PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
TUESDAY
,
JUNE 12, 2018
Information About the Annual Meeting and Voting
This proxy statement is furnished in connection with the solicitation of proxies by the board of directors, or the Board, of Eleven Biotherapeutics, Inc., alternatively referred to herein as “Eleven,” the “Company,” “we” or “us” for use at the 2018 Annual Meeting of Stockholders, or the 2018 Annual Meeting, on
Tuesday
,
June 12, 2018
, beginning at
8:00 a.m.
, Eastern Daylight Time, at the Hilton Boston Logan Airport, One Hotel Drive, Boston, MA 02128. On
April 23, 2018
, the record date for the determination of stockholders entitled to vote at the 2018 Annual Meeting, or the Record Date, there were outstanding and entitled to vote an aggregate of
47,664,313
shares of our common stock, par value $0.001 per share, or common stock. Each share of common stock entitles the record holder thereof to one vote on each of the matters to be voted on at the 2018 Annual Meeting.
On or about
May 3, 2018
, we intend to begin mailing a Notice of Internet Availability of Proxy Materials, or the Notice, to our stockholders of record as of the Record Date, other than to those stockholders who previously requested electronic or paper delivery of proxy materials. The Notice will direct stockholders to a website where they can access our proxy materials, including this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2017. Stockholders may also view instructions regarding how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive paper copies of our proxy materials or to receive our proxy materials electronically, you will continue to receive access to those materials through the method you requested until you elect otherwise.
Your vote is important no matter how many shares you own.
Please take the time to vote. Take a moment to read the instructions below. Choose the way to vote that is easiest and most convenient for you, and cast your vote as soon as possible.
Voting Methods
If you are the “record holder” of your shares, meaning that you own your shares in your own name and not through a bank, broker or other nominee, you may vote in one of four ways:
(1)
You may vote over the Internet.
You may vote your shares by following the “Vote by Internet” instructions in the Notice or on the enclosed proxy card. If you vote over the Internet, you do not need to vote by telephone, by completing and mailing your proxy card or by voting in person at the 2018 Annual Meeting.
(2)
You may vote by telephone.
You may vote your shares by following the “Vote by Phone” instructions in the Notice or on the enclosed proxy card. If you vote by telephone, you do not need to vote over the Internet, by completing and mailing your proxy card or by voting in person at the 2018 Annual Meeting.
(3)
You may vote by mail.
If you received (or requested to receive) a printed copy of the proxy materials, you may vote by completing, dating and signing the proxy card and promptly mailing it in the postage-paid envelope provided. If you vote by mail, you do not need to vote over the Internet, by telephone or by voting in person at the 2018 Annual Meeting.
(4)
You may vote in person.
If you attend the 2018 Annual Meeting, you may vote by delivering your completed proxy card in person or you may vote by completing a ballot at the 2018 Annual Meeting. Ballots will be available at the 2018 Annual Meeting. Any vote cast at the 2018 Annual Meeting will serve to revoke any prior vote made by Internet, telephone or mail.
All proxies that are executed or are otherwise submitted over the Internet or by telephone will be voted on the matters set forth in the accompanying Notice in accordance with the stockholders’ instructions. However, if no choice is specified on a proxy as to one or more of the proposals, the proxy will be voted in accordance with the Board's recommendations on such proposals as set forth in this proxy statement.
After you have submitted a proxy, you may still change your vote and revoke your proxy prior to the 2018 Annual Meeting by doing any one of the following things:
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submitting a new proxy by following the “Vote by Internet” or “Vote by Phone” instructions in the Notice or on the enclosed proxy card up until 11:59 p.m., Eastern Daylight Time, the day before the 2018 Annual Meeting;
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signing another proxy card and either arranging for delivery of that proxy card by mail by 11:59 p.m., Eastern Daylight Time, the day before the 2018 Annual Meeting, or by delivering that signed proxy card in person at the 2018 Annual Meeting;
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giving our Corporate Secretary a written notice before or at the 2018 Annual Meeting that you want to revoke your proxy; or
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voting in person at the 2018 Annual Meeting.
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Your attendance at the 2018 Annual Meeting alone will not revoke your proxy.
Shares Held in Street Name
If the shares you own are held in “street name” by a bank, broker or other nominee record holder, which, for convenience, we collectively refer to in this proxy statement as brokerage firms, your brokerage firm, as the record holder of your shares, is required to vote your shares according to your instructions. In order to vote your shares, change your vote or revoke your instructions, you will need to follow the directions your brokerage firm provides you. Many brokerage firms also offer the option of providing for voting over the Internet or by telephone, instructions for which, if available, would be provided by your brokerage firm on the voting instruction form that it delivers to you. Because most brokerage firms are member organizations of the New York Stock Exchange, or NYSE, the rules of the NYSE will likely govern how your brokerage firm would be permitted to vote your shares in the absence of instruction from you. Under the current rules of the NYSE, if you do not give instructions to your brokerage firm, it will still be able to vote your shares with respect to certain “discretionary” items, but will not be allowed to vote your shares with respect to certain “non-discretionary” items. The ratification of Ernst & Young LLP as our independent registered public accounting firm (Proposal 2) is considered to be a discretionary item under the NYSE rules, and your brokerage firm will be able to vote on this item even if it does not receive instructions from you, so long as it holds your shares in its name. The election of class I directors (Proposal 1) is a “non-discretionary” item, meaning that if you do not instruct your brokerage firm on how to vote with respect to Proposal 1, your brokerage firm will not vote with respect to this proposal and your shares will be counted as “broker non-votes.” “Broker non-votes” are shares that are held in “street name” by a brokerage firm that indicates on its proxy that it does not have or did not exercise discretionary authority to vote on a particular matter.
If your shares are held in street name, you must bring an account statement from your brokerage firm showing that you are the beneficial owner of the shares as of the Record Date in order to be admitted to the 2018 Annual Meeting. To be able to vote your shares held in street name at the 2018 Annual Meeting, you will need to obtain a proxy card from the holder of record.
Quorum
The holders of
23,832,157
shares of our common stock, representing a majority of the shares of our common stock issued and outstanding and entitled to vote at the 2018 Annual Meeting, will constitute a quorum for the transaction of business at the 2018 Annual Meeting. Shares of common stock represented in person or by proxy (including shares which abstain or do not vote with respect to one or more of the matters presented for stockholder approval) will be counted for purposes of determining whether a quorum is present at the 2018 Annual Meeting.
Votes Required
The following votes are required for approval of the proposals being presented at the 2018 Annual Meeting:
Proposal 1: To Elect Two Class I Directors.
The two nominees for director receiving the highest number of votes “FOR” election will be elected as directors. This is called a plurality.
Proposal 2: To Ratify the Selection of Ernst & Young LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2018.
The affirmative vote of a majority of the shares cast in person or represented by proxy at the 2018 Annual Meeting and entitled to vote on the matter is required to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the current fiscal year.
Broker non-votes and abstentions with respect to a proposal are counted as present or represented by proxy for purposes of establishing a quorum. If a quorum is present, votes to withhold will have no effect on the outcome of the votes on Proposal 1 (election of directors), but abstentions will count as votes against Proposal 2 (ratification of Ernst & Young LLP as our independent registered public accounting firm for the current fiscal year). Broker non-votes will have no effect on the outcomes of Proposal 1 or Proposal 2.
All outstanding shares of the Company's common stock represented by valid and unrevoked proxies received in time for the 2018 Annual Meeting will be voted. With respect to the election of directors, a stockholder may (i) vote for the election of all of the named director nominees, (ii) withhold authority to vote for all such director nominees, or (iii) vote for the election of one or more director nominees and withhold authority to vote for one or more director nominees.
The proposal to ratify Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018 allows stockholders to (i) vote “FOR” the matter, (ii) vote “AGAINST” the matter, or (iii) “ABSTAIN” from voting on the matter.
Shares will be voted on each proposal as instructed in the accompanying proxy. However, if no instructions are given on a validly signed and returned proxy (other than with respect to broker non-votes), the shares will be voted in accordance with the Company’s recommendations as follows: (i) “FOR” the election of the named director nominees; and (ii) “FOR” ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.
We intend to first make available this proxy statement, the enclosed proxy card and our Annual Report on Form 10-K for the year ended December 31, 2017, or the 2017 Annual Report, on or about May 3, 2018.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to Be Held on
Tuesday
,
June 12, 2018
:
This proxy statement and our 2017 Annual Report are available at www.proxydocs.com/ebio
for viewing, downloading and printing.
A copy of our Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission, or SEC, except for exhibits, will be furnished without charge to any stockholder upon written or oral request to Eleven Biotherapeutics, Inc., 245 First Street, Suite 1800 Cambridge, MA 02142, Attention: Corporate Secretary, Telephone: (617) 444-8550.
CORPORATE GOVERNANCE
Board of Directors
Members of Our Board of Directors
The following table sets forth the name and age as of
May 3, 2018
of each of our directors.
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Name
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Age
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Position
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Stephen A. Hurly
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50
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President and Chief Executive Officer and Director
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Wendy Dixon Ph.D.(1)(2)
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62
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Chair of the Board of Directors
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Abbie C. Celniker, Ph.D.(3)
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59
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Director
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Paul G. Chaney(2)
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60
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Director
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Leslie L. Dan, B.Sc., Phm., M.B.A., C.M
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88
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Director
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Jay S. Duker, M.D.
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59
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Director
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Barry J. Gertz, M.D., Ph.D.
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66
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Director
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Jane V. Henderson(1)(3)
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52
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Director
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Daniel S. Lynch(1)(2)(3)
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60
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Director
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(1)
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Member of the Audit Committee.
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(2)
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Member of the Compensation Committee.
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(3)
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Member of the Nominating and Corporate Governance Committee.
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Stephen A. Hurly
has served as our President and Chief Executive Officer since September 2016. Mr. Hurly brings nearly two decades of leadership experience in the life sciences industry. Prior to his role as our President and Chief Executive Officer, he served as the President and Chief Executive Officer of Viventia Bio Inc., or Viventia, a specialty pharmaceutical company, from March 2014 through our acquisition of Viventia in September 2016. Previously, Mr. Hurly was the Chief Executive Officer of Burrill & Co.’s Merchant Banking Division, a finance business for life science companies, from 2011 to 2014. Prior to that, Mr. Hurly was the head of the Life Sciences Investment Banking Practice at Boenning & Scattergood, a securities asset management and investment banking firm, from 2008 to 2011. Mr. Hurly has more than 15 years of experience in the investment banking business. Mr. Hurly has served on the board of directors of PHusis Therapeutics Inc., a private targeted small molecule therapeutics company, since May 2011. He graduated from Swarthmore College with a B.A. degree in Engineering and earned an M.B.A. from the University of Chicago. We believe that Mr. Hurly is qualified to serve on our Board because of his extensive knowledge of our business based on his service as our President and Chief Executive Officer and previously as the President and Chief Executive Officer of Viventia.
Wendy L. Dixon, Ph.D.
has served as the Chair of our Board since December 2016 and as a member of our Board since October 2014. Dr. Dixon has been the President of Great Meadow Consulting, L.L.C., a life science consulting firm, since July 2009. Additionally, Dr. Dixon has been an advisor to the Mellon Group since August 2014 and was a Senior Advisor to The Monitor Group, now Deloitte Consulting LLP, a consulting firm, from November 2010 to January 2012. Dr. Dixon has also been a member of the Industry Advisory Board of Longitude Capital, a venture capital firm, since March 2015. From 2001 to 2009, Dr. Dixon was the Chief Marketing Officer and President, Global Marketing for Bristol-Myers Squibb, where she served on the Executive Committee. From 1996 to 2001, she was the Senior Vice President, Marketing at Merck and Co., and prior to that, she held executive management positions at West Pharmaceuticals, Inc., Osteotech, Inc. (subsequently acquired by Medtronic Inc.) and Centocor Biotech, Inc. (now Janssen Biotech, Inc.) and various positions at SmithKline and French (now GlaxoSmithKline) in marketing, regulatory affairs, project management and as a biochemist. Dr. Dixon has served on the board of directors of Alkermes plc (Nasdaq: ALKS) since January 2011, Incyte Corporation (Nasdaq: INCY) since May 2010, bluebird bio, Inc. (Nasdaq: BLUE) since May 2013, and Voyager Therapeutics, Inc. (Nasdaq: VYGR) since January 2017, and was formerly on the boards of Ardea Biosciences, when Ardea was acquired by AstraZeneca plc in 2012, Furiex Pharmaceuticals, when Furiex was acquired by Actavis plc in 2014, Dentsply International and Orexigen Therapeutics, Inc. (Nasdaq: OREX). Dr. Dixon received a B.S. and a M.S. in Natural Science and a Ph.D. in Biochemistry from the University of Cambridge (UK). We believe that Dr. Dixon is qualified to serve on our Board because of her extensive executive leadership experience in and knowledge of the life sciences industry, as well as her extensive corporate governance experience from serving on numerous boards of directors in the life sciences industry.
Abbie C. Celniker, Ph.D.
has served as a member of our Board since September 2011 and previously as our President and Chief Executive Officer from September 2011 to September 2016. Since October 2016, Dr. Celniker has served as a partner of
Third Rock Ventures, a venture capital firm, as board chairperson at Goldfinch Biopharma, Inc., a private biotechnology company. From October 2016 until December 2017, Dr. Celniker also served as the interim chief executive officer at Goldfinch Biopharma, Inc. Since December 2017, Dr. Celniker has served as the interim chief executive officer and board chairperson of Rheos Medicines. Since March 2018, Dr. Celniker has served as a board chairperson at Cedilla Therapeutics. Previously, Dr. Celniker served as the Executive Vice President, Translational Medicine of Alexion Pharmaceuticals, Inc., a biopharmaceutical company, from January 2011 to August 2011. Prior to joining Alexion Pharmaceuticals, Dr. Celniker served as the President and Chief Executive Officer and as a member of the board of directors of Taligen Therapeutics, Inc., a biotechnology company, from July 2008 to January 2011, when Taligen Therapeutics was acquired by Alexion Pharmaceuticals. Previously, Dr. Celniker served as the Global Head of Biologics of Novartis AG, the Senior Vice President of Research and Development Strategy and Operations of Millennium Pharmaceuticals, Inc. and the Vice President Protein Technologies of the Wyeth Research facilities in Cambridge, Massachusetts. Dr. Celniker formerly served on the board of directors of Dyax Corp. when it was acquired by Shire plc in 2015. Dr. Celniker received a B.A. in Biology from the University of California, San Diego, and a Ph.D. in Molecular Biology from the University of Arizona. We believe that Dr. Celniker is qualified to serve on our Board because of her extensive experience in the development of biologics, her extensive executive leadership experience in the life sciences industry and her extensive knowledge of our company based on her prior experience as our President and Chief Executive Officer.
Paul G. Chaney
has served as a member of our Board since February 2014. Mr. Chaney is a co-founder of PanOptica, Inc., a private biopharmaceutical company focused on developing innovative ophthalmic therapeutics, and has served as its President and Chief Executive Officer since 2009. Prior to co-founding PanOptica, Mr. Chaney was executive vice president of OSI Pharmaceuticals, Inc. and president of (OSI) Eyetech, Inc., OSI Pharmaceutical’s wholly-owned eyecare subsidiary. Mr. Chaney joined Eyetech Pharmaceuticals as Chief Operating Officer in 2003. Prior to joining Eyetech, Mr. Chaney held a variety of senior management positions at Pharmacia Corporation, including Vice President of the Global Ophthalmology Business and Vice President of Global Pharmaceutical Ophthalmology. Mr. Chaney also serves as the chairman of the board of directors of Eyegate Pharmaceuticals, Inc. (Nasdaq: EYEG) since August 2008. He began his career as a sales representative for The Upjohn Company in 1980. Mr. Chaney earned a dual degree in Biological Sciences and English from the University of Delaware. We believe that Mr. Chaney is qualified to serve on our Board because of his extensive executive leadership experience in the life sciences industry and at pharmaceutical company business units for over 20 years.
Leslie L. Dan, B.Sc. Phm., M.B.A., C.M.
has served as a member of our Board since September 2016 and is the founder of Viventia. He was appointed the chair of Viventia’s board of directors in January 2013 and served as Viventia's President and Secretary from 2012 to 2015. Mr. Dan also founded Novopharm (now known as Teva Canada Limited) in 1964, now a wholly-owned subsidiary of Teva Pharmaceuticals Industries Limited, and has served on Teva Canada’s board of directors as Chairman since 2000. Mr. Dan also served on the board of directors of Draxis Health Inc. (now known as Draxis Specialty Pharmaceuticals Inc.), a provider of sterile products, non-sterile products and radiopharmaceuticals, from 1993 to 2003, and on the board of directors of Teva Israel from 2001 to 2007. Mr. Dan graduated from the University of Toronto with a B.Sc. Phm. and an M.B.A. He has also received honorary doctorates from the University of British Columbia, Dalhousie University, York University and the University of Toronto. We believe that Mr. Dan is qualified to serve on our Board because of his extensive executive leadership experience in and knowledge of the life sciences industry, as well as his extensive knowledge of our business as a founder of Viventia.
Jay S. Duker, M.D.
, has served as a member of our Board since January 2015. Dr. Duker has served in varying capacities at the New England Eye Center (NEEC) since January 1992, most recently as Director since 2001. He is also the Professor and Chairman of the Department of Ophthalmology at Tufts Medical Center and the Tufts University School of Medicine since 2003. He has published more than 300 journal articles, with his major research interests including retinal imaging, in particular optical coherence tomography (OCT), retinal vascular diseases, and drug delivery to the posterior segment. His book, Yanoff and Duker’s Ophthalmology, is one of the bestselling ophthalmic texts over the past decade. Dr. Duker is the co-founder of three companies, including Hemera Biosciences, a biotech start-up whose focus is a gene therapy based treatment for age-related macular degeneration. Dr. Duker has served on the board of directors of EyePoint Pharmaceuticals, Inc. (Nasdaq: EYPT), formerly pSivida Corp., since September 2016. Dr. Duker received an A.B. from Harvard University and a M.D. from the Jefferson Medical College at Thomas Jefferson University. We believe that Dr. Duker is qualified to serve on our Board because of his extensive clinical and academic experience, his medical knowledge and as a co-founder of other life sciences companies.
Barry J. Gertz, M.D., Ph.D.
has served as a member of our Board since January 2015. In October 2014, Dr. Gertz joined Clarus Ventures, a venture capital firm, where he currently serves as a Partner. Prior to his time with Clarus Ventures, Dr. Gertz served in varying roles at Merck & Co., Inc., a pharmaceutical company, from 1986 until July 2014, including as Senior Vice President and Head of Global Clinical Development from 2002 to 2014. Dr. Gertz has co-authored over 100 scientific publications and has been a contributor to the evaluation and approval of more than 26 new drugs or vaccines. Dr. Gertz
received a B.A. in chemistry from the University of Pennsylvania. He subsequently received M.D. and Ph.D. degrees in the Medical Scientist Training Program at the University of Pennsylvania, School of Medicine with a Ph.D. in the Department of Pharmacology. We believe that Dr. Gertz is qualified to serve on our Board because of his extensive executive leadership experience in a pharmaceutical company, his experience in clinical development, his knowledge of the life sciences industry and his insight into financial and investment matters from his experience in private equity investing in life sciences companies.
Jane V. Henderson
has served as a member of our Board since October 2013. Since January 2017, Ms. Henderson has served as the Chief Financial Officer of Voyager Therapeutics, Inc., a biopharmaceutical company. Prior to joining Voyager Therapeutics, Ms. Henderson served as the Senior Vice President, Chief Financial and Business Officer of Kolltan Pharmaceuticals, Inc., a biopharmaceutical company, from February 2013 to November 2016, when Kolltan Pharmaceuticals was acquired by Celldex Therapeutics, Inc. Prior to joining Kolltan Pharmaceuticals, Ms. Henderson served as the Vice President, Business Development of ISTA Pharmaceuticals, Inc., an eye care company, from June 2010 to June 2012, when ISTA Pharmaceuticals was acquired by Bausch + Lomb Incorporated. Prior to joining ISTA Pharmaceuticals, Ms. Henderson served as the Executive Vice President, Chief Financial Officer and Head of Business Development of Axerion Pharmaceuticals, Inc., a pharmaceutical company, from September 2009 to June 2010, provided independent consulting services from February 2009 to September 2009 and served as the Executive Vice President, Chief Financial Officer and Chief Business Officer of Panacos Pharmaceuticals, Inc., a pharmaceutical company, from January 2008 to February 2009. Prior to that, Ms. Henderson served in a variety of senior investment banking roles at HSBC Holdings plc, Canadian Imperial Bank of Commerce, Lehman Brothers and Salomon Brothers. Ms. Henderson currently serves on the board of directors of Ophthotech Corporation, where she also serves as Chair of the Audit Committee. Ms. Henderson received a B.S. in Psychology from Duke University. We believe that Ms. Henderson is qualified to serve on our Board because of her extensive executive leadership experience in and knowledge of the life sciences industry and her extensive finance background as a chief financial officer for over ten years and as an investment banker for over twenty years.
Daniel S. Lynch
has served as a member of our Board since December 2013 and as the Chair of our Board from December 2013 to December 2016. Mr. Lynch has served as a venture partner at Third Rock Ventures, a venture capital firm, from May 2013 until December 2016, and as an entrepreneur-in-residence from May 2011 to May 2013. Since 2005, Mr. Lynch has served on the boards of directors of several life sciences companies, including on the board of directors of bluebird bio, Inc. (Nasdaq: BLUE) since 2011 and as chairman of the board of directors for Blueprint Medicines Corp. (Nasdaq: BPMC) since 2012 and as chairman of the board of Surface Oncology since (Nasdaq: SURF) since 2016. Previously, Mr. Lynch served on the board of directors of DNIB Unwind, Inc. (formerly BIND Therapeutics, Inc.) from 2012 until its acquisition by Pfizer Inc. Prior to that, Mr. Lynch served as the Chief Financial Officer and then the Chief Executive Officer of ImClone Systems Inc. Mr. Lynch received a B.A. in Mathematics from Wesleyan University and a M.B.A. from the Darden Graduate School of Business Administration at the University of Virginia. We believe that Mr. Lynch is qualified to serve on our Board because of his senior leadership experience, his experience in private equity investing in life sciences companies and his extensive corporate governance experience through service on the boards of directors of other life sciences companies.
Board Composition
Our Board is currently authorized to have nine members and currently consists of nine members. Our Board is divided into three classes, with members of each class serving staggered three-year terms. The members of the classes are divided as follows:
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the class I directors are Leslie Dan, Barry Gertz and Stephen Hurly, and their term expires at our annual meeting of stockholders to be held in 2018;
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the class II directors are Paul Chaney, Jay Duker and Wendy Dixon, and their term expires at our annual meeting of stockholders to be held in 2019; and
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the class III directors are Abbie Celniker, Jane Henderson and Daniel Lynch, and their term expires at the 2020 Annual Meeting.
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Upon the expiration of the term of a class of directors, directors in that class are eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires. Our directors may be removed only for cause by the affirmative vote of the holders of 75% or more of our voting stock.
In accordance with our certificate of incorporation and by-laws, our Board has made the determination to reduce the size of the Board, effective as of the 2018 Annual Meeting, to eight (8) members with class I thereafter consisting of only two (2) members. Accordingly, our Board has chosen not to nominate a third director to stand for election as a class I director at the 2018 Annual Meeting.
Board Determination of Independence
Our Board observes all applicable criteria for independence established by the Nasdaq Stock Market Rules and other governing laws and applicable regulations, including the requirement that a majority of our directors be independent as defined under the Nasdaq Stock Market Rules. Under Rule 5605(a)(2) of the Nasdaq Stock Market Rules, a director will only qualify as an “independent director” if, in the opinion of our Board, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board has determined that all of our directors with the exceptions of Messrs. Hurly and Dan and Dr. Celniker are independent as defined under the Nasdaq Stock Market Rules.
In addition, the Nasdaq Stock Market Rules require that, subject to specified exceptions, (i) each member of our audit and compensation committees be independent; (ii) each member of our audit committee satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act; and (iii) each member of our compensation committee satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of our audit committee may not, other than in his or her capacity as a member of the audit committee, the Board, or any other Board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from us or any of our subsidiaries; or (2) be an affiliated person of us or any of our subsidiaries. In addition, Rule 10C-1 under the Exchange Act requires that, with respect to the independence of each member of our compensation committee, our Board consider all factors specifically relevant to determining whether a director has a relationship with us which is material to that director’s ability to be independent from management in connection with his or her duties as a compensation committee member, including, but not limited to: (1) the source of his or her compensation as a director, including any consulting, advisory or other compensatory fee paid by us to him or her; and (2) whether he or she is affiliated with us or any of our subsidiaries or affiliates.
Our Board has also determined that: (i) Ms. Henderson, Dr. Dixon and Mr. Lynch, who comprise our audit committee; and (ii) Messrs. Lynch and Chaney and Dr. Dixon, who comprise our compensation committee, each satisfy the independence standards for those committees established by the applicable rules and regulations under the Exchange Act and the Nasdaq Stock Market Rules. In addition, with the exception of Dr. Celniker, each member of our nominating and corporate governance committee is independent as defined under the Nasdaq Stock Market Rules. In making such determination, our Board considered the relationships that each such non-employee director has with us and all other facts and circumstances our Board deemed relevant in determining independence.
No director is related to any of our other directors or executive officers and there are no arrangements or understandings between a director and any other person pursuant to which such person was elected as director, except for Mr. Dan and Mr. Hurly, each of whom were originally appointed to our Board as a condition to the closing of our acquisition of Viventia in 2016. Each of Mr. Dan and Mr. Hurly are standing for re-election at this 2018 Annual Meeting.
How Our Board Is Organized
Board Leadership Structure
The positions of chair of the Board and chief executive officer are presently separated at our company. The duties of the chair of the Board include the following:
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chairing meetings of our Board and of the independent directors in executive session;
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meeting with any director who is not adequately performing his or her duties as a member of our Board or any committees thereof;
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facilitating communications between other members of our Board and the chief executive officer;
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determining the frequency and length of Board meetings and recommending when special meetings of our Board should be held;
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preparing or approving the agenda for each Board meeting; and
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reviewing and, if appropriate, recommending action to be taken with respect to written communications from stockholders submitted to our Board.
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Our Board decided to separate the roles of chair and chief executive officer because it believes that a bifurcated leadership structure offers the following benefits:
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increasing the independent oversight of our company and enhancing our Board’s objective evaluation of our chief executive officer;
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freeing the chief executive officer to focus on company operations instead of board administration;
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providing the chief executive officer with an experienced sounding board;
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providing greater opportunities for communication between stockholders and our Board;
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enhancing the independent and objective assessment of risk by our Board; and
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providing an independent spokesman for our company.
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Board Committees
Our Board has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which operates under a charter that has been approved by our Board. Copies of the committee charters are posted on the Investor Relations section of our website, which is located at ir.elevenbio.com.
Audit Committee
The members of our audit committee are Ms. Henderson, Dr. Dixon and Mr. Lynch. Ms. Henderson chairs our audit committee. Our audit committee’s responsibilities include:
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appointing, approving the compensation of, and assessing the independence of, our registered public accounting firm;
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overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports and other communications from such firm;
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reviewing and discussing with management and our independent registered public accounting firm (x) our annual and quarterly financial statements and related disclosures (including any interim financial statements to be included in our periodic disclosures filed with the SEC); (y) our earnings press releases; and (z) litigation or other legal matters that could have a significant impact on our financial results;
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monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
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overseeing our internal audit function;
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overseeing our risk assessment and risk management policies;
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establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;
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meeting independently with our internal auditing staff, if applicable, and our independent registered public accounting firm and management;
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reviewing and approving or ratifying any related person transactions;
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preparing the audit committee report required by SEC rules; and
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conducting a periodic self-assessment of the audit committee and its charter.
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All audit and non-audit services, other than
de minimis
non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee.
Our Board has determined that each of Ms. Henderson and Mr. Lynch is an “audit committee financial expert” as defined in applicable SEC rules and that each qualifies as independent as defined under the applicable Nasdaq rules.
The audit committee met five times during 2017.
Compensation Committee
The members of our compensation committee are Dr. Dixon and Messrs. Lynch and Chaney. Dr. Dixon chairs our compensation committee. Our compensation committee’s responsibilities include:
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reviewing and approving, or making recommendations to our Board with respect to, the compensation of our chief executive officer and our other executive officers;
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overseeing an evaluation of our senior executives, including the establishment of corporate goals and objectives applicable to our chief executive officer and our other executive officers;
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reviewing and approving, or making recommendations to our Board with respect to, the terms of any binding offer letters, employment agreements, termination agreements or arrangements, change-in-control agreements, severance agreements, indemnification agreements or other material compensatory agreements with our chief executive officer or our other executive officers;
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overseeing and administering our cash and equity incentive plans;
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retaining the services, following the determination of independence under applicable Nasdaq and Exchange Act rules, of our compensation consultant, as well as overseeing and considering the recommendations of our compensation consultant;
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reviewing and making recommendations to our Board with respect to director compensation;
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establishing, if deemed advisable by our Board, stock ownership guidelines for our chief executive officer, directors and other executive officers;
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reviewing and discussing annually with management our compensation disclosure required by SEC rules;
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preparing the compensation committee report required by SEC rules; and
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conducting a periodic self-assessment of the compensation committee and its charter.
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The processes and procedures followed by our compensation committee in considering and determining executive and director compensation are described below under “Board Processes—Executive and Director Compensation Processes.” In addition to the Board’s independence determination, our Board has determined that each member of our compensation committee is a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act, and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code.
The compensation committee met three times during 2017.
Nominating and Corporate Governance Committee
The members of our nominating and corporate governance committee are Mr. Lynch, Dr. Celniker and Ms. Henderson. Mr. Lynch chairs our nominating and corporate governance committee. Our nominating and corporate governance committee’s responsibilities include:
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identifying individuals qualified to become members of our Board;
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recommending to our Board the persons to be nominated for election as directors and to each of our Board’s committees;
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reviewing and making recommendations to our Board with respect to our Board leadership structure;
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reviewing and making recommendations to our Board with respect to management succession planning;
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reviewing and making recommendations to our Board with respect to the adequacy of our certificate of incorporation and by-laws;
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developing and recommending to our Board corporate governance principles;
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overseeing a periodic evaluation of our Board; and
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conducting a periodic self-assessment of the nominating and corporate governance committee and its charter.
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The nominating and corporate governance committee met one time during 2017.
At the 2018 Annual Meeting, stockholders will be asked to consider the election of Messrs. Dan and Hurly, each of whom has been nominated for election as a director for the first time since our acquisition of Viventia in September 2016. In accordance with our certificate of incorporation and by-laws, our Board has made the determination to reduce the size of the Board, effective as of the 2018 Annual Meeting, to eight (8) members with class I thereafter consisting of only two (2) members. Accordingly, our Board has chosen not to nominate a third director to stand for election as a class I director at the 2018 Annual Meeting.
During 2016, each of Mr. Dan and Mr. Hurly were appointed by our Board as a new director as a condition to the closing of our acquisition of Viventia.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our Board or our compensation committee. None of the members of our compensation committee is, or has ever been, an officer or employee of our company.
Board Meetings and Attendance
Our Board met eight times during 2017. During 2017, each director attended at least 75% of the aggregate of the number of Board meetings and the number of meetings held by all committees of the Board on which he or she then served.
Our directors are encouraged to attend our annual meetings of stockholders. At the annual meeting of stockholders held in 2017, all nine of the directors then in office were in attendance.
Board Processes
Oversight of Risk
Our Board oversees our risk management processes directly and through its committees. Our management is responsible for risk management on a day-to-day basis. The role of our Board and its committees is to oversee the risk management activities of management. They fulfill this duty by discussing with management the policies and practices utilized by management in assessing and managing risks and providing input on those policies and practices. In general, our Board oversees risk management activities relating to business strategy, acquisitions, capital allocation, organizational structure and certain operational risks; our audit committee oversees risk management activities related to financial controls and legal and compliance risks; our nominating and corporate governance committee oversees risk management activities relating to Board composition and management succession planning; and our compensation committee oversees risk management activities relating to our compensation policies and practices. Each committee reports to the full Board on a regular basis, including reports with respect to the committee’s risk oversight activities as appropriate. In addition, since risk issues often overlap, committees from time to time request that the full Board discusses particular risks.
Executive Sessions
Executive sessions of our independent directors are held at each regularly scheduled meeting of our Board and at other times they deem necessary. Our Board’s policy is to hold executive sessions both with and without the presence of management. Our Board committees also generally meet in executive session at the end of each committee meeting.
Director Nomination Process
The process followed by our nominating and corporate governance committee and the independent directors of our Board to identify and evaluate director candidates may include requests to Board members and others for recommendations, evaluation of the performance on our Board and its committees of any existing directors being considered for nomination, consideration of biographical information and background material relating to potential candidates and, particularly in the case of potential candidates who are not then serving on our Board, interviews of selected candidates by members of our nominating and corporate governance committee and the independent directors of our Board.
In considering whether to recommend any particular candidate for inclusion in our Board’s slate of recommended director nominees, our nominating and corporate governance committee and the independent directors of our Board apply the criteria set forth in our corporate governance guidelines described below under “Corporate Governance Guidelines”. Consistent with these criteria, our nominating and corporate governance committee and the independent directors of our Board expect every nominee to have the following attributes or characteristics, among others: integrity, honesty, adherence to high ethical standards, business acumen, good judgment and a commitment to understand our business and industry.
Each of the director nominees is currently a member of our Board. The nominee biographies under “Board of Directors—Members of Our Board of Directors” indicate the experience, qualifications, attributes and skills of each of our current directors that led our nominating and corporate governance committee and the independent directors of our Board to conclude he should continue to serve as a member of our Board. Our nominating and corporate governance committee and the independent directors of our Board believe that each of the nominees has the individual attributes and characteristics required of each of our directors, and that the nominees as a group possess the skill sets and specific experience desired of our Board as a whole.
Our nominating and corporate governance committee and the independent directors of our Board consider the value of diversity when selecting nominees, and believe that our Board, taken as a whole, should embody a diverse set of skills, experiences and abilities. Our nominating and corporate governance committee and the independent directors of our Board do not make any particular weighting of diversity or any other characteristic in evaluating nominees and directors.
Stockholders may recommend individuals for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials, and information with respect to the stockholder or group of stockholders making the recommendation, including the number of shares of common stock owned by such stockholder or group of stockholders, to our Corporate Secretary at Eleven Biotherapeutics, Inc., 245 First Street, Suite 1800, Cambridge, MA
02142, Attention: Corporate Secretary. The specific requirements for the information that is required to be provided for such recommendations to be considered are specified in our by-laws and must be received by us no later than the date referenced below in “Other Matters—Deadline for Submission of Stockholder Proposals for 2019 Annual Meeting of Stockholders.” Assuming that appropriate biographical and background material has been provided on a timely basis, the nominating and corporate governance committee and the independent directors of our Board will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.
Stockholders also have the right under our by-laws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance committee or the independent directors of our Board, by following the procedures set forth under “Other Matters—Deadline for Submission of Stockholder Proposals for 2019 Annual Meeting of Stockholders.”
Communications with Stockholders
Our management will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. Stockholders may communicate with our management by writing to our Corporate Secretary at Eleven Biotherapeutics, Inc., Attention: Corporate Secretary, or by calling (617) 444-8550. Additional information about contacting our Board or management is available on the Investor Relations section of our website, which is located at ir.elevenbio.com.
In addition, stockholders who wish to communicate with our entire Board may do so by writing to Dr. Wendy Dixon, Chair of the Board, Eleven Biotherapeutics, Inc. 245 First Street, Cambridge, MA 02142. Communications will be forwarded to other directors if they relate to substantive matters that the Chair of the Board, in consultation with our legal counsel, considers appropriate for attention by the other directors. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances or matters as to which we tend to receive repetitive or duplicative communications.
Executive and Director Compensation Processes
Our executive compensation program is administered by the compensation committee of our Board, subject to the oversight and approval of our full Board. Our compensation committee reviews our executive compensation practices on an annual basis and based on this review makes recommendations to our Board for approval, which has full discretion to approve or modify the recommendations of the compensation committee.
In designing our executive compensation program, our compensation committee considers publicly available compensation data for national and regional companies in the biotechnology/pharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our compensation committee has also retained the services of Radford, an independent compensation consultant, to provide it with additional comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. Although the compensation committee considers Radford’s advice and recommendations about our executive compensation program, the compensation committee ultimately makes its own decisions about these matters.
None of the compensation committee members and none of our executive officers or directors have any relationship with Radford or the individual consultants employed by Radford. Radford has not provided any other services to our Board or management other than compensation consulting services to the compensation committee. The compensation committee has determined that no conflicts of interest exist between Radford and our company, our directors or our executive officers. The compensation committee is directly responsible for the appointment and oversight of any compensation consultants and other advisors it retains.
Our director compensation program is administered by the compensation committee of our Board, subject to the oversight and approval of our full Board. The compensation committee conducts periodic reviews of director compensation and makes recommendations to the Board with respect thereto.
Corporate Governance Guidelines
Our Board has adopted corporate governance guidelines to assist in the exercise of its duties and responsibilities and to serve the best interests of our stockholders. The guidelines provide that:
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our Board’s principal responsibility is to oversee our management;
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•
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a majority of the members of our Board must be independent directors;
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•
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the independent directors meet in executive session at least twice a year;
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•
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directors have full and free access to management and, as necessary, independent advisors;
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•
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new directors participate in an orientation program and all directors are expected to participate in continuing director education on an ongoing basis; and
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our Board will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively.
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A copy of the corporate governance guidelines is posted under the heading “Corporate Governance” on the Investor Relations section of our website, which is located at ir.elevenbio.com.
Board Policies
Related Person Transactions
Our Board has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we refer to as a “related person,” has a direct or indirect material interest. As a smaller reporting company, we are also required to review and approve any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds the lesser of $120,000 and or one percent of the average of our total assets at year-end for the last two completed fiscal years, and a related person has a direct or indirect material interest. Because one percent of our average total assets for the past two fiscal years has exceeded $120,000, our Board has continued to apply the $120,000 threshold under our policy.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our principal accounting officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction or direct that such transaction be terminated and rescinded. The policy also permits the chair of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the audit committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:
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the related person’s interest in the related person transaction;
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the approximate dollar value of the amount involved in the related person transaction;
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the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
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whether the transaction was undertaken in the ordinary course of our business;
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whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
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the purpose of, and the potential benefits to us of, the transaction; and
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any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
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Our audit committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
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interests arising solely from the related person’s position as an executive officer of another entity, whether or not the person is also a director of the entity, that is a participant in the transaction where the related person and all other related
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persons own in the aggregate less than a 10% equity interest in such entity, the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and the amount involved in the transaction is less than $120,000; and
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a transaction that is specifically contemplated by provisions of our certificate of incorporation or by-laws.
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The policy provides that transactions involving the compensation of executive officers shall be reviewed and approved by our compensation committee in the manner specified in the compensation committee’s charter.
Certain Relationships and Related Party Transactions
Since January 1, 2016, we have engaged in the following transactions with our directors, executive officers, holders of more than 5% of our voting securities, and affiliates or immediate family members of our directors, executive officers, and holders of more than 5% of our voting securities. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.
Viventia Acquisition
On September 20, 2016, we entered into a Share Purchase Agreement with Viventia, the shareholders of Viventia named therein - collectively referred to herein as the Selling Shareholders - and, solely in its capacity as seller representative, Clairmark, an affiliate of Leslie Dan, one of our directors, pursuant to which we agreed to and simultaneously completed the acquisition of all of the outstanding capital stock of Viventia from the Selling Shareholders, referred to herein as the Acquisition. The Selling Shareholders included Clairmark and Mr. Hurly, our chief executive officer. In connection with the closing of the Acquisition, we issued 4,013,431 shares of our common stock to the Selling Shareholders according to their pro rata share of Viventia’s then-outstanding common shares, which represented approximately 19.9% of our voting power as of immediately prior to the issuance of such shares of our common stock.
In connection with the closing of the Acquisition, we entered into a registration rights agreement with Clairmark, pursuant to which Clairmark has rights, subject to specific conditions, to require us to file registration statements covering the 3,582,328 shares it acquired in the Acquisition or to include such shares in registration statements that we may file for ourselves or other stockholders.
In connection with the forgiveness of certain debt held by Viventia immediately preceding the Acquisition, Viventia irrevocably assigned and set over the right to receive up to $814,000 in the form of research and development investment tax credits to and in favor of Clairmark. In October 2016, we received $697,000 in research and development investment tax credits and in November 2016, we remitted the same amount to Clairmark. In November 2017, we received the remaining $117,000 in research and development investment tax credits and remitted the same amount to Clairmark.
Manufacturing and Office Leases
We lease a manufacturing, laboratory, and office facility in Winnipeg, Manitoba, from an affiliate of Mr. Dan, under a five year renewable lease through September 2020 with a right to renew the lease for one subsequent five-year term. We have an annual minimum rent obligation of $336,000 for this facility. During the years ended December 31, 2016 and 2017, we incurred $86,000 and $320,000, respectively, in rent expense for this facility.
We also lease an office facility in Toronto, Ontario from an affiliate of Mr. Dan. The lease is on a month-to-month basis unless terminated by either party by giving the requisite notice. We pay approximately $2,000 per month for this office facility. During the years ended December 31, 2016 and 2017, we incurred $5,000 and $18,000, respectively, in rent expense for this facility.
Protoden License
We are party to an intellectual property license agreement under which we pay fees to Protoden Technologies Inc., or Protoden, a company owned by Clairmark. Pursuant to the agreement, we have an exclusive, perpetual, irrevocable and non-royalty bearing license, with the right to sublicense, under certain patents and technology to make, use and sell products that utilize such patents and technology. The annual fee is $100,000. Beginning on January 1, 2025, the licenses granted to us will require no further payments to Protoden. During the years ended December 31, 2016 and 2017, we paid $28,000 and $100,000, respectively, to Protoden under this license agreement.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Business Conduct and Ethics covers fundamental ethical and compliance-related principles and practices such as accurate accounting records and financial reporting, avoiding conflicts of interest, the protection and use of our property and information and compliance with legal and regulatory requirements. A current copy of the code is posted on the Corporate Governance section of our website, which is located at
http://www.elevenbio.com
. If we make any substantive amendments to, or grant any waivers from, the Code of Business Conduct and Ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in filings under the Securities Exchange Act of 1934, as amended, to the extent required by the applicable rules and exchange requirements.
EXECUTIVE OFFICERS
The following table sets forth information regarding our executive officers as of
April 30, 2018
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Name
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Age
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Position
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Stephen A. Hurly
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50
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President and Chief Executive Officer and Director
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Richard F. Fitzgerald
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54
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Chief Financial Officer, Secretary and Treasurer
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In addition to the biographical information for Mr. Hurly, which is set forth above, under “Corporate Governance—Board of Directors—Members of Our Board of Directors,” set forth below is certain biographical information about Mr. Fitzgerald:
Richard Fitzgerald
has served as our Chief Financial Officer, Secretary and Treasurer since January 2018. From October 2017 through December 2017 he served as our Interim Chief Financial Officer. From July 2017 through October 2017, he served as a consultant to private life science based companies. Previously he served as the Chief Financial Officer of PAVmed Inc. (Nasdaq: PAVM) from October 2015 through March 2017 during which time PAVmed completed its IPO and Nasdaq listing. From April 2009 to October 2015, Mr. Fitzgerald was the Chief Financial Officer of TechPrecision Inc. (OTCBB: TPCS), a global manufacturer of precision large-scale components for the medical device, defense and energy industries. From 2002 to 2008, he served in various senior financial roles culminating in the role of Vice President and Chief Financial Officer of Nucleonics Inc., a venture-backed biotechnology company and early pioneer within the field of RNAi therapeutics whose assets were sold to Alnylam Pharmaceuticals Inc. (Nasdaq: ALNY) in December 2008. During his tenure at Nucleonics, he served as co-Chair of the Biotechnology Industry Organization’s (BIO) National CFO and Tax VP Committee, supporting federal tax, finance and capital formation lobbying efforts, and was active in the Association of Biotechnology Financial Officers. From 1995 to 2002, Mr. Fitzgerald served in the corporate development office and, from 1998 to 2002, as Director of Corporate Development for Exelon Corporation (NYSE: EXC), an energy generator and distributor, where he managed business development efforts, mergers and acquisitions, including the $18 billion merger with Unicom and the rollup of utility contractors which led to the formation of InfraSource (NYSE: IFS). From 1985 to 1995, Mr. Fitzgerald served as a Senior Manager in the Audit and Transaction Services Group of Coopers & Lybrand LLP (now PricewaterhouseCoopers). He is a member of the American and Pennsylvania Institutes of Public Accounting and a founding member of the Bucknell University Business Advisory Board. Mr. Fitzgerald received his B.S. in Business Administration and Accounting from Bucknell University.
EXECUTIVE COMPENSATION
Our named executive officers for 2017 are Stephen A. Hurly, our President and Chief Executive Officer, Richard Fitzgerald, our Chief Financial Officer, John J. McCabe, C.P.A., our former Chief Financial Officer and Arthur DeCillis, M.D., our former Chief Medical Officer.
Summary Compensation Table
The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers for the years ended December 31, 2017 and 2016.
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Name and Principal Position
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Year
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Salary
($)
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Bonus
($)(5)
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Option
awards
($)(6)
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All other
compensation
($)(7)
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Total
($)
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Stephen A. Hurly(1)
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2017
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425,000
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116,802
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521,527
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4,000
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1,067,329
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President and Chief Executive Officer
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2016
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119,093
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—
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755,511
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—
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874,604
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Richard F. Fitzgerald (2)
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2017
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—
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—
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—
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67,693
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67,693
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Chief Financial Officer, Secretary and Treasurer
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John J. McCabe, C.P.A.(3)
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2017
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259,424
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75,000
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156,165
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11,161
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501,750
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Former Chief Financial Officer
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2016
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305,000
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75,000
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227,846
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—
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607,846
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Arthur DeCillis, M.D.(4)
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2017
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324,018
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100,000
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29,085
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4,459
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457,562
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Former Chief Medical Officer
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2016
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116,855
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—
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215,860
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—
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332,715
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(1)
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Mr. Hurly has served as our President and Chief Executive Officer since September 20, 2016.
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(2)
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Mr. Fitzgerald served as our Interim Chief Financial Officer from October 20, 2017 to January 23, 2018, when he was appointed our Chief Financial Officer. During the period that Mr. Fitzgerald served as our Interim Chief Financial Officer, Mr. Fitzgerald served as a consultant to the Company pursuant to a consulting agreement dated October 13, 2017. Pursuant to such consulting agreement, we paid Mr. Fitzgerald a consulting fee at an agreed upon monthly consulting rate of $26,667 for such services and reimbursed Mr. Fitzgerald for business related expenses. Mr. Fitzgerald became an employee on January 23, 2018 when he was appointed our Chief Financial Officer, Secretary and Treasurer.
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(3)
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Mr. McCabe resigned as our Chief Financial Officer effective October 20, 2017. All compensation reported for Mr. McCabe, except for amounts reported in the "All other compensation" column, reflects amounts awarded to, earned by, or paid to him prior to October 20, 2017.
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(4)
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Dr. DeCillis resigned as our Chief Medical Officer effective October 3, 2017. All compensation reported for Dr. DeCillis, except for amounts reported in the "All other compensation" column, reflects amounts awarded to, earned by, or paid to him prior to October 3, 2017.
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(5)
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The amounts reported in the "Bonus" column reflect discretionary cash bonuses payable to our named executive officers in a given year in recognition of their performance.
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(6)
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The amounts reported in the "Options awards" column reflect the aggregate grant date fair value of stock options awarded during the year computed in accordance with the provisions of Financial Accounting Standards Board Accounting Standard Codification, or ASC, Topic 718. See Note 12 to our financial statements appearing at the end of our Annual Report on Form 10-K for the year ended December 31, 2017 regarding assumptions underlying the valuation of equity awards.
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(7)
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The amounts reported in the "All other compensation" column reflect amounts paid to our named executive officers for consulting services rendered in a given year, any unused vacation wages paid to our named executive officers upon their termination of employment and discretionary 401(k) matching contributions paid to our named executive officers as approved by the Board.
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Narrative to Summary Compensation Table
Employment, Retention and Consulting Agreements with Named Executive Officers
Stephen A. Hurly
In September 2016, we entered into an employment agreement with Mr. Hurly. Mr. Hurly’s agreement provides that his employment will continue until either we or Mr. Hurly provide notice of termination in accordance with the terms of the agreement. In addition, we entered into a non-competition, non-solicitation, confidentiality and assignment agreement with Mr. Hurly, which prohibits him from competing with us, soliciting our employees and customers and disclosing confidential information during the term of his employment and for one year following the conclusion of his service with us.
Pursuant to Mr. Hurly’s employment agreement, he is entitled to receive an annual base salary of $425,000, which will be reviewed at least annually and will be subject to increase (but not decrease) from time to time, as determined by our Board. In addition, pursuant to his employment agreement, Mr. Hurly is eligible to receive an annual cash bonus based on the achievement of individual and corporate performance objectives, calculated as a percentage of his annual base salary, and which will be determined by our Board, in its sole discretion. Mr. Hurly’s annual target bonus for 2018 is equal to 50% of his annual base salary.
Richard F. Fitzgerald
In October 2017, we entered into a consulting agreement with Mr. Fitzgerald as our Interim Chief Financial Officer. Under such agreement, Mr. Fitzgerald received a monthly salary of $26,667 and reimbursement of business related expenses. In January 2018, we entered into an employment agreement with Mr. Fitzgerald. Mr. Fitzgerald's agreement provides that employment will continue until either we or Mr. Fitzgerald provide notice of termination in accordance with the terms of the agreement. In addition, we entered into a non-competition, non-solicitation, confidentiality and assignment agreement with Mr. Fitzgerald, which prohibits him from competing with us, soliciting our employees and customers and disclosing confidential information during the term of his employment and for one year following the conclusion of his service with us.
Pursuant to Mr. Fitzgerald's employment agreement, he is entitled to receive an annual base salary of $320,250, which will be reviewed at least annually and will be subject to increase (but not decrease) from time to time, as determined by our Board. In addition, pursuant to his employment agreement, Mr. Fitzgerald is eligible to receive an annual cash bonus based on the achievement of individual and corporate performance objectives, calculated as a percentage of his annual base salary, and
which will be determined by our Board, in its sole discretion. Mr. Fitzgerald’s annual target bonus for 2018 is equal to 35% of his annual base salary.
Arthur DeCillis
Arthur DeCillis was our Chief Medical Officer when he resigned from all of his positions with us effective as of October 3, 2017. Pursuant to our employment agreement with Dr. DeCillis, and the determination of our Board, Dr. DeCillis was entitled to an annual base salary of $417,011 for the 2017 fiscal year. Pursuant to our employment agreement with Dr. DeCillis, he was also eligible to receive an annual cash bonus based on the achievement of individual and corporate performance objectives, calculated as a percentage of his annual base salary, and which was determined by our Board, in its sole discretion. Dr. DeCillis’ annual target bonus for 2017 was equal to 30% of his annual base salary. In addition, we have entered into a non-competition, non-solicitation, confidentiality and assignment agreement with Dr. DeCillis, which prohibits him from competing with us, soliciting our employees and customers and disclosing confidential information during the term of his employment and for one year following the conclusion of his service with us.
In October 2017, we entered into a consulting agreement with Dr. DeCillis following his resignation, pursuant to which he agreed to provide certain consulting and advisory services to us from time to time. He will be compensated at an-agreed-to hourly rate and will receive reimbursement of business related expenses. In 2017, we paid approximately $1,000 to Dr. DeCillis for services rendered pursuant to his consulting agreement.
John McCabe
Mr. McCabe was our Chief Financial Officer until October 20, 2017, when he resigned from all of his positions with us. Pursuant to our employment agreement with Mr. McCabe, and the determination of our Board, Mr. McCabe was entitled to an annual base salary of $305,000 for the 2017 fiscal year. Pursuant to our employment agreement with Mr. McCabe, he was also eligible to receive an annual cash bonus based on the achievement of individual and corporate performance objectives, calculated as a percentage of his annual base salary, and which was determined by our Board, in its sole discretion. Mr. McCabe’s annual target bonus for 2017 was equal to 30% of his annual base salary. In addition, we have entered into a non-competition, non-solicitation, confidentiality and assignment agreement with Mr. McCabe, which prohibits him from competing with us, soliciting our employees and customers and disclosing confidential information during the term of his employment and for one year following the conclusion of his service with us.
In connection with the Acquisition, we also entered into a retention letter agreement with Mr. McCabe, who continued to serve as our Chief Financial Officer following the closing of the Acquisition. The retention letter agreement, as subsequently amended on March 5, 2017, provided that Mr. McCabe: (i) would receive a $75,000 transaction bonus at the closing of the Acquisition (this bonus was paid to Mr. McCabe in September 2016), (ii) was eligible for an additional $75,000 retention bonus payable in six months or earlier if his employment was terminated without cause or for good reason (each as defined in his employment agreement) (this bonus was paid to Mr. McCabe in September 2017); (iii) may voluntarily resign for any reason within the six-month period following the closing of the Acquisition and receive the post-change in control severance benefits under his employment agreement, provided, however, that if such resignation was without good reason, Mr. McCabe would forego the above described retention bonus, and (iv) would receive a stock option award to purchase 100,000 shares of our common stock that vests over four years, with 25% of the shares underlying the option vesting on the first anniversary of the grant date and 6.25% of the shares underlying the option vesting quarterly thereafter until the fourth anniversary of the grant date (these options were granted to Mr. McCabe on September 20, 2016).
In October 2017, we entered into a consulting agreement with Mr. McCabe following his resignation, pursuant to which he agreed to provide certain consulting and advisory services to us from time to time. He will be compensated at an-agreed-to hourly rate and will receive reimbursement of business related expenses. In 2017, we paid approximately $2,000 to Mr. McCabe for services rendered pursuant to his consulting agreement.
For a description of the severance entitlements of Messrs. Hurly and Fitzgerald pursuant to their respective employment agreements and the severance benefits paid to Mr. McCabe and Dr. DeCillis in connection with their resignations from us on October 20, 2017 and October 3, 2017, respectively, see the section below entitled “Executive Compensation - Potential Payments to Named Executive Officers Upon Termination or Change in Control Transaction.”
Equity Awards
Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our
stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention by incenting our executive officers to remain in our employment during the vesting period. Accordingly, our Board periodically reviews the equity incentive compensation of our named executive officers and from time to time may grant equity incentive awards to them, including in the form of stock options or restricted stock units, or RSUs.
In April 2017, we granted Mr. Hurly options to purchase 32,692 shares of our common stock, Mr. McCabe options to purchase 14,077 shares of our common stock and Dr. DeCillis options to purchase 19,246 shares of our common stock, in each case at an exercise price of $2.28 per share. These options vest 50% on grant date of April 3, 2017, with the remaining 50% vesting on the first anniversary of the grant date, subject to the executive's continued service with the Company on the vesting date. In October 2017, we granted Mr. Hurly options to purchase 420,000 shares of our common stock and Mr. McCabe options to purchase 120,000 shares of our common stock, in each case at an exercise price of $1.59 per share. These options vest in installments based on the achievement of certain strategic and clinical milestones. In January 2018 and March 2018, the Compensation Committee of the Board of Directors of the Company determined that certain performance milestones were met, resulting in vesting of the option for Mr. Hurly with respect to 80,430 and 105,000 shares, respectively, and a cancellation of 24,570 options. As of the date of this proxy statement, 210,000 shares of Mr. Hurly’s option remain eligible to vest based on the achievement of certain strategic and clinical milestones prior to the fourth quarter of 2019. All unvested options granted to Mr. McCabe and Dr. DeCillis were cancelled as of their respective resignation dates.
Outstanding Equity Awards at December 31, 2017
The following table sets forth information regarding all outstanding stock options held by each of our named executive officers as of December 31, 2017.
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Option Awards
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Name
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Number of
securities
underlying
unexercised
options
(#)
exercisable
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Number of
securities
underlying
unexercised
options
(#)
unexercisable
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Option
exercise
price
($)
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Option
expiration
date
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Stephen A. Hurly
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109,375
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240,625
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(1)
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3.37
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9/19/2026
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16,346
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16,346
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(2)
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2.28
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4/2/2027
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—
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420,000
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(3)
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1.59
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10/3/2027
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Richard F. Fitzgerald
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—
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—
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—
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John J. McCabe
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21,496
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—
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0.76
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1/18/2018
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3,937
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—
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0.83
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1/18/2018
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10,236
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—
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7.37
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1/18/2018
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16,844
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(4)
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—
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10.40
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6/30/2018
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24,500
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(4)
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—
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3.10
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6/30/2018
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10,000
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(4)
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—
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4.09
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6/30/2018
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12,387
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(4)
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—
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0.28
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6/30/2018
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20,000
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(4)
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—
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0.28
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6/30/2018
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15,833
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(4)
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—
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0.28
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6/30/2018
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25,000
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(4)
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—
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3.37
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6/30/2018
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7,039
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(4)
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—
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2.28
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6/30/2018
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Arthur DeCillis
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25,000
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(5)
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—
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3.37
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1/3/2018
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9,623
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(5)
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—
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2.28
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1/3/2018
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(1)
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Vests over four years, with 25% of the shares underlying the option vesting on September 20, 2017, the first anniversary of the grant date, and 6.25% of the shares underlying the option vesting quarterly thereafter until the fourth anniversary of the grant date.
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(2)
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Vests 50% on the grant date (April 3, 2017) with the remaining 50% vesting on the first anniversary of the grant date.
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(3)
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This option vests in installments based on the achievement of certain strategic and clinical milestones. On January 18, 2018 and March 14, 2018, the Compensation Committee of the Board of Directors of the Company determined that certain performance milestones were met, resulting in vesting of the option with respect to 80,430 and 105,000 shares, respectively.
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(4)
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Pursuant to the consulting agreement we entered into with Mr. McCabe on October 20, 2017, the services provided by Mr. McCabe under the consulting agreement constitute 'continuous service' for purposes of the vested portion of any stock option awards granted to Mr. McCabe under the 2014 Stock Incentive Plan. We terminated this consulting agreement effective as of March 30, 2018. Accordingly, the vested portion of such stock option awards will remain exercisable pursuant to its terms until June 30, 2018, after which date they will, to the extent unexercised, be forfeited. The unvested portion of any of Mr. McCabe's stock option awards or restricted stock awards were forfeited as of October 20, 2017, the effective date of Mr. McCabe's resignation.
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(5)
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Pursuant to Dr. DeCillis' resignation, effective as of October 3, 2017, all unvested stock option awards were forfeited at the time of his resignation, and all vested stock option awards expired on January 3, 2018.
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Potential Payments to Named Executive Officers Upon Termination or Change in Control Transaction
Pursuant to their respective employment agreements with the Company, upon execution and effectiveness of a release of claims, each of Messrs. Hurly and Fitzgerald will be entitled to severance payments if his employment is terminated under specified circumstances.
Mr. Hurly.
If we terminate Mr. Hurly’s employment without cause, as defined in his employment agreement, or if Mr. Hurly terminates his employment with us for good reason, as defined in his employment agreement, absent a change in control transaction, as defined in his employment agreement, we are obligated to (i) pay Mr. Hurly’s base salary for a period of 12 months, payable in accordance with our then-current payroll practices, (ii) pay Mr. Hurly an amount equal to his target bonus payment for the year in which the termination of employment occurs, prorated for the portion of the year in which he was employed, and, (iii) to the extent allowed by applicable law and the applicable plan documents, continue to provide Mr. Hurly and certain of his dependents with group health and dental insurance for a period of 12 months.
If we terminate Mr. Hurly’s employment without cause or if Mr. Hurly terminates his employment with us for good reason, in each case within 18 months following a change in control transaction, we are obligated to (i) pay Mr. Hurly an amount equal to his base salary for 12 months, payable in accordance with our then-current payroll practices, (ii) pay Mr. Hurly an amount equal to his target bonus payment for the year in which the termination of employment occurs, (iii) accelerate in full the vesting of all of Mr. Hurly’s outstanding equity awards and, (iv) to the extent allowed by applicable law and the applicable plan documents, continue to provide Mr. Hurly and certain of his dependents with group health and dental insurance for a period of 12 months.
In addition, we have agreed to indemnify Mr. Hurly in any action or proceeding arising out of his service to us, unless he initiates such action or proceeding. These indemnification obligations may require us, among other things, to indemnify Mr. Hurly for certain expenses, including attorneys’ fees that are incurred by him, and to advance to Mr. Hurly such expenses upon request.
Mr. Fitzgerald
. If we terminate Mr. Fitzgerald's employment without cause, as defined in his employment agreement, or if Mr. Fitzgerald terminates his employment with us for good reason, as defined in his employment agreement, absent a change in control transaction, as defined in his employment agreement, we are obligated to (i) pay Mr. Fitzgerald’s base salary for a period of 12 months, payable in accordance with our then-current payroll practices and, (ii) to the extent allowed by applicable law and the applicable plan documents, continue to provide Mr. Fitzgerald and certain of his dependents with group health and dental insurance for a period of up to 12 months. If we terminate Mr. Fitzgerald’s employment without cause or if Mr. Fitzgerald terminates his employment with us for good reason, in each case within 12 months following a change in control transaction, we are obligated to: (i) pay Mr. Fitzgerald’s base salary for a period of 12 months, paid in accordance with our then-current payroll practices, (ii) continue, to the extent allowed by applicable law and the applicable plan documents, to provide Mr. Fitzgerald and certain of his dependents with group health and dental insurance for a period of 12 months, and (iii) accelerate in full the vesting of all of Mr. Fitzgerald’s outstanding equity awards.
Mr. McCabe and Dr. DeCillis
. Pursuant to their respective employment agreements, if we terminated either Mr. McCabe’s or Dr. DeCillis’ employment without cause, as defined in their respective employment agreements, or if Mr. McCabe or Dr. DeCillis terminated his employment with us for good reason, as defined in their respective employment agreements, absent a change in control transaction, as defined in their respective employment agreements, we were obligated to (i) pay Mr. McCabe’s or Dr. DeCillis’, as the case may be, base salary for a period of 12 months, payable in accordance with our then-current payroll practices and, (ii) continue, to the extent allowed by applicable law and the applicable plan documents, to
provide Mr. McCabe or Dr. DeCillis, as the case may be, and certain of their respective dependents with group health and dental insurance for a period of 12 months.
Pursuant to their respective employment agreements, if we terminated Mr. McCabe’s or Dr. DeCillis’ employment without cause or if Mr. McCabe or Dr. DeCillis terminated his employment with us for good reason, in each case within 12 months following a change in control transaction, as defined in their respective employment agreements, we were obligated to (i) pay Mr. McCabe or Dr. DeCillis, as the case may be, an amount equal to his base salary for 12 months, payable in accordance with our then-current payroll practices, (ii) accelerate in full the vesting of all of Mr. McCabe’s or Dr. DeCillis’, as the case may be, outstanding equity awards and, (iii) continue, to the extent allowed by applicable law and the applicable plan documents, to provide Mr. McCabe or Dr. DeCillis, as the case may be, and certain of their respective dependents with group health and dental insurance for a period of 12 months.
In addition, we entered into non-competition, non-solicitation, confidentiality and assignment agreements with each of each of Mr. McCabe and Dr. DeCillis which prohibit them from competing with us, soliciting our employees and customers and disclosing confidential information during the term of their employment and for a specified time thereafter.
Dr. DeCillis resigned as our Chief Medical Officer effective October 3, 2017. In connection with his resignation, we paid all of Dr. DeCillis’ compensation due and owing to him as of October 3, 2017, including any accrued and unused vacation for fiscal year 2017, in accordance with our usual compensation and payroll practices. On October 24, 2017, we entered into a consulting agreement with Dr. DeCillis, to be compensated at an-agreed-to hourly rate and reimbursement of business related expenses. In 2017, we paid approximately $1,000 for services rendered pursuant to his consulting agreement.
Mr. McCabe resigned as our Chief Financial Officer effective October 20, 2017. In connection with his resignation, we paid all of Mr. McCabe’s compensation due and owing to him as of October 20, 2017, including any accrued and unused vacation for fiscal year 2017, in accordance with our usual compensation and payroll practices.
On October 20, 2017, we entered into a consulting agreement with Mr. McCabe, to be compensated at an-agreed-to hourly rate and reimbursement of business related expenses. In 2017, we paid approximately $2,000 for services rendered pursuant to his consulting agreement. Pursuant to the terms of this consulting agreement, the services provided by Mr. McCabe constitute ‘continuous service’ for purposes of the vested portion of any stock option awards granted to Mr. McCabe under the 2014 Stock Incentive Plan. On March 30, 2018, we terminated the consulting agreement with Mr. McCabe. Accordingly, the vested portions of Mr. McCabe's stock option awards will expire on June 30, 2018 unless otherwise exercised pursuant to their terms prior to that date. The unvested portion of any of Mr. McCabe's stock options awards or restricted stock awards were forfeited as of October 20, 2017, the effective date of Mr. McCabe’s resignation.
Taxation
. To the extent that any severance or other compensation payment to any of Messrs. Hurly and Fitzgerald pursuant to their respective employment agreements or any other agreement constitutes an “excess parachute payment” within the meaning of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended, or the Code, then such executive officer will receive the full amount of such severance and other payments, or a reduced amount intended to avoid the application of Sections 280G and 4999 of the Code, whichever provides the executive with the highest amount on an after-tax basis.
401(k) Plan
We maintain a defined contribution 401(k) retirement plan for our employees in which substantially all of our full-time U.S. employees are eligible to participate, including our named executive officers. Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations. We made matching contributions of $19,000 to the plan during the year ended December 31, 2017.
Limitation of Liability and Indemnification
Our certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law, or the DGCL, and provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors:
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for any breach of the director’s duty of loyalty to us or our stockholders;
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•
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for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
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•
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for voting for or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
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•
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for any transaction from which the director derived an improper personal benefit.
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Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such amendment or repeal. If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the DGCL.
In addition, our certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
We maintain a general liability insurance policy that covers specified liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers. In addition, we have entered into indemnification agreements with all of our directors and executive officers. These indemnification agreements may require us, among other things, to indemnify each such director and executive officer for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by him in any action or proceeding arising out of his or her service as one of our directors or executive officers.
Some of our non-employee directors may, through their relationships with their employers, be insured or indemnified against specified liabilities incurred in their capacities as members of our Board.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, or the Securities Act, may be permitted to directors, executive officers or persons controlling us, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.