up companies and companies with orphan drugs. From 2004 to 2012, Dr. Carlson served as Vice President, Medical and Regulatory Affairs at Synteract, Inc., a clinical research organization, where she was responsible for safety surveillance, medical monitoring and regulatory submissions, among other duties. In 2004, Dr. Carlson founded and served as President of entreMeDica, Inc., a consulting firm offering chief medical officer services to biotechnology and life sciences companies with marketed products and products in development in a variety of therapeutic areas.  Dr. Carlson also served as Vice President, Medical/Regulatory and Chief Medical Officer at Prometheus Laboratories Inc. from 2000 to 2004 and as Vice President, Clinical and Medical Affairs and Chief Medical Officer at Advanced Corneal Systems (now ISTA Pharmaceuticals) in 2000. Before that, Dr. Carlson worked at XOMA (US) LLC as Vice President, Clinical and Medical Affairs from 1999 to 2000 and as Medical Director from 1997 to 1999. From 1991 to 1997, Dr. Carlson held positions in clinical research, medical affairs and technical brand management at Procter & Gamble (P&G) Healthcare and P&G Pharmaceuticals. Prior to joining P&G, Dr. Carlson held academic and clinical positions at Case Western Reserve University, Western Reserve Geriatric Education Center and the MetroHealth Medical Center in Cleveland, Ohio. She holds a B.A. from Hunter College of the City University of New York, a D.M.D. from the Harvard School of Dental Medicine and an M.D. from Case Western Reserve University School of Medicine, completed an internal medicine residency at The Cleveland Clinic Foundation and holds a certification in regulatory affairs.

25


 

Overview

This Executive Compensation section provides information about the material components of our executive compensation program for our “named executive officers,” consisting of the following persons:

 

 

 

David A. Gonyer, R.Ph., our President and Chief Executive Officer;

   

 

Matthew J. D’Onofrio, our Executive Vice President, Chief Business Officer, Secretary and Treasurer; and

   

 

Marilyn R. Carlson, D.M.D., M.D., our Chief Medical Officer.

Summary Compensation Table

The following table shows information regarding the compensation earned by our named executive officers during the fiscal years ended December 31, 2017, 2016 and 2015:

 

Name and

Principal Position

 

Year

 

Salary

($)

 

Bonus

($)(1)

 

Option

Awards

($)(2)

 

All Other

Compensation ($)(3)

 

Total $

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David A. Gonyer

 

 

2017

 

 

425,000

 

 

185,938

 

 

407,385

 

 

41,486

 

 

1,059,809

 

  President and Chief Executive Officer

 

 

2016

 

 

400,000

 

 

200,000

 

 

206,748

 

 

31,945

 

 

838,693

 

 

 

 

2015

 

 

380,000

 

 

156,000

 

 

320,336

 

 

29,082

 

 

885,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matthew J. D'Onofrio

 

 

2017

 

 

345,000

 

 

135,844

 

 

271,590

 

 

27,928

 

 

780,362

 

  Executive Vice President, Chief

 

2016

 

 

335,500

 

 

134,200

 

 

166,016

 

 

21,303

 

 

657,019

 

  Business Officer, Secretary and

 

2015

 

 

323,291

 

 

106,000

 

 

280,294

 

 

19,403

 

 

728,988

 

  Treasurer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marilyn R. Carlson, D.M.D., M.D.

 

 

2017

 

 

325,000

 

 

113,750

 

 

181,060

 

 

22,902

 

 

642,712

 

  Chief Medical Officer

 

 

2016

 

 

310,000

 

 

93,000

 

 

137,696

 

 

20,503

 

 

561,199

 

 

 

 

2015

 

 

293,550

 

 

72,000

 

 

180,189

 

 

14,993

 

 

560,732

 

 

(1)

Amounts shown represent performance bonuses earned for 2017, 2016 and 2015, which were each paid in cash during the first quarter of 2018, 2017 and 2016, respectively.

(2)

In accordance with SEC rules, this column reflects the aggregate grant date fair value of the option awards granted during 2017, 2016 and 2015 computed in accordance with Financial Accounting Standard Board ASC Topic 718 for stock-based compensation transactions, or ASC 718. Assumptions used in the calculation of these amounts are included in Note 6 to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 7, 2018. These amounts do not reflect the actual economic value that will be realized by the named executive officer upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options.

For 2016, also includes the incremental fair value of the options granted during 2016 to the named executive officers pursuant to the option exchange program.  As a result of the option exchange, the incremental fair value compared to the surrender date fair value of the surrendered options for each of our named executive officers was as follows:  Mr. Gonyer, $33,263; Mr. D’Onofrio, $33,351; and Dr. Carlson, $35,646.

(3)

Amount shown represents the cost of company-paid health insurance premiums (in the case of Mr. Gonyer and Mr.  D’Onofrio) and reimbursement for health insurance benefits (in the case of Dr. Carlson) during 2017, 2016 and 2015.

Narrative Disclosure to Compensation Tables

Employment Agreements

Employment Agreements with Messrs. Gonyer and D'Onofrio

We have entered into employment agreements with each of Messrs. Gonyer and D’Onofrio, which agreements were amended and restated in June 2013.

Pursuant to each of the employment agreements, if we terminate such officer’s employment without cause (as defined below), such officer resigns for good reason (as defined below) or such officer’s employment is terminated as a result of his or her death or following his or her permanent disability, the executive officer or his or her estate, as applicable, is entitled to the following payments and benefits: (1) fully earned but unpaid base salary through the date of termination at the rate then in effect, plus all other amounts under any compensation plan or practice to which he or she is entitled; (2) a lump sum cash payment in an

26


 

amount equal to 12 months of his base salary as in effect immediately prior to the date of termination; (3) a lump sum cash payment in an amount equal to his or her bonus (as defined below) for the year in which the termination of his employment occurs, prorated for the period of his service during such year, provided that the officer shall not be entitled to receive such amount in the event that his termination results from his discharge by us without cause prior to a change in control (as defined below); (4) a lump sum cash payment in an amount equal to the cost of the continuation of health benefits for a period of 12 months following date of termination; (5) a lump sum cash payment in an amount equal to the cost of his life insurance premiums for a period of 12 months following the date of termination; (6) solely in the event of the officer’s termination by us without cause or by the officer for good reason, a lump sum cash payment in an amount equal to $15,000 for outplacement service; and (7) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards as to the number of stock awards that would have vested over the 12-month period following termination had such executive officer remained continuously employed by us during such period. In the event an officer’s termination without cause or resignation for good reason occurs within three months prior to the occurrence of a change in control or within 12 months following a change in control, all of his outstanding unvested stock awards will accelerate and become fully vested on the later of (1) the date of termination or (2) the date of such change in control.

Effective in January 2017, Mr. D’Onofrio’s employment agreement was amended to increase his target annual bonus under the Company’s bonus plan or plans applicable to senior executives from 40% of his base salary actually paid for such year to 45% of his base salary actually paid for such year, effective for 2017.

Employment Agreement with Dr. Carlson

In connection with her commencement of employment in December 2013, we entered into an employment agreement with Dr. Carlson.

Pursuant to the employment agreement, Dr. Carlson agrees to devote 80% of her productive time and efforts to the performance of her duties as Chief Medical Officer. Pursuant to the employment agreement, Dr. Carlson’s base salary is subject to review each year at the sole discretion of the compensation committee. Dr. Carlson is also eligible to earn, commencing with the fiscal year ending December 31, 2014, an annual cash performance bonus under the Company’s bonus plan or plans applicable to senior executives. In January 2017, Dr. Carlson’s employment agreement was amended to increase her target annual bonus under any such plan from 30% of her base salary actually paid for such year to 40% of her base salary actually paid for such year, effective for 2017. The annual cash performance bonus payable is based on the achievement of individual and/or Company performance goals to be determined in good faith by the compensation committee. The Company also pays Dr. Carlson a taxable monthly payment equal to the monthly premium Dr. Carlson pays for healthcare coverage under Medicare, in an amount not to exceed $2,000 per month.

Pursuant to the employment agreement, if we terminate Dr. Carlson’s employment without cause (as defined below) or Dr. Carlson resigns for good reason (as defined below), Dr. Carlson is entitled to the following payments and benefits: (1) fully earned but unpaid base salary through the date of termination at the rate then in effect, plus all other amounts under any compensation plan or practice to which she is entitled; (2) a lump sum cash payment in an amount equal to her monthly base salary as in effect immediately prior to the date of termination for a period of nine months; (3) a lump sum cash payment in an amount equal to her bonus for the year in which the termination of her employment occurs, prorated for the period of her service during such year, provided that Dr. Carlson shall not be entitled to receive such amount in the event that her termination results from her discharge by the Company without cause prior to a change in control (as defined below); and (4) a taxable monthly payment in an amount equal to her monthly healthcare coverage costs under Medicare as in effect immediately prior to the date of termination, in an amount not to exceed $2,000 per month, for a period of nine months.

In the event Dr. Carlson’s termination without cause or resignation for good reason occurs within three months prior to the occurrence of a change in control or within 12 months following a change in control, all of her outstanding unvested stock awards will accelerate and become fully vested on the later of (1) the date of termination or (2) the date of such change in control.

Dr. Carlson’s employment agreement also contains standard confidentiality, non-competition and non-solicitation covenants.

Defined Terms for Purposes of Employment Agreements

For purposes of the employment agreements with the named executive officers, “cause” generally means an executive officer’s (1) commission of an act of fraud, embezzlement or dishonesty that has a material adverse impact on us or any successor or affiliate of ours; (2) conviction of, or entry into a plea of “guilty” or “no contest” to, a felony; (3) unauthorized use or disclosure of our confidential information or trade secrets or any successor or affiliate of ours that has a material adverse impact on any such entity; (4) gross negligence, insubordination or material violation of any duty of loyalty, or any other material misconduct on the part of the executive officer; (5) ongoing and repeated failure or refusal to perform or neglect of his or her duties as required by his or her employment agreement, which failure, refusal or neglect continues for 15 days following his or her receipt of written notice from our board of directors stating with specificity the nature of such failure, refusal or neglect; or (6) breach of any material provision of his or her employment agreement.

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For purposes of the employment agreements with the named executive officers, “good reason” generally means (1) other than for Dr. Carlson, a change in the executive officer’s status, position or responsibilities that, in the executive officer’s reasonable judgment, represents a substantial and material reduction in the status, position or responsibilities as in effect immediately prior thereto; the assignment to the executive officer of any duties or responsibilities that, in the executive officer’s reasonable judgment, are materially inconsistent with such status, position or responsibilities; or any removal of the executive officer from or failure to reappoint or reelect the executive officer to any of such positions, except in connection with the termination of the executive officer’s employment for cause (as defined above), as a result of his or her permanent disability or death, or by the executive officer other than for good reason; (2) with respect to Dr. Carlson, a material diminution in her authority, duties or responsibilities; (3) a material reduction in the executive officer’s annual base salary, except in connection with a general reduction in the compensation of our or any successor’s or affiliate’s personnel with similar status and responsibilities; (4) our or any successor’s or affiliate’s requirement the executive officer (without the executive officer’s consent) be based at any place outside a 50-mile radius of his or her placement of employment as of the effective date of the employment agreement, except for reasonably required travel for our or any successor’s or affiliate’s business that is not materially greater than such travel requirements prior to the effective date of the employment agreement; (5) any material breach by us or any successor or affiliate of obligations to the executive officer under the employment agreement; (6) other than for Dr. Carlson, any purported termination of the executive officer’s employment or service relationship for cause (as defined above) by us or any successor or affiliate that is not in accordance with the definition of cause; or (7) other than for Dr. Carlson, a change in control (as defined below).

For purposes of the employment agreements with the named executive officers, “bonus” generally means an amount equal to the greater of (1) the executive officer’s target bonus for the fiscal year in which the date of termination occurs; or (2) the bonus awarded to the executive officer for the fiscal year prior to the date of termination (which bonus shall be annualized to the extent the executive officer was not employed for the entire fiscal year prior to the date of termination). If any portion of the bonus awarded to the executive officer consisted of securities or other property, the fair market value thereof shall be determined in good faith by our board of directors.

For purposes of the employment agreements with the named executive officers, “change in control” has the same meaning as such term is given under the terms of our 2007 Equity Incentive Plan, except that for purposes of the employment agreements a change in control will not be triggered pursuant to a change in the composition of our board of directors, as more fully described below.

Executive Compensation Components

2017 Peer Group

During 2017, our compensation committee retained Marsh & McLennan Agency LLC as its independent compensation consultant.  Marsh & McLennan assisted the compensation committee in confirming a peer group of companies to be used in the compensation setting process.  For 2017, a peer group of 23 life sciences companies in similar phases of development as us with the following characteristics was selected based on the following parameters and not on the basis of executive compensation levels:

 

 

 

Market capitalization less than $500 million.

 

 

Revenues less than $50 million.

 

 

Employee size less than 100 employees.

 

 

Peer group companies were located nationally.

The 2017 peer group consisted of the following companies:

  

Agile Therapeutics

Endocyte

Aldeyra Therapeutics

Geron

Anthera Pharmaceuticals

ImmunoCellular Therapeutics

Apricus Biosciences

MEI Pharma

ArQule

Northwest Biotherapeutics

Cara Therapeutics

Onconova Therapeutics

Celsion

Pain Therapeutics

Cyclacel Pharmaceuticals

Syndax Pharmaceuticals

Cytokinetics

Tonix Pharmaceuticals

CytRx

Verastem

Edge Therapeutics

Vical

Eleven Biotherapeutics

 

 

While our compensation committee reviewed the foregoing comparable company data in connection with its determinations of the 2018 base salaries, target bonuses and equity awards for our named executive officers, our committee did not attempt to set

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those compensation levels or awards at a certain target percentile with respect to the comparable company data or otherwise rely entirely on that data to determine named executive officer compensation. Instead, as described above and consistent with past practice, the compensation committee members relied on their judgment and experience in setting those compensation levels and making those awards.

We expect that the compensation committee will continue to review comparable company data in connection with setting the compensation we offer our named executive officers to help ensure that our compensation programs are competitive and fair.

Base Salaries

In general, base salaries for our named executive officers are initially established through arm’s length negotiation at the time the executive is hired, taking into account such executive’s qualifications, experience and prior salary. Base salaries of our named executive officers are approved and reviewed annually by our compensation committee and adjustments to base salaries are based on the scope of an executive’s responsibilities, individual contribution, prior experience and sustained performance. Decisions regarding salary increases may take into account an executive officer’s current salary, equity ownership, and the amounts paid to an executive officer’s peers inside our company by conducting an internal analysis, which compares the pay of an executive officer to other members of the management team. Base salaries are also reviewed in the case of promotions or other significant changes in responsibility. Base salaries are not automatically increased if the board of directors and compensation committee believe that other elements of the named executive officer’s compensation are more appropriate in light of our stated objectives. This strategy is consistent with our intent of offering compensation that is both cost-effective, competitive and contingent on the achievement of performance objectives.

The actual base salaries paid to all of our named executive officers for 2017 are set forth in the “Summary Compensation Table” above.

In January 2017, our compensation committee approved base salary increases for 2017 for Messrs. Gonyer and D'Onofrio and Dr. Carlson to $425,000, $345,000 and $325,000, respectively. These base salary increases represented adjustments of approximately 6.3%, 2.8% and 4.8%, respectively.

In February 2018, our compensation committee approved base salary increases for 2018 for Messrs. Gonyer and D’Onofrio and Dr. Carlson to $450,000, $357,000 and $337,000, respectively.  These base salary increases represented adjustments of approximately 5.9%, 3.5% and 3.7%, respectively.

The base salaries of our named executive officers continue to be below the median level of similarly-situated executives for our peer group of companies.

Annual Cash Performance Bonuses

Each named executive officer is also eligible for a performance bonus based upon the achievement of certain corporate performance goals and objectives approved by our compensation committee and board of directors.

Bonuses are set based on a percentage of the executive’s base salary as of the end of the bonus year and are expected to be paid out in the first quarter of the following year. The target levels for 2017 executive bonuses were as follows: 50% for our Chief Executive Officer, 45% for our Executive Vice President and Chief Business Officer, and 40% for our Chief Medical Officer. The executive bonuses are 100% based on the achievement of corporate objectives that are set each year by the board of directors and the compensation committee.  All final bonus payments to our named executive officers are determined by our compensation committee. The actual bonuses awarded in any year, if any, may be more or less than the target, depending on individual performance and the achievement of corporate objectives and may also vary based on other factors at the discretion of the compensation committee.

For 2017, the corporate performance objectives for our Chief Executive Officer and our Executive Vice President and Chief Business Officer were related to clinical and regulatory development, commercial development, and corporate financial objectives. These performance objectives and areas of emphasis were used as a guide by the compensation committee and board of directors in determining overall corporate performance for these executives as they represented those areas in which they were expected to focus their efforts during the year.  Both qualitative and quantitative guidelines were established for purposes of evaluating performance relating to these corporate objectives during 2017.  In coming to its final determination regarding the overall corporate achievement for 2017, our compensation committee noted our clinical and regulatory development milestones related to Gimoti, including (1) successful preparation and execution of the comparative exposure PK trial and attainment of expected trial outcomes; (2) continuing progress on the preparation of the NDA; and (3) FDA related communications and activities.  The compensation committee also considered our progress towards the commencement of commercial activities.  In addition, the compensation committee considered our cash management efforts which included managing expenditures within budgeted levels. As a result of these achievements, the compensation committee determined to award a corporate achievement level of 87.5% for our Chief Executive Officer and Executive Vice President and Chief Business Officer.

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For 2017, the corporate performance objectives for our Chief Medical Officer were related to the continued clinical and regulatory development of Gimoti. These performance objectives and area of emphasis was used as a guide by the compensation committee and board of directors in determining overall corporate performance for purposes of our Chief Medical Officer's annual bonus as it represented the area in which she was expected to focus her efforts during the year.  Both qualitative and quantitative guidelines were established for purposes of evaluating her performance relating to these corporate objectives during 2017. As a result of the clinical development milestones related to Gimoti that were attained, including (1) successful preparation and execution of the comparative exposure PK trial and attainment of expected trial outcomes and the continuing progress on the preparation of the NDA, and (2) FDA related activities and submissions, the compensation committee determined to award a corporate achievement level of 87.5% for our Chief Medical Officer.

The overall achievement level was then used to determine each named executive officer’s bonus.  The bonuses paid to our named executive officers for 2017 are set forth in the “Summary Compensation Table” above.

Equity Compensation

The goals of our long-term, equity-based incentive awards are to align the interests of our named executive officers and other employees, non-employee directors and consultants with the interests of our stockholders. Because vesting is based on continued employment, our equity-based incentives also encourage the retention of our named executive officers through the vesting period of the awards. In determining the size of the long-term equity incentives to be awarded to our named executive officers, we take into account a number of internal factors, such as the relative job scope, the value of existing long-term incentive awards, individual performance history, prior contributions to us and the size of prior grants.  Our compensation committee reviews competitive market data prepared by Barney & Barney in connection with its grant of long-term equity incentive awards to the named executive officers, but such awards are not determined by reference to any specific target level of compensation or benchmarking. Based upon these factors, the compensation committee determines the size of the long-term equity incentives at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value. We have not granted any equity awards other than stock options to date.

To reward and retain our named executive officers in a manner that best aligns employees’ interests with stockholders’ interests, we use stock options as the primary incentive vehicles for long-term compensation. We believe that stock options are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance. Because employees are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time.

The exercise price of each stock option grant is the fair market value of our common stock on the grant date, as determined by our board of directors from time to time. Stock option awards granted to our named executive officers generally vest on a monthly basis over a four-year period.  From time to time, our compensation committee may, however, determine that a different vesting schedule is appropriate.

In January 2017, our named executive officers were granted stock Contingent Options to purchase shares of our common stock, which stock options vest on a monthly basis over a four-year period.  Specifically, Messrs. Gonyer and D'Onofrio and Dr. Carlson were granted options to purchase 225,000, 150,000 and 100,000 shares of our common stock, respectively.

In February 2018, our named executive officers were granted stock options to purchase shares of our common stock, which stock options vest on a monthly basis over a four-year period.  Specifically, Messrs. Gonyer and D'Onofrio and Dr. Carlson were granted options to purchase 225,000, 150,000 and 125,000 shares of our common stock, respectively.  These stock option grants are subject to stockholder approval of Proposal 3 noted within this proxy statement, and the exercisability restrictions described in Proposal 3.  Specifically, the options will not be exercisable prior to the first to occur of (1) FDA Approval, (2) the second anniversary of the date of grant, or (3) immediately prior to the consummation of a change in control (as defined in the Restated Plan). The Administrator of the amended and restated 2013 Equity Incentive Award Plan may, in its sole discretion, remove these exercisability restrictions in connection with or following an officer’s death, disability, or termination of employment or service.

We have had no program, plan or practice pertaining to the timing of stock option grants to named executive officers coinciding with the release of material non-public information. Stock options granted to our named executive officers may be subject to accelerated vesting in certain circumstance. For additional discussion, please see “Employment Agreements” above and “Change in Control Benefits” below.

Other Elements of Compensation

Retirement Plans

We currently maintain a 401(k) retirement savings plan that allows eligible employees to contribute a portion of their compensation, within limits prescribed by the Internal Revenue Code, on a pre-tax basis through contributions to the plan. Our named executive officers are eligible to participate in the 401(k) plan. We believe that providing a vehicle for tax-deferred

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retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our named executive officers in accordance with our compensation policies.

Employee Benefits and Perquisites

Our named executive officers are eligible to participate in our health and welfare plans.  We reimburse Dr. Carlson for her health care premiums and pay for the health and welfare benefits for our other named executive officers and our other four employees. We do not provide our named executive officers with any other significant perquisites or other personal benefits.

Employee Stock Purchase Plan

We maintain an employee stock purchase plan, or ESPP, that allows eligible employees to purchase our common stock at a discount, subject to applicable limits as set forth in the ESPP, through payroll deductions of up to 20% of their eligible compensation.  All of our employees, including our named executive officers, participate in the ESPP on the same terms and conditions.

No Tax Gross-Ups

We do not make gross-up payments to cover our named executive officers’ personal income taxes that may pertain to any of the compensation paid or provided by our company.

Termination and Change in Control Benefits

Our named executive officers may become entitled to certain benefits or enhanced benefits in connection with certain qualifying terminations of employment and/or a change in control of our company. Each of our named executive officers’ employment agreements entitles them to severance in the event of their termination without cause or their resignation for good reason (and, for Mr. Gonyer and Mr. D'Onofrio, upon termination by reason of death or disability).  In addition, each named executive officer is entitled to accelerated vesting of all outstanding equity awards upon his or her termination without cause or their resignation for good reason within three months prior to the occurrence of a change in control or within 12 months following a change in control of our company. In addition, the occurrence of a change in control constitutes “good reason” for Mr. Gonyer's and Mr. D'Onofrio's resignation under their employment agreements. For additional discussion, please see “Employment Agreements” above.

 

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Outstanding Equity Awards at Fiscal Year-End  

The following table sets forth specified information concerning unexercised stock options and unvested stock awards for each of the named executive officers outstanding as of December 31, 2017:

 

  

 

Option Awards

 

Stock Awards

 

Name

 

Grant

Date

 

Number of Securities Underlying Unexercised Options (#) Exercisable(1)

 

 

Number of Securities Underlying Unexercised Options (#) Unexercisable(1)

 

Option

Exercise Price ($)

 

 

Option Expiration Date

 

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)

 

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David A.

Gonyer, R.Ph.

 

1/25/2017

 

 

56,250

 

 

 

168,750

 

 

 

 

2.36

 

 

1/24/2027

 

 

 

 

 

 

 

2/5/2016

 

 

40,000

 

 

 

20,000

 

(3)

 

 

3.04

 

 

3/5/2025

 

 

 

 

 

 

 

2/5/2016

 

 

47,124

 

 

 

23,563

 

(3)

 

 

3.04

 

 

12/1/2023

 

 

 

 

 

 

 

1/28/2016

 

 

42,500

 

 

 

42,500

 

 

 

 

3.07

 

 

1/27/2026

 

 

 

 

 

 

 

2/9/2011

 

 

72,000

 

 

 

 

 

 

0.40

 

 

2/8/2021

 

 

 

 

 

 

 

9/14/2007

 

 

 

 

 

 

 

 

 

 

22,500

 

(4)

 

 

50,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matthew J.

D'Onofrio

 

1/25/2017

 

 

37,500

 

 

 

112,500

 

 

 

 

2.36

 

 

1/24/2027

 

 

 

 

 

 

 

2/5/2016

 

 

35,000

 

 

 

17,500

 

(3)

 

 

3.04

 

 

3/5/2025

 

 

 

 

 

 

 

2/5/2016

 

 

47,124

 

 

 

23,563

 

(3)

 

 

3.04

 

 

12/1/2023

 

 

 

 

 

 

 

1/28/2016

 

 

32,500

 

 

 

32,500

 

 

 

 

3.07

 

 

1/27/2026

 

 

 

 

 

 

 

2/9/2011

 

 

46,000

 

 

 

 

 

 

0.40

 

 

2/8/2021

 

 

 

 

 

 

 

9/14/2007

 

 

 

 

 

 

 

 

 

 

7,500

 

(4)

 

 

16,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marilyn R.

Carlson, D.M.D., M.D.

 

1/25/2017

 

 

25,000

 

 

 

75,000

 

 

 

 

2.36

 

 

1/24/2027

 

 

 

 

 

 

 

2/5/2016

 

 

22,500

 

 

 

11,250

 

(3)

 

 

3.04

 

 

3/5/2025

 

 

 

 

 

 

 

2/5/2016

 

 

50,000

 

 

 

25,000

 

(3)

 

 

3.04

 

 

12/1/2023