CORMEDIX INC.
10-Ks and 10-Qs
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed
by the Registrant ☒ Filed by a Party other than the
Registrant
Check
the appropriate box:
☐ Preliminary Proxy
Statement
☐ Confidential, for Use of
the Commission Only (as permitted by Rule
14a-6(e)(2))
☒ Definitive Proxy
Statement
☐ Definitive Additional
Materials
☐ Soliciting Material Pursuant to §
240.14a-12
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CorMedix Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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☒
No fee required.
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☐
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1)
Title of each class of securities to which transaction
applies:
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2)
Aggregate number of securities to which transaction
applies:
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3) Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
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4)
Proposed maximum aggregate value of transaction:
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5)
Total fee paid:
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☐ Fee
paid previously with preliminary materials.
☐ Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1)
Amount Previously Paid:
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2)
Form, Schedule or Registration Statement No.:
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3)
Filing Party:
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4) Date
Filed:
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CORMEDIX INC.
1430 U.S. Highway 206, Suite 200
Bedminster, New Jersey 07921
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2017
TO THE
STOCKHOLDERS OF
CORMEDIX
INC.
A
special meeting of stockholders of CorMedix Inc. will be held at
1545 U.S. Highway 206, First Floor Conference Room, Bedminster, New
Jersey, on June 6, 2017, at 11:00 a.m. Eastern time, for the
following purposes:
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1.
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To
elect six directors to serve until the 2018 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified;
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2.
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To
approve an amendment to our Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of
capital stock from 82,000,000 shares to 202,000,000 shares and to
increase the number of authorized shares of common stock from
80,000,000 shares to 200,000,000 shares;
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3.
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To
ratify the appointment of Friedman LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2017; and
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4.
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To act
upon such other matters as may properly come before the meeting or
any adjournment thereof.
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These
matters are more fully described in the proxy statement
accompanying this notice.
The
Board has fixed the close of business on April 13, 2017 as the
record date for the determination of stockholders entitled to
notice of and to vote at the meeting or any adjournment thereof. A
list of stockholders eligible to vote at the meeting will be
available for review during our regular business hours at our
principal offices in Bedminster, New Jersey for the 10 days prior
to the meeting for review for any purposes related to the
meeting.
You are
cordially invited to attend the meeting in person. However, to
assure your representation at the meeting, you are urged to vote by
proxy by following the instructions contained in the accompanying
proxy statement. You may revoke your proxy in the manner described
in the proxy statement at any time before it has been voted at the
meeting. Any stockholder attending the meeting may vote in person
even if he or she has returned a proxy.
Your vote is important
.
Whether or not you plan to attend the special
meeting, we hope that you will vote as soon as
possible.
We are
pleased to take advantage of the Securities and Exchange
Commission, or SEC, rules that allow us to furnish proxy materials,
including this notice, and the proxy statement (including an
electronic proxy card for the meeting) for the special meeting via
the Internet. Taking advantage of these rules allows us to lower
the cost of delivering annual meeting materials to our stockholders
and reduce the environmental impact of printing and mailing these
materials.
Bedminster,
New Jersey
Dated:
April 24, 2017
By
Order of the Board of Directors
Antony
E. Pfaffle, M.D.,
Secretary
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
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Q:
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Who may vote at the meeting?
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A:
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The
Board of Directors has set April 13, 2017 as the record date for
the meeting. If you owned shares of our common stock at the close
of business on April 13, 2017, you may attend and vote at the
meeting. Each stockholder is entitled to one vote for each share of
common stock held on all matters to be voted on. As of April 13,
2017, there were 40,720,838 shares of our common stock outstanding
and entitled to vote at the meeting. Our outstanding Series C-2,
C-3, D and E preferred stock is non-voting and therefore has no
voting rights at the Special Meeting.
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Q:
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What is the difference between holding shares as a stockholder of
record and as a beneficial owner?
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A:
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If your
shares are registered directly in your name with our transfer
agent, VStock Transfer, LLC, you are considered, with respect to
those shares, a “stockholder of record.” If you are a
stockholder of record, we have sent the Notice of Internet
Availability of Proxy Materials to you directly.
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If your
shares are held in a stock brokerage account or by a bank or other
holder of record, you are considered the “beneficial
owner” of shares held in street name. In that case, the
Notice of Internet Availability of Proxy Materials has been
forwarded to you by your broker, bank, or other holder of record
who is considered, with respect to those shares, the stockholder of
record. As the beneficial owner, you have the right to direct your
broker, bank, or other holder of record on how to vote your shares
by using the voting instruction card you receive.
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Q:
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What is the quorum requirement for the meeting?
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A:
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A
majority of our outstanding shares of capital stock entitled to
vote as of the record date must be present at the meeting in order
for us to hold the meeting and conduct business. This is called a
quorum. Your shares will be counted as present at the meeting if
you:
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are present and
entitled to vote in person at the meeting; or
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properly submitted
a proxy card or voter instruction card in advance of or at the
meeting.
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If you
are present in person or by proxy at the meeting, but abstain from
voting on any or all proposals, your shares are still counted as
present and entitled to vote. The proposal listed in this proxy
statement identifies the votes needed to approve or ratify the
proposed action.
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Q:
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What proposals will be voted on at the meeting?
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A:
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The
proposals to be voted on at the meeting are as
follows:
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1.
To
elect the six directors named in the proxy statement to serve until
our next annual meeting or until their successors have been elected
and qualified;
2.
To
approve an amendment to our Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of
capital stock from 82,000,000 shares to 202,000,000 shares and to
increase the number of authorized shares of common stock from
80,000,000 shares to 200,000,000 shares; and
3.
To
ratify the appointment of Friedman LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2017.
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We will
also consider any other business that properly comes before the
meeting. As of the record date, we are not aware of any other
matters to be submitted for consideration at the meeting. If any
other matters are properly brought before the meeting, the persons
named in the enclosed proxy card or voter instruction card will
vote the shares they represent using their best
judgment.
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Q:
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How may I vote my shares in person at the meeting?
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A:
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If your
shares are registered directly in your name with our transfer
agent, VStock Transfer, LLC, you are considered, with respect to
those shares, the stockholder of record. As the stockholder of
record, you have the right to vote in person at the meeting. You
will need to present a form of personal photo identification in
order to be admitted to the meeting. If your shares are held in a
brokerage account or by another nominee or trustee, you are
considered the beneficial owner of shares held in street name. As
the beneficial owner, you are also invited to attend the meeting.
Because a beneficial owner is not the stockholder of record, you
may not vote these shares in person at the meeting unless you
obtain a “legal proxy” from your broker, nominee, or
trustee that holds your shares, giving you the right to vote the
shares at the meeting.
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Q:
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How can I vote my shares without attending the
meeting?
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A:
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Whether
you hold shares directly as a registered stockholder of record or
beneficially in street name, you may vote without attending the
meeting. If your common stock is held by a broker, bank or other
nominee, they should send you instructions that you must follow in
order to have your shares voted. If you hold shares in your own
name, you may vote by proxy in any one of the following
ways:
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Via the Internet
by accessing the proxy materials on the secured website
https://www.IPROXYDIRECT.com/CRMD and following the voting
instructions on that website;
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Via telephone by
calling toll free 1-866-752-8683 in the United States or
1-866-752-VOTE (8683) outside the United States and following the
recorded instructions; or
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By requesting that
printed copies of the proxy materials be mailed to you pursuant to
the instructions provided in the Notice of Internet Availability of
Proxy Materials and completing, dating, signing and returning the
proxy card that you receive in response to your
request.
The Internet and
telephone voting procedures are designed to authenticate
stockholders’ identities by use of a control number to allow
stockholders to vote their shares and to confirm that
stockholders’ instructions have been properly recorded.
Voting via the Internet or telephone must be completed by 11:59
p.m. Eastern Time on June 5, 2017. Of course, you can always come
to the meeting and vote your shares in person. If you submit or
return a proxy card without giving specific voting instructions,
your shares will be voted as recommended by the Board of
Directors.
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Q:
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How can I change my vote after submitting it?
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A:
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If you
are a stockholder of record, you can revoke your proxy before your
shares are voted at the meeting by:
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Filing a written
notice of revocation bearing a later date than the proxy with our
Corporate Secretary either before the meeting or at the meeting at
1430 U.S. Highway 206, Suite 200, Bedminster, New Jersey
07921;
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Duly executing a
later-dated proxy relating to the same shares and delivering it to
our Corporate Secretary either before the meeting or at the meeting
and before the taking of the vote, at 1430 U.S. Highway 206, Suite
200, Bedminster, New Jersey 07921; or
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Attending the
meeting and voting in person (although attendance at the meeting
will not in and of itself constitute a revocation of a
proxy).
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If you
are a beneficial owner of shares, you may submit new voting
instructions by contacting your bank, broker, or other holder of
record. You may also vote in person at the meeting if you obtain a
legal proxy from them as described in the answer to a previous
question.
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Q:
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Where can I find the voting results of the meeting?
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A:
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We will
announce the voting results at the special meeting. We will publish
the results in a Form 8-K filed with the SEC within four business
days of the special meeting.
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ii
CORMEDIX INC.
1430 U.S. Highway 206, Suite 200
Bedminster, New Jersey 07921
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
JUNE 6, 2017
This
proxy statement has been prepared by the management of CorMedix
Inc. “We,” “our” and the
“Company” each refers to CorMedix Inc.
In
accordance with the rules of the SEC, instead of mailing a printed
copy of our proxy materials to each stockholder of record, we are
furnishing proxy materials, including the notice, this proxy
statement, and a proxy card for the meeting, by providing access to
them on the Internet to save printing costs and benefit the
environment. These materials were first available on the Internet
on or about April 24, 2017. We mailed a Notice of Internet
Availability of Proxy Materials on or about April 24, 2017 to our
stockholders of record and beneficial owners as of April 13, 2017,
the record date for the meeting. This proxy statement and the
Notice of Internet Availability of Proxy Materials contain
instructions for accessing and reviewing our proxy materials on the
Internet and for voting by proxy over the Internet. You will need
to obtain your own Internet access if you choose to access the
proxy materials and/or vote over the Internet. If you prefer to
receive printed copies of our proxy materials, the Notice of
Internet Availability of Proxy Materials contains instructions on
how to request the materials by mail. You will not receive printed
copies of the proxy materials unless you request them. If you elect
to receive the materials by mail, you may also vote by proxy on the
proxy card or voter instruction card that you will receive in
response to your request.
GENERAL INFORMATION ABOUT SOLICITATION VOTING AND
ATTENDING
Who Can Vote
You are
entitled to attend the meeting and vote your common stock if you
held shares as of the close of business on April 13, 2017. At the
close of business on April 13, 2017, a total of 40,720,838 shares
of common stock were outstanding and entitled to vote. Each share
of common stock has one vote.
Counting Votes
Consistent with
state law and our bylaws, the presence, in person or by proxy, of
at least a majority of the shares entitled to vote at the meeting
will constitute a quorum for purposes of voting on a particular
matter at the meeting. Once a share is represented for any purpose
at the meeting, it is deemed present for quorum purposes for the
remainder of the meeting and any adjournment thereof unless a new
record date is set for the adjournment. Shares held of record by
stockholders or their nominees who do not vote by proxy or attend
the meeting in person will not be considered present or represented
and will not be counted in determining the presence of a quorum.
Signed proxies that withhold authority or reflect abstentions and
“broker non-votes” will be counted for purposes of
determining whether a quorum is present. “Broker
non-votes” are proxies received from brokerage firms or other
nominees holding shares on behalf of their clients who have not
been given specific voting instructions from their clients with
respect to non-routine matters.
1
Assuming the
presence of a quorum at the meeting:
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The
election of directors will be determined by a plurality of the
votes cast at the meeting. This means that the six nominees
receiving the highest number of “FOR” votes will be
elected as directors. Withheld votes and broker non-votes, if any,
are not treated as votes cast, and therefore will have no effect on
the proposal to elect directors.
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The
vote on the amendment to our Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of
capital stock from 82,000,000 shares to 202,000,000 shares and to
increase the number of authorized shares of common stock from
80,000,000 shares to 200,000,000 shares requires the affirmative
vote of a majority of the shares outstanding and able to vote at
the meeting. Withheld votes and broker non-votes, if any, will
effectively be a vote against this proposal.
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The
ratification of the appointment of our independent registered
public accounting firm requires the affirmative vote of a majority
of the votes cast at the meeting. Withheld votes and broker
non-votes, if any, are not treated as votes cast, and therefore
will have no effect on this proposal.
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With
respect to “routine” matters, such as the ratification
of the selection of our independent registered public accounting
firm, a bank, brokerage firm, or other nominee has the authority
(but is not required) under the rules governing self-regulatory
organizations, or SRO rules, including the NYSE MKT, on which our
common stock is listed, to vote its clients’ shares if the
clients do not provide instructions. When a bank, brokerage firm,
or other nominee votes its clients’ shares on routine matters
without receiving voting instructions, these shares are counted
both for establishing a quorum to conduct business at the meeting
and in determining the number of shares voted FOR, AGAINST or
ABSTAINING with respect to such routine matters.
With
respect to “non-routine” matters, such as the amendment
to the Certificate of Incorporation, a bank, brokerage firm, or
other nominee is not permitted under the SRO rules to vote its
clients’ shares if the clients do not provide instructions.
The bank, brokerage firm, or other nominee will so note on the
voting instruction form, and this constitutes a “broker
non-vote.” “Broker non-votes” will be counted for
purposes of establishing a quorum. Because the proposal requires a
majority of outstanding shares to vote for approval, a broker
non-vote will effectively be a vote against this
proposal.
While
the election of directors is a non-routine matter, directors are
elected by a plurality of the votes cast, which means that
the six nominees receiving the highest
number of votes will be elected.
As a result, broker
non-votes have no effect on the election.
In
summary, if you do not vote your proxy, your bank, brokerage firm,
or other nominee may either:
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cast a
“broker non-vote” on non-routine matters;
or
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leave
your shares unvoted altogether.
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We
strongly encourage you to provide instructions to your bank,
brokerage firm, or other nominee by voting your proxy. This action
ensures that your shares will be voted in accordance with your
wishes at the meeting.
Cost of this Proxy Solicitation
We will
pay the cost of this proxy solicitation. In addition to soliciting
proxies by mail, our directors and employees might solicit proxies
personally and by telephone. None of these individuals will receive
any additional compensation for this. We did not, but may in the
future, retain a proxy solicitor to assist in the solicitation of
proxies for a fee. We will, upon request, reimburse brokers, banks
and other nominees for their expenses in sending proxy materials to
their principals and obtaining their proxies.
Attending the Special Meeting
If you
are a holder of record and plan to attend the special meeting,
please bring a photo identification to confirm your identity. If
you are a beneficial owner of common stock held by a bank or
broker, i.e., in “street name,” you will need proof of
ownership to be admitted to the meeting. A recent brokerage
statement or letter from a bank or broker are examples of proof of
ownership. If you want to vote in person your common stock held in
street name, you must get a proxy in your name from the registered
holder.
2
PROPOSAL
NO. 1 – ELECTION OF DIRECTORS
Our bylaws currently provide that the number of
directors constituting the Board shall be not less than five nor
more than nine. The Board may establish the number of directors
within this range. There are six directors presently serving on our
Board, and the number of directors to be elected at this annual
meeting is six. In March 2015, in connection with a backstop
financing agreement, w
e granted Manchester Securities Corp.,
our largest stockholder, the right for as long as it or its
affiliates hold any of our common stock or securities convertible
into our common stock the right to appoint up to two members to our
Board of Directors and/or to have up to two observers attend Board
meetings in a non-voting capacity. Manchester has exercised these
rights and has appointed Janet Dillione and Myron Kaplan as members
of the Board.
The
Board proposes the six nominees listed below for election to the
Board for a one-year term. The Board has determined that directors
Janet Dillione, Michael George, Myron Kaplan, Taunia Markvicka and
Cora Tellez are independent as defined in Rule 803A(2) of the NYSE
MKT Rules. The Board has determined that director Khoso Baluch, who
is also our Chief Executive Officer, is not independent under that
definition. In addition to the specific bars to independence set
forth in that rule, we also consider whether a director or his or
her affiliates have provided any services to, worked for or
received any compensation from us or any of our subsidiaries in the
past three years in particular. In addition, none of the nominees
is related by blood, marriage or adoption to any other nominee or
any of our executive officers.
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Director Nominees with Terms Expiring in 2017
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Name
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Age
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Director Since
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Position(s) with CorMedix
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Khoso
Baluch
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59
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October 2016
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Director and Chief Executive Officer
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Janet
M. Dillione
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57
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August 2015
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Director
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Michael
W. George
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68
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February 2014
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Director
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Myron
Kaplan
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72
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April 2016
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Director
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Taunia
Markvicka
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48
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April 2014
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Director
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Cora
M. Tellez
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67
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April 2014
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Director
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Khoso
Baluch
joined our Board in
October 2016 upon his appointment as our Chief Executive Officer.
Mr. Baluch previously served as Senior Vice President and President
Europe, Middle East & Africa EMEA of UCB, SA, or UCB, from
January 2015 to early 2016, Senior Vice President and President of
the European Region of UCB from February 2013 to December 2014, and
Senior Vice President and Chief Marketing Officer of UCB from
January 2010 to February 2013. Prior to joining UCB, Mr. Baluch
worked for Eli Lilly & Co for 24 years, holding international
positions spanning Europe, the Middle East and the United States in
general management, business development, market access and product
leadership. He has served as an independent director of Poxel SA, a
French publicly traded biotech company, since 2013. Mr. Baluch
holds a BSc in Aeronautical Engineering from City University London
and a Masters of Business Administration from Cranfield School of
Management.
Among other qualifications, attributes and
skills, Mr. Baluch’s business expertise and significant
executive management experience in the pharmaceutical industry led
to the conclusion of our Board that he should serve as a director
of our company in light of our business and structure.
Janet M. Dillione
has been a director of CorMedix since August 2015. Ms. Dillione has
served as the Chief Executive Officer of Bernoulli (formerly known
as Cardiopulmonary Corp.), a leader in medical device connectivity
for EMR integration, and integrated clinical applications and
workflows for over 20 years, since 2014. Previously, she was at
Nuance Communications, Inc., a leading provider of voice and
language solutions for businesses and consumers around the world,
having joined Nuance in April 2010 as Executive Vice President and
General Manager of the Healthcare Division and serving as an
executive officer from May 2010 until March 2014. From June 2000 to
April 2010, Ms. Dillione held several senior level management
positions at Siemens Medical Solutions, a global leader in medical
imaging, laboratory diagnostics, and healthcare information
technology, including President and CEO of the global healthcare IT
division.
Ms. Dillione received her
B.A. from Brown University in 1981 and completed the Executive
Program at The Wharton School of Business of the University of
Pennsylvania in 1995.
She has over 25 years of experience
leading global teams in the development and delivery of healthcare
technology and services. Among other qualifications, attributes and
skills, Ms. Dillione’s financial expertise and significant
executive management experience with medical device and healthcare
companies led to the conclusion of our Board that she should serve
as a director of our company in light of our business and
structure.
3
Michael W.
George
joined our
Board in February 2014. Mr. George is currently the Chief Executive
Officer of Michael George & Associates, a health care
consulting firm. Prior to forming Michael George & Associates,
Mr. George served as a restructuring and turnaround executive for
aaiPharma Inc., Derm Tech International and Urocor, Inc. Prior to
that, he served as President/North America of Elan Pharmaceuticals.
He has over 25 years of sales and marketing experience, including
senior management positions, with three large pharmaceutical
companies, DuPont Merck Pharmaceutical Company, Bristol Myers
Pharmaceutical Company and Sandoz Pharmaceuticals, Inc. (now
Novartis). Mr. George recently served on the board of ClearPath
Diagnostics, Inc., a private company that was sold in the fall of
2016, and Coastal Horizons, Inc., a non-profit corporation, until
his term ended. He has served on the boards of two other public
companies. He holds a B.S. in Business Administration from Central
Missouri State University (now the University of Central Missouri)
and a Masters of Business Administration from New Hampshire College
(now the University of Southern New Hampshire). Among other
experience, qualifications, attributes and skills, Mr.
George’s executive, commercial and marketing expertise with
pharmaceutical companies led to the conclusion of our Board that he
should serve as a director of our company in light of our business
and structure.
Myron
Kaplan
became a director
of CorMedix in April 2016. He is a founding partner of Kleinberg,
Kaplan, Wolff & Cohen, P.C., a New York City general practice
law firm, where he has practiced corporate and securities law for
more than forty years. In 2012, Mr. Kaplan became a trustee of the
Lehman Brothers Plan Holding Trust. Previously, he served as a
member of the board of directors of SAirGroup Finance (USA) Inc., a
subsidiary of SAirGroup that had publicly issued debt securities,
Trans World Airlines, Inc. and Kitty Hawk, Inc. Among his business
and civic involvements, Mr. Kaplan currently serves on the boards
of directors of a number of private companies and has been active
for many years on the Boards of Trustees and various board
committees of The Children’s Museum of Manhattan and JBI
International (formerly The Jewish Braille Institute of America).
Mr. Kaplan graduated from Columbia College and holds a Juris Doctor
from Harvard Law School. Among other experience, qualifications,
attributes and skills, Mr. Kaplan’s experience in a broad
range of corporate and securities matters and service as a director
of public companies led to the conclusion of our Board that he
should serve as a director of our company in light of our business
and structure.
Taunia Markvicka PharmD,
MBA
became a director of CorMedix in April 2014. She is
Chief Commercial Officer at Symbiomix Therapeutics. Prior to this,
she was Senior Vice President, Chief Commercial Officer at Pacira
Pharmaceuticals (Nasdaq: PCRX), a position she held since January
2014 to January 2016, prior to which she served as Vice President,
Commercial at Pacira, beginning in November 2010, and where she
first began working in 2008. Ms. Markvicka has a strong commercial
and clinical background, and has extensive experience in managing a
product strategy from development to commercialization. She has
been responsible for all facets of commercialization, market
analysis, pre-launch planning, forecasts, budgets and
launches. She has held leadership roles at Stack Pharma,
The Medicines Company, Watson Pharmaceuticals, and Sandoz
Pharmaceuticals (now Novartis). Among other experience,
qualifications, attributes and skills, Ms. Markvicka’s
commercial and marketing expertise with pharmaceutical companies
led to the conclusion of our Board that she should serve as a
director of our company in light of our business and
structure.
Cora M. Tellez
joined the Board of CorMedix in April 2014. She is currently
President and CEO of Sterling HSA, a company she founded in
2004. Mr. Tellez has 25 years of management experience
in health care finance and delivery. Prior to founding
Sterling HSA, Ms. Tellez was President of the Health Plans division
of Health Net, Inc., an insurance provider that operated in seven
states and achieved revenue of $8 billion from health
plans. She has also served as President of
Prudential’s western health operations, CEO of Blue Shield of
California, Bay Region and Regional Manager for Kaiser Permanente
of Hawaii. She serves on the boards of HMS Holdings,
Inc. (NASDAQ:HMSY) and Pacific Premier Bancorp Inc.
(NASDAQ:PPBI). She previously served as a former board
director of Crescent Healthcare, Bank of Hawaii, Glendale Federal
Bank, Cal Fed Bank, Catellus Development Company, First Consulting
Group and Practice Fusion. Among other experience, qualifications,
attributes and skills, Ms. Tellez’s business experience in
the healthcare industry, and her service as a director of a public
company, led to the conclusion of our Board that she should serve
as a director of our company in light of our business and
structure.
Vote Required
Directors
are elected by a plurality of the votes cast at the annual meeting.
This means that the six nominees receiving the highest number of
votes will be elected.
Recommendation
The Board recommends that stockholders vote
FOR
the election of the six nominees for
election to the Board for a one-year term.
4
PROPOSAL NO. 2-APPROVAL
OF THE
AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
CAPITAL STOCK FROM 82,000,000 SHARES TO 202,000,000 SHARES AND TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
80,000,000 SHARES TO 200,000,000 SHARES
Our Board of Directors has approved and
recommended a proposal to amend our amended and restated
Certificate of Incorporation (“Certificate of
Incorporation”), substantially in the form of
Appendix
A
hereto, to increase our
shares of authorized capital stock from 82,000,000 shares to
202,000,000 shares and to increase the number of authorized shares
of common stock from 80,000,000 to 200,000,000
shares.
If
approved by our stockholders, we intend to file the amendment with
the Secretary of State of Delaware as soon as practicable following
the annual meeting, and the amendment will be effective upon such
filing. If the proposal is not approved by our stockholders, our
Certificate of Incorporation will continue as currently in
effect.
Current Structure
As
of April 13, 2017, we had 82,000,000 authorized shares, with
80,000,000 shares designated as common stock, $0.001 par value per
share, of which 40,720,838 shares were issued and outstanding, and
2,000,000 shares of preferred stock, $0.001 par value per share, of
which 442,585 shares were issued and outstanding. Of the remaining
39,279,162 authorized shares of common stock, 6,228,999 shares are
reserved for issuance upon the conversion of the outstanding shares
of our Series C, Series D and Series E preferred stock, 5,667,045
shares are reserved for issuance upon the exercise of issued and
outstanding options, 107,931 shares are reserved for issuance upon
the vesting of restricted stock units, 81,038 shares are reserved
for issuance pursuant to deferred director compensation, 4,507,569
shares are reserved for future issuance under our 2013 Stock
Incentive Plan, and 4,006,468 shares are reserved for issuance upon
the exercise of issued and outstanding warrants. This leaves an
aggregate of only 18,680,112 shares of our authorized common stock
remaining available for future issuance.
Background and Purpose of the Amendment
The
Board of Directors believes it continues to be in our best interest
to have sufficient additional authorized but unissued shares of
common stock available in order to provide flexibility for
corporate action in the future. Management believes that the
availability of additional authorized shares for issuance from time
to time in the Board of Directors’ discretion in connection
with possible future financings or for other corporate uses is
critical to our long-term success and is in the best interests of
our company and our stockholders. While we currently have no
specific understandings, arrangements or agreements with respect to
any future actions that would require us to issue a material amount
of the additional new shares of our common stock, in light of our
need for additional financing in 2017 and in the future, the Board
of Directors believes that the currently available unissued shares
do not provide sufficient flexibility and anticipates having to
draw on the proposed increase in authorized shares in 2017. In
addition, we have entered into an At Market Issuance Sales
Agreement with FBR for an at-the-market common stock program,
which, in order to access the full $40.0 million available, we
would need the proposed increase in the authorized
shares.
Effects of the Amendment
If
the proposed amendment of our Certificate of Incorporation is
approved, the number of authorized shares of capital stock will be
increased from 82,000,000 shares to 202,000,000 shares and the
number of authorized shares of common stock of our Company will be
increased from 80,000,000 to 200,000,000. The amendment will not
change the par value of the shares of our common stock, affect the
number of shares of our common stock that are outstanding, or
affect the legal rights or privileges of holders of existing shares
of common stock. The increase will not have any effect on the
authorized or outstanding shares of preferred stock. The increase
will not have any effect on any outstanding equity incentive awards
or warrants to purchase our common stock.
Vote Required
Approval
of the amendment to our Certificate of Incorporation to increase
our authorized shares of capital stock from 82,000,000 shares to
202,000,00 shares and the authorized shares of common stock from
80,000,000 to 200,000,000 requires the receipt of the affirmative
vote of a majority of the shares of our common stock issued and
outstanding as of the record date.
5
Possible Anti-Takeover Implications of the Authorized Share
Increase
We have
no intent or plan to employ the additional unissued authorized
shares as an anti-takeover device. As indicated above, the purpose
of the increase in our authorized shares of common stock is to
ensure that we have sufficient authorized common stock to, among
other things, to provide flexibility to consummate future equity
financings and other corporate opportunities. However, our
authorized but unissued shares of common stock could (within the
limits imposed by applicable law and regulation) be issued in one
or more transactions that could make a change of control more
difficult and therefore more unlikely.
Our
Board did not propose the increase in our authorized shares of
capital and common stock in response to any effort known to our
Board to accumulate common stock or to obtain control of our
company by means of a merger, tender offer or solicitation in
opposition to management. Further, our Board does not currently
contemplate recommending the adoption of any other amendments to
our Certificate of Incorporation that could be construed as
limiting the ability of third parties to consummate a takeover or
effect a change of control. Although this proposal to increase the
authorized number of shares of capital and common stock has been
prompted by business and financial considerations and not by the
threat of any known or threatened hostile takeover attempt,
stockholders should be aware that approval of this proposal could
facilitate future efforts by our Company to oppose changes in
control of our company and perpetuate our company’s
management, including transactions in which the stockholders might
otherwise receive a premium for their shares over then-current
market prices.
The
issuance in the future of additional authorized shares of common
stock may have the effect of diluting the earnings or loss per
share and book value per share, as well as the ownership and voting
rights of the holders of our then-outstanding shares of common
stock. In addition, an increase in the number of authorized but
unissued shares of common stock may have a potential anti-takeover
effect, as our ability to issue additional shares could be used to
thwart persons, or otherwise dilute the stock ownership of
stockholders, seeking to control our company. The increase in the
authorized shares of capital and common stock is not being
recommended by our Board as part of an anti-takeover
strategy.
Recommendation
The
Board of Directors has unanimously
approved the amendment to our Amended and Restated Certificate of
Incorporation and recommends that you vote
FOR
Proposal No. 2.
6
PROPOSAL
NO. 3 – RATIFICATION OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Pursuant
to its charter, the Audit Committee of our Board has appointed the
firm Friedman LLP, New York, New York, to serve as our independent
registered public accounting firm for the fiscal year ending
December 31, 2017. While the Audit Committee is solely
responsible for the appointment, compensation, retention and
oversight of the independent registered public accounting firm, the
Committee and the Board are requesting that the stockholders ratify
this appointment. If the stockholders ratify this appointment, the
Audit Committee, in its discretion, may appoint a different
independent registered public accounting firm at any time during
the year if it believes that doing so would be in the best
interests of our stockholders. If the stockholders do not ratify
this appointment, the Audit Committee may reconsider, but might not
change, its appointment.
Representatives of Friedman LLP
are expected to be present at the
annual meeting of stockholders with the opportunity to make a
statement if they desire to do so and are expected to be available
to respond to appropriate questions.
Vote Required
Ratification of the appointment of Friedman
LLP
as our independent
registered public accounting firm requires the affirmative vote of
a majority of the votes cast at the meeting.
Recommendation
The Board unanimously recommends that stockholders
vote
FOR
the ratification of the appointment of Friedman
LLP
as our independent
registered public accounting firm for the fiscal year ending
December 31, 2017.
7
CORPORATE GOVERNANCE
Information about the Board of Directors and its
Committees
Board Composition
Our
Board currently consists of six members. Directors elected at this
meeting and each subsequent annual meeting will be elected for
one-year terms or until their successors are duly elected and
qualified.
We
separate the positions of Chairman, currently held by independent
director Cora M. Tellez, and that of Chief Executive Officer,
currently held by Khoso Baluch. While the Board believes that
separation of these positions serves our company well, and intends
to maintain this separation where appropriate and practicable, the
Board does not believe that it is appropriate to prohibit one
person from serving as both Chairman and Chief Executive
Officer.
Selection of Nominees for our Board of Directors
To
be considered as a director nominee, an individual must have, among
other attributes: high personal and professional ethics, integrity
and values; commitment to our company and its stockholders; an
inquisitive and objective perspective and mature judgment;
availability to perform all Board and committee responsibilities;
and independence. In addition to these minimum requirements, the
Nominating and Governance Committee will also evaluate whether the
nominee’s skills are complementary to the existing
directors’ skills and the Board’s need for operational,
management, financial, international, industry-specific or other
expertise. We do not have a specific written policy with regard to
the consideration of diversity in identifying director nominees. We
focus on identifying nominees with experience, qualifications,
attributes and skills to work with the other directors to serve the
long-term interests of our stockholders. All those matters being
equal, we do and will consider diversity a positive additional
characteristic in potential nominees.
The
Nominating and Governance Committee invites Board members to submit
nominations for director. In addition to candidates submitted by
Board members, director nominees recommended by stockholders will
be considered. Stockholder recommendations must be made in
accordance with the procedures described in the section titled
“Stockholder Proposals” below and will receive the same
consideration that other nominees receive. All nominees are
evaluated by the Nominating and Governance Committee to determine
whether they meet the minimum qualifications and whether they will
satisfy the Board’s needs for specific expertise at that
time. The Committee recommends to the full Board nominees for
election as directors at our annual meeting of
stockholders.
No
stockholder has nominated anyone for election as a director at this
annual meeting.
Board Committees
Our
Board has established an Audit Committee, Compensation Committee
and Nominating and Governance Committee. Our Audit Committee
currently consists of Ms. Dillione (Chair), Mr. Kaplan, Ms.
Markvicka and Ms. Tellez. Our Compensation Committee currently
consists of Ms. Markvicka (Chair), Ms. Dillione, Mr. George and Mr.
Kaplan. Our Nominating and Governance Committee currently consists
of Mr. George (Chair), Ms. Dillione, Ms. Markvicka and Ms. Tellez.
The membership of these Committees may be changed after the annual
meeting.
Our
Board has undertaken a review of the independence of our directors
and has determined that (i) all current directors except Khoso
Baluch are independent within the meaning of Section 803A(2) of the
NYSE MKT Rules, (ii) all members of our Audit Committee meet the
additional test for independence for audit committee members
imposed by SEC regulation and Section 803B(2) of the NYSE MKT
Rules, and (iii) all of the members of our Compensation Committee
and Nominating and Governance Committee are independent within the
meaning of Section 805(c) of the NYSE MKT Rules.
Each of
the above-referenced committees operates pursuant to a formal
written charter. The charters for each committee, which have been
adopted by our Board, contain a detailed description of the
respective committee’s duties and responsibilities and are
available on our website at
www.cormedix.com
under the
“Investor Relations—Corporate Governance”
tab.
8
Audit Committee
The
Audit Committee monitors our corporate financial statements and
reporting and our external audits, including, among other things,
our internal controls and audit functions, the results and scope of
the annual audit and other services provided by our independent
registered public accounting firm and our compliance with legal
matters that have a significant impact on our financial statements.
The Audit Committee also consults with our management and our
independent registered public accounting firm prior to the
presentation of financial statements to stockholders and, as
appropriate, initiates inquiries into aspects of our financial
affairs. The Audit Committee is responsible for establishing
procedures for the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls or auditing
matters, and for the confidential, anonymous submission by our
employees of concerns regarding questionable accounting or auditing
matters. In addition, the Audit Committee is directly responsible
for the appointment, retention, compensation and oversight of the
work of our independent registered public accounting firm,
including approving services and fee arrangements. All related
party transactions will be approved by the Audit Committee before
we enter into them.
Both
our independent registered public accounting firm and internal
financial personnel regularly meet with, and have unrestricted
access to, the Audit Committee.
The
Board has determined that each of Ms. Dillione and Ms. Tellez
qualifies as an “audit committee financial expert” as
that term is defined in the rules and regulations of the SEC. The
designation of each of Ms. Dillione and Ms. Tellez as an
“audit committee financial expert” does not impose on
them any duties, obligations or liability that are greater than
those that are generally imposed on them as a member of the Audit
Committee and the Board, and their designation as an “audit
committee financial expert” pursuant to this SEC requirement
does not affect the duties, obligations or liability of any other
member of the Audit Committee or the Board.
Compensation Committee
The
Compensation Committee reviews and approves our compensation
policies and all forms of compensation to be provided to our
executive officers and directors, including, among other things,
annual salaries, bonuses, and other incentive compensation
arrangements. In addition, the Compensation Committee administers
our stock option and employee stock purchase plans, including
granting stock options to our executive officers and directors. The
Compensation Committee also reviews and approves employment
agreements with executive officers and other compensation policies
and matters.
In
2016, we engaged Frederick W. Cook & Co., an independent
compensation consultant, for input on the compensation of our Named
Executive Officers and directors. The Compensation Committee
assessed the independence of Frederick W. Cook & Co.,
considering the factors required by the NYSE MKTand concluded that
no conflict of interest exists that would prevent Frederick W. Cook
& Co. from independently representing our company. In the
future, we, or the Compensation Committee, may engage or seek the
advice of Frederick W. Cook & Co., or another compensation
consultant.
Each
member of the Compensation Committee is a non-employee director, as
defined pursuant to Rule 16b-3 promulgated under the Exchange Act,
and an outside director, as defined pursuant to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”).
Nominating and Governance Committee
The
Nominating and Governance Committee identifies, evaluates and
recommends nominees to the Board and committees of the Board,
conducts searches for appropriate directors and evaluates the
performance of the Board and of individual directors. The
Nominating and Governance Committee also is responsible for
reviewing developments in corporate governance practices,
evaluating the adequacy of our corporate governance practices and
reporting and making recommendations to the Board concerning
corporate governance matters.
Information Regarding Meetings of the Board and
Committees
The
business of our company is under the general oversight of our Board
as provided by the laws of Delaware and our bylaws. During the
fiscal year ended December 31, 2016, the Board held eight meetings
and also conducted business by written consent, the Audit Committee
held eight meetings and also conducted business by written consent,
the Compensation Committee held 12 meetings and also conducted
business by written consent, and the Nominating and Governance
Committee held six meetings. Each person who was a director during
2016 attended at least 75% of the Board meetings and the meetings
of the committee on which he or she served. We do not have a formal
written policy with respect to Board members’ attendance at
our annual meetings of stockholders, but we encourage them to do
so. Directors Janet Dillione, Michael George, Myron Kaplan, Taunia
Markvicka and Cora Tellez attended the 2016 annual meeting,
participating via telephone, while then-Directors Randy Milby and
Antony Pfaffle attended in person.
9
Risk Oversight
Our
Board is responsible for our company’s risk oversight and has
delegated that role to the Audit Committee. In fulfilling that
role, the Audit Committee focuses on our general risk-management
strategy, the most significant risks facing our company, and
ensures that risk-mitigation strategies are implemented by
management. The Compensation Committee oversees risks related to
our compensation and benefit plans and policies to ensure sound pay
practices that do not cause risks to arise that are reasonably
likely to have a material adverse effect on our Company. The
Nominating and Governance Committee seeks to minimize risks related
to governance structure by implementing sound corporate governance
principles and practices. Each of the committees regularly reports
to the full Board as appropriate on its efforts at risk oversight,
and will report any matter that rises to the level of a material or
enterprise-level risk.
Stockholder Proposals
The Bylaws
establish procedures for stockholder nominations for elections of
directors and bringing business before any annual meeting or
special meeting of stockholders. A stockholder entitled to vote in
the election of directors may nominate one or more persons for
election as directors at a meeting only if written notice of such
stockholder’s intent to make such nomination or nominations
has been delivered to our Corporate Secretary at our principal
executive offices not less than 90 days nor more than 120 days
prior to the first anniversary of the prior year’s annual
meeting. In the event that the date of the annual meeting is more
than 30 days before or more than 60 days after the anniversary date
of the prior year’s annual meeting, the stockholder notice
must be given not more than 120 days nor less than the later of 90
days prior to the date of the annual meeting or, if it is later,
the 10
th
day following the date on which the date of the annual meeting is
first publicly announced or disclosed by us.
A
stockholder’s notice must set forth: (a) as to each person
whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
and the rules and regulations thereunder (including such
person’s written consent to being named in the proxy
statement as a nominee and to serving as a director if elected);
(b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to
be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business
of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made, (i) the name and address of such
stockholder, as they appear on our books, and of such beneficial
owner, and (ii) the class and number of shares of our company that
are owned beneficially and of record by such stockholder and such
beneficial owner; and (d) any additional information reasonably
requested by the Board.
Notwithstanding
anything in the previous paragraph to the contrary, in the event
that the number of directors to be elected to the Board is
increased and there is no public announcement by us naming all of
the nominees for director or specifying the size of the increased
Board at least 70 days prior to the first anniversary of the
preceding year’s annual meeting, a stockholder’s notice
required by the Bylaws will also be considered timely, but only
with respect to nominees for any new positions created by such
increase, if it is delivered to our Corporate Secretary at our
principal executive offices not later than the close of business on
the 10
th
day following the day on which such public announcement is first
made by us.
The
chairman of the meeting has the power and duty to determine whether
a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance
with the procedures set forth in the Bylaws and, if any proposed
nomination or business is not in compliance with the Bylaws, to
declare that such defective proposal or nomination will be
disregarded.
Stockholder Communications with the Board
Stockholders who
wish to do so may communicate directly with the Board or specified
individual directors by writing to:
Board
of Directors (or name of individual director)
c/o
Secretary
CorMedix
Inc.
1430
U.S. Highway 206, Suite 200
Bedminster, New
Jersey 07921
10
We will
forward all communications from stockholders to the full Board, to
non-management directors, to an individual director or to the
chairperson of the Board committee that is most closely related to
the subject matter of the communication, except for the following
types of communications: (i) communications that advocate that we
engage in illegal activity; (ii) communications that, under
community standards, contain offensive or abusive content; (iii)
communications that have no relevance to our business or
operations; and (iv) mass mailings, solicitations and
advertisements. The Corporate Secretary will determine when a
communication is not to be forwarded. Our acceptance and forwarding
of communications to directors does not imply that directors owe or
assume any fiduciary duties to persons submitting the
communications.
Stock Ownership Requirements
We
adopted stock ownership guidelines for our non-employee directors
in October 2014 with the objective of more closely aligning the
interests of our non-employee directors with those of our
stockholders. The stock ownership guidelines require each
non-employee director to acquire $100,000 worth of our common stock
within five years of October 20, 2014 for then current directors
and within five years of joining the Board for directors joining
the Board after that date. This requirement may be met with the
purchase of shares under the Deferred Compensation Plan for
Directors, vested restricted stock units and exercise of stock
options.
Executive Officers
The
following table sets forth information concerning our current
executive officers:
|
Name
|
|
Age
|
|
Position(s) with CorMedix
|
|
Khoso
Baluch
|
|
59
|
|
Chief Executive Officer
|
|
Robert
Cook
|
|
61
|
|
Chief Financial Officer
|
|
Judith
Abrams, M.D.
|
|
57
|
|
Chief Medical Officer
|
|
John
Armstrong
|
|
72
|
|
Executive Vice President for Technical Operations
|
See the
biography for Khoso Baluch under “Proposal No. 1 –
Election of Directors.”
Robert Cook
most
recently served as Chief Financial Officer of Bioblast Pharma Ltd.
from January 2016 to July 2016. His prior pharma experience
includes: Executive Vice President and Chief Financial Officer at
Strata Skin Sciences, Inc. from April 2014 to January 2016; Senior
Vice President and Chief Financial Officer at Immune
Pharmaceuticals, Inc. from August 2013 to March 2014, and its
predecessor EpiCept Corporation from April 2004 to August 2013,
including one year as Interim President and CEO of EpiCept in which
he completed the reverse merger of EpiCept into Immune. Previously
he served as CFO of publicly-held Pharmos Corporation. Mr. Cook
began his career in financial services at Chase Manhattan and he
also held a position as a Vice President in the Healthcare Group at
General Electric Capital Commercial Finance. Mr. Cook holds a B.S.
in Finance,
magna cum
laude
, from The American University, in Washington,
DC.
Judith Abrams
most
recently served as Head of Celgene Corporation’s Otezla
(Apremilast) Global Clinical Submission Team, from January 2012 to
January 2017, where she led all clinical activities supporting the
global submission through approval and launch of Otezla.
Previously, Dr. Abrams has held positions of increasing
responsibility managing the clinical development of a portfolio of
products across all phases of clinical development, including Vice
President, Medical & Science Inflammation at Novo Nordisk, Inc.
from October 2010 to January 2012, and positions at NPS
Pharmaceuticals, Inc., Johnson & Johnson PRD, Novartis
Pharmaceuticals Corporation, Amgen Inc., and Bristol-Myers Squibb
PRI. Dr. Abrams received her M.D. and completed fellowships in
Internal Medicine and Rheumatology at the University of Toronto
Faculty of Medicine. She completed a post-doctoral research
fellowship at Stanford University School of Medicine, Division of
Immunology where she subsequently became a member of the clinical
faculty. Dr. Abrams is Adjunct Associate Professor, Department of
Medicine, New York University School of Medicine.
John Armstrong
became our
Executive Vice President
for Technical Operations
in March 2017. Prior to that, he
was been employed by us as a consultant beginning in November 2014,
performing the same services that he now performs as our
Executive Vice President for Technical
Operations
.
Jack has over 45
years’ experience in the pharmaceutical industry with broad
senior level cross functional experience and has held a number of
General Management positions. Most recently, from August 2010 to
January 2013, he was President, Operations for Correvio, a private
pharmaceutical company supplying product to over 50 countries, and
prior positions include President/CEO of Genaera Corporation, Sr.
Vice President of Urocor Corporation, CEO of Mills Biopharma,
President of Oread CMO), President of Endo Laboratories (subsidiary
of DuPont Merck), President of World-wide Manufacturing for DuPont
Merck Pharmaceuticals, Vice President Operations for Marion/ Marion
Merrill Dow, and held varied roles in Manufacturing, QA, Led
Integrated business systems development for three companies as well
as having expertise in business development. Mr. Armstrong holds an
executive M.B.A. from Century University. He is also a CPIM
(Certified in Production and Inventory
Management).
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Principal Stockholders
The
following table shows the number of shares of our common stock
beneficially owned as of February 28, 2017 by:
|
●
|
each
person known by us to own beneficially more than 5% of the
outstanding shares of our common stock;
|
|
●
|
each
director;
|
|
●
|
each of
our executive officers named in the Summary Compensation Table
below (the “Named Executive Officers”) and our current
executive officers; and
|
|
●
|
all of
our current directors and executive officers as a
group.
|
This
table is based upon the information supplied by our Named Executive
Officers, directors and principal stockholders and from Schedules
13D and 13G filed with the SEC. Except as indicated in footnotes to
this table, the persons named in this table have sole voting and
investment power with respect to all shares of common stock shown,
and their address is c/o CorMedix Inc., 1430 U.S. Highway 206,
Suite 200, Bedminster, New Jersey 07921. As of February 28, 2017,
we had 40,720,838 shares of common stock outstanding. Beneficial
ownership in each case also includes shares issuable upon exercise
of outstanding options that can be exercised within 60 days after
February 28, 2017 for purposes of computing the percentage of
common stock owned by the person named. Options owned by a person
are not included for purposes of computing the percentage owned by
any other person.
|
Name and Address
of Beneficial Owner
|
Common
Stock
Beneficially Owned
(1)
|
|
|
|
Shares
|
%
|
|
5% or Greater Stockholders
|
|
|
|
Elliott Associates,
L.P.
(2)
|
4,332,293
|
9.9
%
|
|
|
|
|
|
Directors and Named Executive Officers:
|
|
|
|
Khoso Baluch
(3)
|
10,000
|
*
|
|
Janet M. Dillione
(4)
|
147,072
|
*
|
|
Michael W. George
(5)
|
185,000
|
*
|
|
Myron Kaplan
(6)
|
70,000
|
*
|
|
Taunia Markvicka
(7)
|
192,600
|
*
|
|
Cora Tellez
(8)
|
298,071
|
*
|
|
Robert
Cook
|
-0-
|
--
|
|
Judith
Abrams
|
-0-
|
--
|
|
John
Armstrong
|
-0-
|
--
|
|
Antony E. Pfaffle,
M.D.
(9)
|
600,000
|
1.5
|
|
|
|
|
|
All executive officers and directors as a
group (10 persons)
(10)
|
1,512,743
|
3.6
%
|
|
|
* Less than 1%
|
|
|
(1)
|
Based
upon 40,720,838 shares of our common stock outstanding on February
28, 2017 and, with respect to each individual holder, rights to
acquire our common stock exercisable within 60 days of February 28,
2017.
|
12
|
|
(2)
|
Due to
the Ownership Limitation (as defined below), Elliott Associates,
L.P. (“Elliott Associates”) may be deemed the
beneficial owner of 4,332,293 shares of our common stock through
securities held by it and by Manchester Securities Corp., a
wholly-owned subsidiary of Elliott Associates
(“Manchester”), and Elliott International, L.P.
(“Elliott International”), the investment advisor of
which is an affiliate of the investment advisor of Elliott
Associates. Notwithstanding the above, Elliott Associates
beneficially holds: (i) 1,730,200 shares of our common stock held
by Manchester, (ii) 2010 warrants held by Manchester exercisable
for 390,720 shares of our common stock, (iii) May 2013 warrants
exercisable for 500,000 shares of our common stock, (iv) 52,500
shares of our Series C-2 non-voting convertible preferred stock
convertible into 525,000 shares of our common stock, (v) October
2013 warrants exercisable for 262,500 shares of our common stock,
(vi) 97,500 shares of our Series C-2 non-voting convertible
preferred stock held by Elliott International convertible into
975,000 shares of our common stock, (vii) October 2013 warrants
held by Elliott International exercisable for 487,500 shares of our
common stock, (viii) 73,962 shares of our Series D non-voting
convertible preferred stock held by Manchester convertible into
1,479,240 shares of our common stock, and (ix) 89,623 shares of our
Series E non-voting convertible preferred stock held by Manchester
convertible into 1,959,759 shares of our common stock (the May 2013
warrants and the October 2013 warrants shall collectively be
referred to herein as the “Convertible Securities”).
However, in accordance with Rule 13d-4 under the Exchange Act, the
number of shares of our common stock into which the Convertible
Securities are convertible or exercisable, as applicable, are
limited pursuant to the terms of the Convertible Securities to that
number of shares of our common stock which would result in Elliott
Associates having aggregate beneficial ownership of, with respect
to the May 2013 warrants, the October 2013 warrants, the Series C-2
preferred stock, the Series D preferred stock and the Series E
preferred stock, 9.99% of the total issued and outstanding shares
of our common stock (the "Ownership Limitation"). Elliott
Associates disclaims beneficial ownership of any and all shares of
our common stock issuable upon any conversion or exercise of the
Convertible Securities if such conversion or exercise would cause
Elliott Associates’ aggregate beneficial ownership to exceed
or remain above the applicable Ownership Limitation (as is
currently the case). Therefore, Elliott Associates disclaims
beneficial ownership of any shares of our common stock, issuable
upon any conversion or exercise of the May 2013 warrants, the
October 2013 warrants, the Series C-2 preferred stock, the Series D
preferred stock and the Series E preferred stock, which conversion
of exercise would be prohibited by the Ownership Limitation. The
business address of Elliott Associates is 40 West 57
th
Street, 30
th
Floor, New York, New York 10019. Based
solely on information contained in a Schedule 13D filed with the
SEC on May 2, 2016 by Elliott Associates and other information
known to us.
|
|
|
|
|
|
(3)
|
Consists
of 10,000 shares of our common stock.
|
|
|
(4)
|
Consists
of (i) 18,738 shares of our common stock, and (ii) 128,334 shares
of our common stock issuable upon the exercise of stock options.
Does not include an aggregate of 19,963 shares of our common stock
that were deferred as director fee compensation and that are not
issuable until after the individual’s cessation of service
with our Board.
|
|
|
(5)
|
Consists
of 185,000 shares of our common stock issuable upon exercise of
stock options. Does not include an aggregate of 27,292 shares of
our common stock that were deferred as director fee compensation
and that are not issuable until after the individual’s
cessation of service with our Board
.
|
|
|
(6)
|
Consists
of (i) 20,000 shares of our common stock, and (ii) 50,000 shares of
our common stock issuable upon exercise of stock
options.
|
|
|
(7)
|
Consists
of (i) 22,600 shares of our common stock, and (ii) 170,000 shares
of our common stock issuable upon the exercise of stock
options.
|
|
|
(8)
|
Consists
of (i) 118,071 shares of our common stock, and (ii) 180,000 shares
of our common stock issuable upon exercise of stock options. Does
not include an aggregate of 33,783 shares of our common stock that
were deferred as director fee compensation and that are not
issuable until after the individual’s cessation of service
with our Board.
|
|
|
(9)
|
Consists
of 600,000 shares of our common stock issuable upon exercise of
stock options. Dr. Pfaffle ceased to be an executive officer in
March 2017.
|
|
|
(10)
|
Consists
of (i) the following held by our directors and executive officers
(A) 189,409 shares of our common stock, and (B) 1,313,334 shares of
our common stock issuable upon exercise of stock options, as
referenced in footnotes 3 through 9.
|
13
DIRECTOR COMPENSATION
Director Compensation in Fiscal 2016
The
following table shows the compensation earned by each non-employee
director of our company for the year ended December 31,
2016.
|
Name
|
Fees Earned
($)
|
Option
Awards
(1)
(2)
($)
|
Total
($)
|
|
Janet
M. Dillione
|
30,000
(3)
|
131,670
|
161,670
|
|
Michael
W. George
|
30,000
(3)
|
124,740
|
154,740
|
|
Myron Kaplan
(4)
|
16,964
|
157,400
|
174,364
|
|
Taunia
Markvicka
|
30,000
|
124,740
|
154,740
|
|
Cora
Tellez
|
30,000
(3)
|
138,600
|
168,600
|
|
Matthew P. Duffy
(5)
|
11,332
(3)
|
103,950
|
115,282
|
|
Steven Lefkowitz
(5)
|
11,332
(3)
|
103,950
|
115,282
|
(1)
The
amounts included in this column are the dollar amounts representing
the full grant date fair value of each stock option award
calculated in accordance with FASB ASC Topic 718 and do not
represent the actual value that may be recognized by the directors
upon option exercise. For information on the valuation assumptions
used in calculating this amount, see Note 8 to our audited
financial statements included in this Annual Report on Form
10-K.
(2)
As of December 31,
2016, the number of shares underlying options held by each
non-employee director was as follows: 145,000 shares for Ms.
Dillione; 185,000 shares for Mr. George; 50,000 shares for Mr.
Kaplan; 170,000 shares for Ms. Markvicka; 180,000 shares for Ms.
Tellez; 0 shares for Mr. Duffy; and 0 shares for Mr.
Lefkowitz.
(3)
Includes
fees of $30,000 for Ms. Dillione, $30,000 for Mr. George, $30,000
for Ms. Tellez and $5,666 for Mr. Duffy that were deferred. See
“Directors Compensation Plan” below for a description
of the deferral plan pursuant to which the deferrals were
made.
(4)
Mr.
Kaplan joined our Board in April 2016.
(5)
Mr.
Duffy and Mr. Lefkowitz ceased to serve as directors in June 2016
and the stock options granted to them in 2016 were forfeited in
June 2016.
Director Compensation Plan
Prior
to February 2017, we had the following cash and equity compensation
plan for non-employee directors. Each director received an annual
cash fee of $25,000, the Board Chair received an additional $5,000
and committee Chairs received an additional $5,000. Upon a
director’s first election to the Board, he or she was granted
an option to purchase 50,000 shares of our common stock that vest
one third each on the date of grant and the first and second
anniversary of the date of grant, subject to continued service on
the Board through the vesting date. After election to the Board, in
the next calendar year after his or her election and annually
thereafter, each director was granted an option to purchase 75,000
shares of our common stock for his or her service on the Board with
an additional 25,000 options for the Board chair, 20,000 options
for the Audit Committee chair, and 15,000 options for other
Committee chairs, which options vested on the first anniversary of
the date of grant, subject to continued service on the
Board.
In late
2016, with the assistance of Frederick W. Cook & Co., the
Compensation Committee reviewed a peer group of 14 public
companies, which group was used by Frederick W. Cook & Co. to
conduct a compensation study for purposes of establishing director
compensation. The composition of the peer group was based on the
following criteria: (i) companies operating in a similar industry
sector, (ii) publicly traded companies, (iii) companies of similar
size, and (iv) companies of similar business operation and stage of
research and development. The peer group companies considered by
the Compensation Committee are set forth under “Executive
Compensation” below. The Compensation Committee also used
this data in various combinations in an effort to establish
director compensation that reflects our particular facts and
circumstances.
14
Based
on the information presented by Frederick W. Cook & Co., in
February 2017, we adopted the following cash and equity
compensation plan for non-employee directors. Each director
receives an annual cash fee of $25,000, the Board Chair and
committee Chairs each receives an additional $5,000. Upon a
director’s first election to the Board, he or she will be
granted an option to purchase 75,000 shares of our common stock
that vest one third each on the date of grant and the first and
second anniversary of the date of grant, subject to continued
service on the Board through the vesting date. After election to
the Board, in the next calendar year after his or her election and
annually thereafter, each director will be granted (i) an option to
purchase 40,000 shares of our common stock that vest one year after
the date of grant, subject to continued service on the Board
through the vesting date, and (ii) restricted stock units in
the amount of the lesser of 10,000 units or $25,000 divided by our
stock price on the date of grant, with the Board chair receiving an
additional number of restricted stock units in the amount of the
lesser of 12,000 units or $24,000 divided by our stock price on the
date of grant, the Audit Committee chair receiving an additional
number of restricted stock units in the amount of the lesser of
6,000 units or $12,000 divided by our stock price on the date of
grant, the Compensation Committee chair receiving an additional
number of restricted stock units in the amount of the lesser of
4,000 units or $8,000 divided by our stock price on the date of
grant, and the Nomination and Governance Committee chair receiving
an additional number of restricted stock units in the amount of the
lesser of 2,500 units or $5,000 divided by our stock price on the
date of grant. Restricted stock units vest one year after the grant
date, subject to continued service on the Board through the vesting
date.
The
exercise price per share of each stock option granted to our
non-employee directors is equal to the fair market value of our
common stock as determined in good faith by our Board on the date
of the grant.
In July
2014, we adopted a Deferred Compensation Plan for Directors,
pursuant to which our non-employee directors may defer all of their
cash director fees and restricted stock units. Any cash fees due a
participating director will be converted into a number of shares of
our common stock by dividing the dollar amount of fees payable by
the closing price of our common stock on the date such fees would
be payable, and the director’s unfunded account would be
credited with the shares. The shares that accumulate in a
director’s account will be paid to the director on the tenth
business day in January following the year in which the
director’s service terminates for whatever reason, other than
death, in which case the account will be paid within 30 days of the
date of death to the designated beneficiaries, if any. If there are
no designated beneficiaries, the account will be paid out the same
as with any other termination of service. In the event of a change
in control of our company, the director would receive cash in an
amount equal to the number of shares in the account multiplied by
the fair market value of our common stock on the change in control
date, and the payment would be accelerated to five business days
after the effective date of the change in control.
EXECUTIVE COMPENSATION
Overview
This
Compensation Discussion and Analysis explains our compensation
philosophy, policies and practices with respect to our Chief
Executive Officer, Chief Financial Officer and Chief Scientific
Officer, who were our only executive officers in 2016 and who we
refer to as our Named Executive Officers. Our Board has delegated
responsibility for creating and reviewing the compensation of our
entire senior management team, including our Named Executive
Officers, to the Compensation Committee of our Board. The role of
the Compensation Committee is to oversee our compensation and
benefit plans and policies, to administer our equity incentive
plans and to review and make recommendations to our Board,
generally on an annual basis, regarding all compensation decisions
for our Named Executive Officers.
The
Chief Executive Officer attends Compensation Committee meetings by
invitation to provide input with respect to compensation and
performance assessments of executive officers.
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation Objectives and Philosophy
The
Compensation Committee is responsible for reviewing and approving
the compensation payable to our Named Executive Officers and other
key employees. As part of such process, the Compensation Committee
seeks to accomplish the following objectives with respect to our
executive compensation programs:
●
motivate,
recruit and retain executives capable of meeting our strategic
objectives;
●
provide
incentives to ensure superior executive performance and successful
financial results for our company; and
15
●
align
the interests of the Named Executive Officers with the long-term
interests of our stockholders.
The
Compensation Committee seeks to achieve these objectives
by:
●
establishing
a compensation structure that is both market competitive and
internally fair;
●
linking
a substantial portion of compensation to our achievement of
objectives, the executive management team’s performance as a
group in meeting those objectives and the individual’s
contribution to the attainment of those objectives;
●
providing
upward leverage for overachievement of goals; and
●
providing
long-term equity-based incentives.
In
order to achieve the above goals, our total compensation package
includes base salary and annual bonus, all paid in cash, as well as
long-term compensation in the form of stock options and/or
restricted stock. We believe that appropriately balancing the total
compensation package is necessary in order to provide
market-competitive compensation.
Setting Executive Compensation
The
Compensation Committee oversees the design, development and
implementation of the compensation program for the Chief Executive
Officer and the other Named Executive Officers. The Compensation
Committee evaluates the performance of the Chief Executive Officer
and determines the Chief Executive Officer’s compensation in
light of the goals and objectives of the compensation program. The
Chief Executive Officer and the Compensation Committee together
assess the performance of the other Named Executive Officers and
determine their compensation, based on initial recommendations from
the Chief Executive Officer. Our Chief Executive Officer provided
the Compensation Committee with a detailed review of the
performance of the other Named Executive Officers and made
recommendations to the Compensation Committee with respect to the
compensation packages for those officers for 2016.
The
other Named Executive Officers do not play a role in their own
compensation determination, other than discussing individual
performance objectives and results with the Chief Executive
Officer.
For
executive compensation in 2016, the Compensation Committee used
compensation data for the life sciences industry that it had
purchased from a nationally recognized firm. The Compensation
Committee did not use any benchmarking to establish executive
compensation for 2016 other than to establish compensation for
Khoso Baluch, who was hired as our Chief Executive Officer in
October 2016.
In 2016, the Compensation Committee engaged
Frederick W. Cook & Co.,
an
independent compensation consultant, to assist with establishing
compensation levels for executive officers, including our Named
Executive Officers.
In late
2016, with the assistance of Frederick W. Cook & Co., the
Compensation Committee reviewed a peer group of 14 public
companies, which group was used by Frederick W. Cook & Co. to
conduct an executive compensation study for purposes of
establishing executive compensation as we sought to hire our Chief
Executive, Financial and Chief Medical Officers. The composition of
the peer group was based on the following criteria: (i) companies
operating in a similar industry sector, (ii) publicly traded
companies, (iii) companies of similar size, and (iv) companies of
similar business operation and stage of research and development.
The peer group companies considered by the Compensation Committee
are:
|
Alchaogen
|
Dipexium
Pharmaceuticals
|
|
Arbutus
Biopharma
|
Matinas
Biopharma
|
|
Cel-Sci
|
Novabay
Pharmaceuticals
|
|
Chimerix
|
Scynexis
|
|
Cidara
Therapeutics
|
Tetraphase
Pharmaceuticals
|
|
Contrafect
|
Vical
|
|
Contravir
Pharmaceuticals
|
Xoma
|
16
The
Compensation Committee uses the benchmarks in various combinations
in an effort to obtain comparative compensation information that
reflects our particular facts and circumstances over the period of
time for which the information is available.
The total compensation for each of our executive
officers is benchmarked against the total compensation of executive
officers in comparable positions at a peer group of companies of
similar size and market capitalization in the pharmaceutical and
biopharmaceutical industries, with a goal of compensating our
executives appropriately and competitively.
Market
benchmarks is one element considered by the Compensation Committee
when making compensation decisions.
As noted above, we also
purchase from time to time compensation data for the life sciences
industry from a nationally recognized firm. We used such data in
late 2016.
The Compensation
Committee generally positions cash compensation, including
non-equity performance bonuses, below the median and equity
compensation above the median to conserve cash and to place
additional emphasis on stock price improvement and stockholder
value creation.
The Compensation Committee also used this
data in various combinations in an effort to establish compensation
that reflects our particular facts and circumstances.
In
the future, we, or the Compensation Committee, may again engage or
seek the advice of a compensation consultant.
The Compensation Committee has structured our
annual and long-term incentive-based cash and non-cash executive
compensation to motivate executives to achieve the business goals
set by the Board and reward the executives for achieving such
goals. After the end of the year, the Compensation Committee
reviews the performance of each Named Executive Officer in
achieving the established objectives. These results are included
with the overall performance review provided by the Chief Executive
Officer, after which the Compensation Committee votes upon any
recommendations for salary adjustments, stock option grants and
cash incentives. The Chief Executive Officer then executes the
actions approved by the Compensation Committee with respect to such
matters.
In
2015, our stockholders approved, on an advisory basis, the
executive compensation paid in 2014, and the Compensation Committee
did and will continue to consider such future votes in our
compensation-setting practices, which votes will be held every
three years, with the next vote to occur in 2018. In the future,
the Compensation Committee intends to use information and advice it
acquires, including that from any compensation consultant, the
result of the say-on-pay vote, as well as information gathered by
the Committee as it has done in the past, to guide our policies and
procedures relating to executive compensation.
Based
on these overall objectives and philosophy, the Compensation
Committee has designed an executive compensation program that
generally seeks to bring base salaries and total executive
compensation in line with the companies at a similar stage of
clinical development represented in the compensation data we
review. Our program allows the Compensation Committee to determine
each component of an executive’s compensation based on a
number of factors, including (a) the executive’s overall
experience and skills (with an emphasis on particular industry
experience), (b) the executive’s position and
responsibilities in comparison to other executives at the company,
(c) individual performance, (d) the demand within our market for
the executive’s skills relative to other executives in our
industry, and (e) the overall performance of the executive
management team as a whole.
Components of Compensation
The key components of our executive compensation
package are cash compensation (salary and annual bonuses),
long-term equity incentive awards and change in control and other
severance agreements. These components are administered with the
goal of providing total compensation that recognizes meaningful
differences in individual performance, is competitive, varies the
opportunity based on individual and corporate performance, and is
valued by our Named Executive Officers.
17
Base Salary
It
is the Compensation Committee’s objective to set a
competitive rate of annual base salary for each Named Executive
Officer. The Compensation Committee believes competitive base
salaries are necessary to attract and retain top quality
executives, since it is common practice for public companies to
provide their named executive officers with a guaranteed annual
component of compensation that is not subject to performance risk.
The Compensation Committee, on its own or with outside consultants,
may establish salary ranges for the Named Executive Officers, with
minimum to maximum opportunities that cover the normal range of
market variability. The actual base salary for each Named Executive
Officer is then derived from those salary ranges based on his or
her responsibility, tenure and past performance and market
comparability. Annual base salaries for the Named Executive
Officers are reviewed and approved by the Compensation Committee in
the first quarter following the end of the previous performance
year. Changes in base salary are based on the scope of an
individual’s current job responsibilities, individual
performance in the previous performance year, target pay position
relative to the peer group, and our salary budget guidelines. The
Compensation Committee reviews established goals and objectives,
and determines an individual’s achievement of those goals and
objectives and considers the recommendations provided by the Chief
Executive Officer to assist it in determining appropriate salaries
for the Named Executive Officers other than the Chief Executive
Officer.
The base salary information for our Named
Executive Officers for 2016 is set forth in the Summary
Compensation Table below. In October 2016, we entered into an
employment agreement with Khoso Baluch, our Chief Executive
Officer. In May 2014, we entered into an employment agreement with
our former Chief Executive Officer, Randy Milby, which we amended
in August 2015. In April 2016, we entered into an employment
agreement with Dr. Anthony Pfaffle, our Chief Scientific Officer,
that provides the terms of his employment. These agreements provide
for a salary for each Named Executive Officer and are described
under the caption “Employment Agreements and
Arrangements.”
Annual Bonuses
As
part of their compensation package, our Named Executive Officers
generally have the opportunity to earn annual non-equity incentive
bonuses. Annual non-equity bonuses are designed to reward superior
executive performance while reinforcing our short-term strategic
operating goals. The Compensation Committee establishes each year a
target award for each Named Executive Officer based on a percentage
of base salary, and based on any applicable terms in any individual
employment agreements. Annual bonus targets as a percentage of
salary increase with executive rank so that for the more senior
executives, a greater proportion of their total cash compensation
is contingent upon annual performance.
At
the beginning of the performance year, each Named Executive
Officer, in conjunction with the Chief Executive Officer,
establishes annual goals and objectives. Actual bonus awards are
based on an assessment against the pre-established goals for each
Named Executive Officer’s individual performance, the
performance of the business function for which he or she is
responsible, the executive management team’s overall
performance, and/or our company’s overall performance for the
year. For any given performance year, proposed annual bonuses may
range from 0% to 100% of target, or higher under certain
circumstances, based on corporate, team and individual performance.
Corporate, team and individual performance has a significant impact
on the annual bonus amounts because the Compensation Committee
believes it is a precise measure of how the Named Executive Officer
contributed to business results.
Pursuant to his
employment agreement, Mr. Baluch is eligible for an annual bonus,
which may equal up to 80% of his base salary then in effect, as
determined by our Board or compensation committee. In determining
such bonus, our Board or compensation committee will take into
consideration the achievement of specified company objectives,
predetermined by the Board in consultation with the Chief Executive
Officer, and specified personal objectives, predetermined by the
Board and the Chief Executive Officer. For fiscal year 2016, Mr.
Baluch’s bonus was prorated, contingent upon Mr. Baluch
meeting performance objectives established by the Board and Mr.
Baluch.
Pursuant to their
respective agreements, Mr. Milby was entitled to an annual target
cash bonus opportunity of up to 100% of his salary, and Dr. Pfaffle
up to 30% (subject to increase depending on performance). For 2016,
the Board established for Mr. Milby a bonus of up to 100% of his
salary and a bonus of 40% for Dr. Pfaffle. The performance goals
generally were determined by our Compensation Committee in the
first quarter of the calendar year but the actual bonuses are
determined after the year’s end to assess achievement of the
goals. Additionally, the Board or the Compensation Committee may
increase or decrease a Named Executive Officer’s bonus
payment (above or below the target) based on its assessment of our
company’s and the Named Executive Officer’s individual
performance during the year. Each Named Executive Officer's
potential bonus was developed taking into account his respective
area of responsibility.
18
For
2016, the annual non-equity incentive bonus for Mr. Baluch was
based on the achievement of objectives in the fourth quarter of
2016 related to developing a strategic plan, the Neutrolin clinical
program and staffing recruitment, all of which goals were
established in October 2016. The 2016 goals for Mr. Milby and Dr.
Pfaffle were established in February 2016. Mr. Milby’s 2016
goals were based on the achievement of commercial and clinical
development goals for various aspects of Neutrolin, developments
related to other pipeline products, and financial goals. Dr.
Pfaffle’s goals were based on clinical and regulatory
development of Neutrolin. All of Mr. Baluch’s goals were met
such that he received 100% of his bonus, prorated for the year. Mr.
Milby left our employment in October 2016, but overall his goals
over which he had primary control were met in 2016 such that he
received 100% of his bonus, prorated for the year. Dr. Pfaffle did
not meet his goals and received no bonus.
We
engaged James Altland, our former interim Chief Financial officer,
pursuant to a contract with a third-party agency. As a result, Mr.
Altland was not an employee and was not eligible for our employment
benefits, including any as a Named Executive Officer. Mr. Altland
ceased employment in February 2017.
Long-Term Incentive Equity Awards
We
believe that long-term performance is achieved through an ownership
culture that encourages high performance by our Named Executive
Officers through the use of stock-based awards. Our 2006 Stock Plan
and 2013 Stock Plan were each established to provide our employees,
including our Named Executive Officers, with incentives to help
align employees’ interests with the interests of our
stockholders. Effective upon the approval by our stockholders of
our 2013 Stock Plan, we were no longer able to issue any award
under the 2006 Stock Plan. The Compensation Committee believes that
the use of stock-based awards offers the best approach to achieving
our compensation goals. We have historically elected to use stock
options as the primary long-term equity incentive vehicle; however,
the Compensation Committee has used restricted stock in the past
and may in the future utilize restricted stock as part of our
long-term incentive program. We have selected the Black-Scholes
method of valuation for share-based compensation. Due to the early
stage of our business and our desire to preserve cash, we may
provide a greater portion of total compensation to our Named
Executive Officers through stock options and restricted stock
grants than through cash-based compensation. The Compensation
Committee generally oversees the administration of our 2006 Stock
Plan and our 2013 Stock Plan.
Stock Options
Our
2013 Stock Plan (and formerly our 2006 Stock Plan) authorizes us to
grant options to purchase shares of common stock to our employees,
directors and consultants.
The
Compensation Committee reviews and approves stock option awards to
Named Executive Officers based upon a review of competitive
compensation data, its assessment of individual performance, a
review of each Named Executive Officer’s existing long-term
incentives, and retention considerations. Periodic stock option
grants are made at the discretion of the Compensation Committee to
eligible employees and, in appropriate circumstances, the
Compensation Committee considers the recommendations of our Chief
Executive Officer.
Stock
options granted to employees have an exercise price equal to the
fair market value of our common stock on the day of grant,
typically vest over a time or upon the achievement of certain
performance-based milestones and are based upon continued
employment, and generally expire 10 years after the date of grant.
The fair value of the options granted to the Named Executive
Officers in the Summary Compensation Table is determined in
accordance with the Black-Scholes method of valuation for
share-based compensation. Incentive stock options also include
certain other terms necessary to ensure compliance with the
Internal Revenue Code of 1986.
We
expect to continue to use stock options as a long-term incentive
vehicle because:
●
Stock
options align the interests of our Named Executive Officers with
those of our stockholders, supporting a pay-for performance
culture, foster employee stock ownership, and focus the management
team on increasing value for our stockholders.
●
Stock
options are performance-based. All of the value received by the
recipient of a stock option is based on the growth of the stock
price. In addition, stock options can be issued with vesting based
on the achievement of specified milestones.
●
Stock
options help to provide balance to the overall executive
compensation program as base salary and annual bonuses focus on
short-term compensation, while the vesting of stock options
increases stockholder value over the longer term.
●
The
vesting period of stock options encourages executive retention and
the preservation of stockholder value. In determining the number of
stock options to be granted to our Named Executive Officers, we
take into account the individual’s position, scope of
responsibility, ability to affect profits and stockholder value and
the individual’s historic and recent performance and the
value of stock options in relation to other elements of the
individual Named Executive Officer’s total
compensation.
19
Restricted Stock
Our
2013 Stock Plan (and formerly our 2006 Stock Plan) authorizes us to
grant restricted stock. No restricted stock grants were awarded
during 2014, 2015 or 2016. In order to implement our long-term
incentive goals, we may grant shares of restricted stock in the
future.
Executive Benefits and Perquisites
Our
Named Executive Officers, some of whom may be parties to employment
or consulting agreements, will continue to be parties to such
agreements in their current form until the expiration or
termination of the employment or consulting agreement or until such
time as the Compensation Committee determines in its discretion
that revisions to such agreements are advisable. In addition,
consistent with our compensation philosophy, we intend to continue
to maintain our current benefits for our Named Executive Officers,
including medical, dental and life insurance and the ability to
contribute to a 401(k) plan; however, the Compensation Committee in
its discretion may revise, amend or add to the officer’s
executive benefits if it deems it advisable. We believe these
benefits are currently comparable to benefit levels for comparable
companies.
Employment Agreements
Employment Agreements with Current Named Executive
Officers
On September 27, 2016, we entered into a
three-year employment agreement with Khoso Baluch, our Chief
Executive Officer. On January 30, 2017, we entered into employment
agreements, each effective February 1, 2017, with Robert Cook to
serve as our Chief Financial Officer and with Judith Abrams to
serve as our Chief Medical Officer. On March 1, 2017, we entered
into an employment agreement with John Armstrong to serve as our
Executive Vice
President
for
Technical
Operations. After the initial three-year term of
each employment agreement, the agreement will automatically renew
for additional successive one-year periods, unless either party
notifies the other in writing at least 90 days before the
expiration of the then current term that the agreement will not be
renewed.
Pursuant
their respective agreements, Mr. Baluch will receive an annual
salary of $375,000, Mr. Cook and Dr. Abrams an annual salary of
$350,000 and Mr. Armstrong an annual salary of $310,000, which
cannot be decreased unless all officers and/or members of our
executive management team experience an equal or greater percentage
reduction in base salary and/or total compensation, provided that
any reduction in executive’s salary may be no greater than
25%. Each executive will be eligible for an annual bonus, which may
equal up to 80% for Mr. Baluch and up to 30% for Mr. Cook and Dr.
Abrams of his or her base salary then in effect, as determined by
our Board or compensation committee. In determining such bonus, our
Board or compensation committee will take into consideration the
achievement of specified company objectives, predetermined by our
Board and Chief Executive Officer, in the case of Mr. Baluch, and
by our Chief Executive Officer in the case of Mr. Cook, Dr. Abrams
and Mr. Armstrong, and approved by the Board or compensation
committee, and specified personal objectives, predetermined by the
Board with each executive. For fiscal year 2017, Mr. Cook’s,
Dr. Abrams’s and Mr. Armstrong’s bonus will be
prorated, contingent upon him or her meeting performance objectives
established by the Board with the executive. Each executive must be
employed through December 31 of a given year to earn that
year’s annual bonus.
The
following
provisions of the employment agreements with Mr.
Baluch, Mr. Cook, Dr. Abrams and Mr. Armstrong are identical except
where noted.
If we terminate the executive’s employment
for Cause (as defined below), the executive will be entitled to
receive only the accrued
compensation
due to him or her as of the date of such
termination,
rights to
indemnification and directors’ and officers’ liability
insurance, and as otherwise required by law. All unvested shares of
restricted stock in the case of Mr. Baluch, and all unvested
options then held by the executive will be forfeited to us as of
such date.
20
If we
terminate
the executive’s employment other than for
Cause, death or disability, other than by notice of nonrenewal, or
if the executive resigns for Good Reason (as defined below), the
executive will receive the following benefits: (i) payment of any
accrued compensation and any unpaid bonus for the prior year, as
well as rights
to indemnification and directors’ and
officers’ liability insurance and any rights or privilege
otherwise required by law;
(ii) we
will continue to pay his or her base salary and benefits for a
period of twelve months in the case of Mr. Baluch and nine months
for the other executives following the effective date of the
termination of employment; (iii) payment on a prorated basis
for any target bonus for the year of termination based on the
actual achievement of the specified bonus objectives; (iv) if the
executive timely elects continued health insurance coverage under
COBRA, then we will pay the premium to continue such coverage for
him or her and his or her eligible dependents in an amount equal to
the portion paid for by us during the executive’s employment
until the conclusion of the time when he or she is receiving
continuation of base salary payments or until he or she becomes
eligible for group health insurance coverage under another
employer’s plan, whichever occurs first, provided however
that we have the right to terminate such payment of COBRA premiums
on behalf of the executive and instead pay him or her a lump sum
amount equal to the COBRA premium times the number of months
remaining in the specified period if we determine in our discretion
that continued payment of the COBRA premiums is or may be
discriminatory under Section 105(h) of the Internal Revenue Code of
1986, as amended; and (v) in the case of Mr. Baluch, all restricted
shares and stock options, and in the case of Mr. Cook and Dr.
Abrams, all unvested time-based stock options that are scheduled to
vest on or before the next succeeding anniversary of the date of
termination shall be accelerated and deemed to have vested as of
the termination date. The separation benefits set forth above are
conditioned upon the executive executing a release of claims
against us, our parents, subsidiaries and affiliates and each such
entities’ officers, directors, employees, agents, successors
and assigns in a form acceptable to us, within a time specified
therein, which release is not revoked within any time period
allowed for revocation under applicable law.
For
purposes
of the agreement, “Cause” is defined
as: (i) the willful failure, disregard or refusal by the executive
to perform his or her material duties or obligations under the
agreement (other than as a result of executive’s mental
incapacity or illness, as confirmed by medical evidence provided by
a physician selected by us) that, in the case of Mr. Cook, Dr.
Abrams and Mr. Armstrong, is not cured, to the extent subject to
cure, by the executive to our reasonable satisfaction within 30
days after we gave written notice thereof to executive; (ii) any
willful, intentional or grossly negligent act by the executive
having the effect of materially injuring (whether financially or
otherwise) our business or reputation or any of our affiliates;
(iii) executive’s conviction of any felony involving moral
turpitude (including entry of a guilty or nolo contendere plea);
(iv) the executive’s qualification as a “bad
actor,” as defined by 17 CFR 230.506(a); (v) the good faith
determination by the Board, after a reasonable and good-faith
investigation by us that the executive engaged in some form of
harassment or discrimination prohibited by law (including, without
limitation, harassment on the basis of age, sex or race) unless the
executive’s actions were specifically directed by the Board;
(vi) any material misappropriation or embezzlement by the
executive of our property or our affiliates (whether or not a
misdemeanor or felony); or (vii) material breach by the executive
of the agreement that is not cured, to the extent subject to cure,
by executive to our reasonable satisfaction within 30 days after we
give written notice thereof to the executive (20 days in the case
of Mr. Baluch).
For purposes of the agreement, “Good
Reason” is defined as: (i) any material breach of the
agreement by us; (ii) any material diminution by us of the
executive’s duties, responsibilities, or authority; (iii) a
material reduction in the executive’s annual base
salary
unless
all officers
and/or members of our executive management team experience an equal
or greater percentage reduction in annual base salary and/or total
compensation; (iv) in the case of Mr. Cook, Dr. Abrams and Mr.
Armstrong,
a required relocation of the primary place of
performance of the executive’s duties to a location more than
50 miles from our current location in Bedminster, New Jersey,
provided that a change in the location of the primary place of
performance of the executive’s duties will not constitute
Good Reason if such change occurs prior to a change in control and
we only require the executive to physically work at that new
location two days or less per workweek and provide reimbursement of
the executive’s reasonable travel expenses in commuting to
such new location
; or (v) a material
reduction in the executive’s target bonus level unless all
officers and/or members of our executive management team experience
an equal or greater percentage reduction related to target bonus
levels.
If the
executive
terminates his or her employment by written notice
of termination or if the executive or we terminate his or her
employment by providing a notice of nonrenewal at least 90 days
before the agreement is set to expire, the executive will not be
entitled to receive any payments or benefits other than any accrued
compensation,
any unpaid prior year’s bonus, rights to
indemnification and directors’ and officers’ liability
insurance and as otherwise required by law.
If the
executive’s employment is terminated as a result of his or
her death or disability, we will pay him or her or his or her
estate, as applicable, any accrued compensation and any unpaid
prior year’s bonus.
21
Our
agreements with Mr. Baluch, Mr. Cook, Dr. Abrams and Mr. Armstrong
each contain a non-compete provision that provides that during the
term of each agreement and the 12-month period immediately
following the executive’s separation from employment for any
reason, the executive is prohibited from engaging in any business
involving the development or commercialization of a preventive
anti-infective product that would be a direct competitor of
Neutrolin or a product containing taurolidine or any other product
being actively developed or produced by us within the United States
and the European Union on the date of termination of his or her
employment.
Employment Agreements with Former Named Executive
Officers
On May
9, 2014, we entered into an employment agreement, effective March
31, 2014, with our former Chief Executive Officer, Randy Milby.
Pursuant to his agreement, Mr. Milby received an annual base salary
of $300,000.00, up to 50% of which was payable in the form of
unregistered common stock at the discretion of Mr. Milby and
subject to specified limitations. Mr. Milby was eligible for an
annual target bonus, the cash portion of which could equal up to
100% of his base salary then in effect, as determined by our Board
or compensation committee. In determining such bonus, our Board or
compensation committee took into consideration the achievement of
specified company objectives, predetermined by the Board, and
specified personal objectives, predetermined by the Board and Mr.
Milby. Mr. Milby’s annual bonus, if any, was to be paid in
cash or a combination of cash and equity, provided that the equity
portion will make up no more than 50% of the value of such annual
bonus.
On
August 3, 2015, we entered into a Release of Claims and Severance
Modification with Mr. Milby due to the anticipated termination of
Mr. Milby’s employment. In exchange for the release of
various claims by Mr. Milby against our company, including claims
related to his employment with us and the termination of same and
claims for additional compensation or benefits other than the
compensation and benefits set forth in his employment agreement, we
agreed to amend Mr. Milby’s employment agreement to specify
that Mr. Milby may not compete against the Company by engaging in
any business involving the development or commercialization of (i)
a preventive anti-infective product that would be a direct
competitor of Neutrolin or (ii) a product containing taurolodine.
The non-compete term did not change and remains at 12 months
following termination of his employment, which occurred on October
2, 2016. The employment agreement was also amended to allow Mr.
Milby a period in which to exercise all vested options and warrants
until the later of 60 months following the termination date of his
employment or 60 months following the date on which his
service on the Company’s Board of Directors ended, provided
in no event shall he be able to exercise any option after the
respective expiration date of the applicable stock option
award.
Effective April 29,
2016, we amended our employment agreement with Mr. Milby. The
amendment was made as we continued our search for a new Chief
Executive Officer and in response to the expiration of Mr.
Milby’s agreement on April 30, 2016. Under the amended
agreement, Mr. Milby became an at-will employee, and all other
terms of his employment agreement remained in place, including
severance benefits.
Pursuant to the
terms of his employment agreement, Mr. Milby was entitled to
receive his base salary and benefits for a period of 12 months
following the effective date of the termination of his employment,
or, in the case of benefits, until such time as he receives
equivalent coverage and benefits under plans and programs of a
subsequent employer if such receipt is prior to the expiration of
the 12-month period. To the extent any of the aforementioned
benefits cannot be provided to former employees, we will pay Mr.
Milby a lump-sum payment in the amount necessary to allow Mr. Milby
to purchase the equivalent benefits.
On
April 18, 2016, we entered into an employment agreement, effective
February 22, 2016, with Dr. Pfaffle. Unless renewed, the agreement
will expire on February 21, 2018. In exchange for his service as
our Chief Scientific Officer, Dr. Pfaffle will receive an annual
base salary of $280,000.00. Dr. Pfaffle will be eligible for an
annual bonus, which may equal up to 50% of his base salary then in
effect, as determined by our Board or compensation committee. In
determining such bonus, our Board or compensation committee will
take into consideration the achievement of specified company
objectives, predetermined by the Board, and specified personal
objectives, predetermined by the Board in consultation with Dr.
Pfaffle. He is also eligible to participate in all employee
benefits available to our senior executives from time-to-time and
is eligible for up to four weeks of paid vacation per year and may
be reimbursed for specified business-related expenses.
Upon
a Change of Control of our company (as defined in the agreement),
all shares of our company’s restricted stock and all unvested
options to purchase shares of our capital stock then held by Dr.
Pfaffle will be accelerated and deemed to have vested as of the
date of such Change of Control.
22
If
we terminate Dr. Pfaffle’s employment for cause (as defined
in the agreement), he will be entitled to receive only the accrued
compensation due to him as of the date of such termination, all
shares of restricted stock then held by him will be forfeited to us
as of such date, and all unexercised options to purchase shares of
our capital stock, whether or not vested, will immediately
terminate. If Dr. Pfaffle resigns for other than good reason (as
defined in the agreement) or if we terminate his employment by
providing notice of nonrenewal at least 60 days before the
agreement is set to expire, he will be entitled only to payment of
his accrued compensation as of such date.
If
we terminate Dr. Pfaffle’s employment other than for cause
(as defined in the agreement), death or disability, other than by
notice of nonrenewal, or if Dr. Pfaffle resigns for good reason (as
defined in the agreement), he will receive the following benefits:
(i) we will continue to pay his base salary and benefits for a
period of 12 months following the effective date of the termination
of his employment; (ii) if Dr. Pfaffle timely elects continued
health insurance coverage under COBRA, then we will pay the entire
premium necessary to continue such coverage for Dr. Pfaffle and his
eligible dependents until the conclusion of the time when he is
receiving continuation of base salary payments or until he becomes
eligible for group health insurance coverage under another
employer’s plan, whichever occurs first, provided however
that we have the right to terminate such payment of COBRA premiums
on behalf of Dr. Pfaffle and instead pay him a lump sum amount
equal to the COBRA premium times the number of months remaining in
the specified period if we determine in our discretion that
continued payment of the COBRA premiums is or may be discriminatory
under Section 105(h) of the Internal Revenue Code of 1986, as
amended; (iii) we will provide such other or additional benefits,
if any, as may be provided under our applicable employee benefit
plans, programs and/or arrangements; and (iv) all equity grants of
any kind, including restricted shares and unvested stock options
held by Dr. Pfaffle, will be accelerated and deemed to have vested
as of the termination date.
If Dr.
Pfaffle’s employment is terminated as a result of his death
or disability, we will shall pay him or his estate, as applicable,
his base salary through the date which is the sooner of the end of
the agreement’s term or 180 days after his death or
disability, and such other or additional benefits, if any, as may
be provided under our applicable employee benefit plans, programs
and/or arrangements. All shares of our stock that are subject to
vesting and all options that are scheduled to vest on or before the
next succeeding anniversary of the effective date of the agreement
will be accelerated and deemed to have vested as of the termination
date. All such restricted shares and options that have not vested
(or been deemed pursuant to the immediately preceding sentence to
have vested) as of the date of termination shall be
forfeited.
During
the term of the agreement and the 12-month period immediately
following his separation from employment for any reason, Dr.
Pfaffle is prohibited from engaging in any business involving the
development or commercialization of a preventive anti-infective
product that would be a direct competitor of Neutrolin or a product
containing taurolidine within the United States and the European
Union.
Tax and Accounting Considerations
U.S.
federal income tax generally limits the tax deductibility of
compensation we pay to our Named Executive Officers to $1.0 million
in the year the compensation becomes taxable to the executive
officers. There is an exception to the limit on deductibility for
performance-based compensation that meets certain requirements.
Although deductibility of compensation is preferred, tax
deductibility is not a primary objective of our compensation
programs. Rather, we seek to maintain flexibility in how we
compensate our executive officers so as to meet a broader set of
corporate and strategic goals and the needs of stockholders, and as
such, we may be limited in our ability to deduct amounts of
compensation from time to time. Accounting rules require us to
expense the cost of our stock option grants. Because of option
expensing and the impact of dilution on our stockholders, we pay
close attention to, among other factors, the type of equity awards
we grant and the number and value of the shares underlying such
awards.
Pension Benefits
We do
not maintain any qualified or non-qualified defined benefit plans.
As a result, none of our Named Executive Officers participate in or
have account balances in qualified or non-qualified defined benefit
plans sponsored by us. Our Compensation Committee may elect to
adopt qualified or non-qualified benefit plans in the future if it
determines that doing so is in our best interests.
Nonqualified Deferred Compensation
None of
our Named Executive Officers participate in our have account
balances in nonqualified defined contribution plans or other
non-qualified deferred compensation plans maintained by us. Our
Compensation Committee may elect to provide our officers and other
employees with non-qualified defined contribution or other
non-qualified deferred compensation benefits in the future if it
determines that doing so is in our best interests.
23
Summary Compensation Table
The
following table sets forth information with respect to compensation
earned by our Named Executive Officers in the years ended December
31, 2016, 2015 and 2014:
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Option
Awards
(1)
($)
|
|
Non-equity Incentive Plan Compensation
($)
|
|
All Other Compensation ($)
|
|
Total
($)
|
||||||
|
Khoso Baluch
(2)
|
|
|
2016
|
|
|
93,750
|
|
|
3,186,450
|
|
|
75,000
|
|
|
39,574
|
(5)
|
|
3,394,774
|
|
Chief
Executive Officer
|
|
|
2015
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
2014
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Randy Milby
(3)
|
|
|
2016
|
|
|
308,746
|
|
|
--
|
|
|
112,500
|
|
|
30,818
|
(6)
|
|
452,064
|
|
Chief
Executive Officer
|
|
|
2015
|
|
|
300,000
|
|
|
269,025
|
|
|
150,000
|
|
|
4,715
|
(7)
|
|
723,740
|
|
|
|
|
2014
|
|
|
287,500
|
|
|
147,500
|
|
|
--
|
|
|
--
|
|
|
435,000
|
|
Antony E. Pfaffle
|
|
|
2016
|
|
|
275,962
|
|
|
--
|
|
|
--
|
|
|
26,641
|
(7)
|
|
302,603
|
|
Chief
Scientific Officer
|
|
|
2015
|
|
|
250,000
|
|
|
269,025
|
|
|
75,000
|
|
|
6,694
|
(7)
|
|
600,719
|
|
|
|
|
2014
|
|
|
219,800
|
|
|
356,550
|
|
|
30,000
|
|
|
16,928
|
(8)
|
|
623,728
|
|
James Altland
(4)
|
|
|
2016
|
|
|
244,485
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
244,485
|
|
Interim
Chief Financial Officer
|
|
|
2015
|
|
|
60,666
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
60,666
|
|
|
|
|
2014
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
_____________________
(1)
The
amounts included in this column are the dollar amounts representing
the full grant date fair value of each stock option award
calculated in accordance with FASB ASC Topic 718 and do not
represent the actual value that may be recognized by the Named
Executive Officers upon option exercise.
(2)
Mr.
Baluch became our Chief Executive Officer on October 3,
2016.
(3)
Mr.
Milby left our employment in October 2016.
(4)
Mr.
Altland was appointed as our Interim Chief Financial Officer
effective October 26, 2015. He served pursuant to a contract
arrangement with a third party agency until February
2017.
(5)
C
onsists of health benefits and reimbursed moving
expenses.
(6)
C
onsists of health benefits and 401K employer
match.
(7)
C
onsists of health benefits.
(8)
Consists
of director fees.
Grants of Plan-Based Awards
The
following table provides information regarding grants of plan-based
awards made to our Named Executive Officers in 2016. The only
plan-based awards granted were stock options; no non-equity awards
were granted. All stock options granted to our Named Executive
Officers were incentive stock options, to the extent permissible
under the Internal Revenue Code; if they exceeded the permitted
amount upon vesting, the options that exceeded the threshold became
non-qualified stock options. The exercise price per share of each
stock option granted to our Named Executive Officers was equal to
the fair market value of our common stock as determined in good
faith by our Board on the date of the grant. All stock options
listed below were granted under our 2013 Stock Plan.
|
Name
|
|
Grant date
|
|
Number of securities underlying
options
(1)
(#)
|
|
Exercise or
Base price of
option awards
($/Sh)
|
|
Grant date fair
value of stock
and option
awards
(2)
($)
|
|
Khoso Baluch
|
|
10/3/2016
|
|
1,850,000
|
|
$2.52
|
|
3,186,450
|
|
Randy Milby
|
|
--
|
|
--
|
|
--
|
|
--
|
|
Antony E. Pfaffle
|
|
--
|
|
--
|
|
--
|
|
--
|
|
James Altland
|
|
--
|
|
--
|
|
--
|
|
--
|
_______________
24
(1)
Mr. Baluch was the only Named Executive Officer
granted options in 2016. T
he options granted to Mr. Baluch
were a component of his employment agreement and vest as follows:
(i) 1,250,000 of the options will vest over four years in four
equal annual installments on the first four anniversaries of
October 3, 2016; (ii) 300,000 of the options are split into three
equal tranches and vest upon the achievement of performance
milestones, but in any event not before December 31, 2018 and not
after October 3, 2020; and (iii) 300,000 of the options vest upon
our stock price on the NYSE attaining an average closing price per
share that is at least 2.75 times the lower of the closing price
per share on September 23, 2016 or October 3, 2016, with such
increased stock price measured on an average basis of the closing
price for a 30-day period (the “Qualifying Price”),
provided these options will be forfeited if the closing stock price
on December 31, 2018 is below the Qualifying Price.
(2)
The
grant date fair value of the restricted stock and option awards is
calculated in accordance with FASB ASC Topic 718.
Outstanding Equity Awards at Fiscal Year-End 2016
The
following table contains certain information concerning unexercised
options for the Named Executive Officers as of December 31,
2016.
|
Name
|
|
Number of Shares Underlying Unexercised Options (#) –
Exercisable
|
|
Number of Shares Underlying Unexercised Options (#) –
Unexercisable
|
|
Option Exercise Price ($)
|
|
Option Expiration Date
|
|
Khoso Baluch
|
|
--
|
|
1,850,000
|
|
2.52
|
|
10/03/2026
|
|
|
|
|
|
|
|
|
|
|
|
Randy Milby
(1)
|
|
437,500
|
|
--
|
|
0.90
|
|
10/03/2021
|
|
|
|
100,000
|
|
--
|
|
2.02
|
|
10/03/2021
|
|
|
|
75,000
|
|
--
|
|
5.00
|
|
10/03/2021
|
|
|
|
|
|
|
|
|
|
|
|
Antony E. Pfaffle
|
|
20,000
|
|
--
|
|
3.125
|
|
3/30/2020
|
|
|
|
30,000
|
|
--
|
|
2.10
|
|
1/14/2021
|
|
|
|
80,000
|
|
--
|
|
0.68
|
|
12/05/2022
|
|
|
|
175,000
|
|
--
|
|
0.90
|
|
3/22/2023
|
|
|
|
100,000
|
|
--
|
|
2.02
|
|
1/09/2024
|
|
|
|
30,000
|
|
--
|
|
2.02
|
|
1/09/2024
|
|
|
|
100,000
|
|
--
|
|
2.27
|
|
4/01/2024
|
|
|
|
75,000
|
|
--
|
|
5.00
|
|
2/24/2025
|
|
|
|
|
|
|
|
|
|
|
|
James Altland
|
|
--
|
|
--
|
|
--
|
|
--
|
_______________
(1)
Upon Mr.
Milby’s termination of employment on October 3, 2016,
t
he option expiration date was
reset for all of Mr. Milby’s options pursuant to the terms of
his severance agreement dated July 17, 2015.
Option Exercises
The
following table sets forth information on the aggregate number and
value of all options exercised by the Named Executive Officers in
2016.
25
Option Exercises in Fiscal 2016
|
|
|
Option
awards
|
||
|
Name
|
|
Number of
shares
acquired on
exercise
(#)
|
|
Value
realized
on
exercise
($)
(1)
|
|
Khoso
Baluch
|
|
--
|
|
--
|
|
Randy
Milby
|
|
150,000
|
|
124,500
|
|
Antony
E. Pfaffle
|
|
170,000
|
|
312,857
|
|
James
Altland
|
|
--
|
|
--
|
_______________
(1)
The aggregate value
realized equals the difference between the fair market value of the
shares acquired, based on the closing sale price, if any, or
closing bid price per share of our common stock on the NYSE MKT on
the date of exercise, and the exercise price for the underlying
stock options.
Option Repricings
We
did not engage in any repricings or other modifications to any of
our Named Executive Officers’ outstanding options during the
year ended December 31, 2016.
Potential Payments on Change of Control
Pursuant to the
terms of his employment agreement and upon the termination of his
employment with us on October 2, 2016, Randy Milby became entitled
to the severance benefit set forth below. See the discussion of Mr.
Milby’s employment agreement and the employment agreements we
have with Khoso Baluch and Antony Pfaffle under the heading
“Employment Agreements”. If the severance payments
called for in our agreements for Mr. Baluch and Dr. Pfaffle had
been triggered on December 31, 2016, we would have been obligated
to make the following payments:
|
Name
|
|
Cash Payment
($ per month) and
(# of months paid)
|
|
Benefits
($ per month) and
(# of months paid)
|
|
Number of Options
(# that would vest) and
($ market value)
(1)
|
|||
|
Khoso
Baluch
|
|
$ 31,250
|
12 mos.
|
|
$
2,291
|
12
mos.
|
|
1,850,000
|
$
-0-
|
|
Randy
Milby
|
|
$ 25,000
|
9 mos
|
|
$
2,807
|
9 mos
|
|
612,500
|
$
310,625
|
|
Antony
E. Pfaffle
|
|
$ 20,833
|
12 mos
|
|
$
2,896
|
12 mos
|
|
600,000
|
$
189,350
|
______________________
(1)
The market value
equals the difference the fair market value of the shares that
could be acquired based on the closing sale price per share of our
common stock on the NYSE MKT on December 28, 2016 (the last trading
day of 2016), which was $1.61, and the exercise prices for the
underlying stock options.
Compensation Committee Report
The
Compensation Committee has reviewed and discussed the CD&A
contained in this proxy statement with management and, based on
that review and discussion, the Compensation Committee recommended
to the Board of Directors that the CD&A be included in this
proxy statement.
Submitted by:
THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
Taunia
Markvicka, Chair
Janet
M. Dillione
Michael
George
Myron
Kaplan
26
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Ms.
Markvicka (Chairman), Ms. Dillione and Mr. George served as members
of our Compensation Committee during all of 2016; Mr. Kaplan joined
the Committee in April 2016. None of these individuals was at any
time during 2016 or at any other time thereafter an officer or
employee of our company. Mr. Baluch, our Chief Executive Officer,
and Mr. Milby, our former Chief Executive Officer, participated in
discussions regarding salaries and incentive compensation for all
of our Named Executive Officers, except each was and is excluded
from discussions regarding his own salary and incentive stock
compensation. No interlocking relationship exists between any
member of our Compensation Committee and any member of any other
company’s board of directors or compensation
committee.
AUDITOR AND AUDIT COMMITTEE MATTERS
Report of the Audit Committee
The Audit Committee has reviewed and discussed
with management our audited financial statements for the fiscal
year ended December 31, 2016, which were audited by
Friedman
LLP,
our independent registered public
accounting firm. The Audit Committee discussed with
Friedman
LLP
the matters required to be
discussed
pursuant to Public Company Accounting Oversight
Board (United States) Auditing Standard 16 (Communication with
Audit Committee)
. The Audit Committee
received the written disclosures and letter from the independent
registered public accounting firm required by applicable
requirements of the PCAOB regarding the independent registered
public accounting firm’s communications with the Audit
Committee concerning independence, and discussed with the
independent registered public accounting firm the independent
registered public accounting firm’s independence. The Audit
Committee also considered whether the provision of services other
than the audit of our financial statements for the fiscal year
ended December 31, 2016 were compatible with maintaining
Friedman LLP
’s
independence.
Based
on the review and discussions referred to in the foregoing
paragraph, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2016 for filing with the SEC.
All
members of our Audit Committee are independent under SEC regulation
and Section 803B(2) of the NYSE MKT Rules. The financial literacy
requirements of the SEC require that each member of our Audit
Committee be able to read and understand fundamental financial
statements. In addition, at least one member of our Audit Committee
must qualify as an audit committee financial expert, as defined in
Item 407(d)(5) of Regulation S-K promulgated by the SEC, and
have financial sophistication in accordance with the NYSE MKT Rules
803B2(a)(iii). Our Board has determined that each of Ms. Dillione
and Ms. Tellez qualifies as an audit committee financial
expert.
THE AUDIT COMMITTEE
Janet M. Dillione, Chairman
Myron Kaplan
Taunia Markvicka
Cora M. Tellez
Fees Paid to the Independent Registered Public Accounting
Firm
The
following table sets forth fees billed to us by Friedman LLP, our
independent registered public accounting firm for the years ended
December 31, 2016 and 2015, for services relating to: auditing our
annual financial statements; reviewing our financial statements
included in our quarterly reports on Form 10-Q; reviewing
registration statements during 2016 and 2015; financing activities
in 2016 and 2015; and services rendered in connection with tax
compliance, tax advice and tax planning, and all other fees for
services rendered.
|
|
2016
|
2015
|
|
|
|
|
|
Audit
Fees
|
$
170,000
|
$
181,000
|
|
Audit Related
Fees
|
27,500
|
20,250
|
|
Tax
Fees
|
10,800
|
11,500
|
|
All Other
Fees
|
--
|
--
|
|
Total
|
$
208,300
|
$
212,250
|
27
Audit Committee Pre-Approval Policies and Procedures
Pursuant to its
charter, the Audit Committee is responsible for reviewing and
approving in advance any audit and any permissible non-audit
engagement or relationship between us and our independent
registered public accounting firm. The Audit Committee may delegate
to one or more designated members of the Audit Committee the
authority to grant pre-approvals, provided such approvals are
presented to the Audit Committee at a subsequent meeting. If the
Audit Committee elects to establish pre-approval policies and
procedures regarding non-audit services, the Audit Committee must
be informed of each non-audit service provided by our independent
registered public accounting firm. Audit Committee pre-approval of
audit and non-audit services will not be required if the engagement
for the services is entered into pursuant to pre-approval policies
and procedures, provided the policies and procedures are detailed
as to the particular service, the Audit Committee is informed of
each service provided and such policies and procedures do not
include delegation of the Audit Committee’s responsibilities
under the Exchange Act to our management. Audit Committee
pre-approval of non-audit services (other than review and
attestation services) also will not be required if such services
fall within available exceptions established by the SEC. All
services performed by our independent registered public accounting
firm during 2016 were pre-approved by the Audit
Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
There
were no related party transactions during the year ended December
31, 2016.
Procedures for Review and Approval of Transactions with Related
Persons
Pursuant to the
Audit Committee Charter, the Audit Committee is responsible for
reviewing and approving all related party transactions as defined
under Item 404 of Regulation S-K, after reviewing each such
transaction for potential conflicts of interests and other
improprieties. Our policies and procedures for review and approval
of transactions with related persons are in writing in our Code of
Conduct and Ethics available on our website at
www.cormedix.com
under the
“Investor Relations—Corporate Governance”
tab.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Exchange Act requires our directors, executive
officers and holders of more than 10% of our common stock to file
with the SEC initial reports of ownership and reports of changes in
the ownership of our common stock and other equity securities. Such
persons are required to furnish us copies of all Section 16(a)
filings. Based solely upon a review of the copies of the forms
furnished to us, we believe that our officers, directors and
holders of more than 10% of our common stock complied with all
applicable filing requirements during the fiscal year ended
December 31, 2015, with the exception of: a Form 4 for each of
Janet Dillione, Michael George and Cora Tellez to report the
election to defer the receipt of cash compensation for directors
fees, which reports were due on February 18, 2016 and were filed on
March 22, 2016; and two Forms 4 for Janet Dillione to report the
purchase of 15,000 shares of common stock on September 22, 2015 and
the purchase of 3,738 shares of common stock on June 8, 2016, which
reports were due on September 28, 2015 and June 14, 2016,
respectively, and both of which were filed on June 29,
2016.
STOCKHOLDER COMMUNICATIONS
Stockholders may
send any communications regarding our company’s business to
the Board in care of our Corporate Secretary at our principal
executive offices located at 1430 U.S. Highway 206, Suite 200,
Bedminster, New Jersey 07921. The Secretary will forward all such
communications to the addressee.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 2018 ANNUAL
MEETING
Stockholder
proposals to be included in the proxy statement for our next annual
meeting of stockholders must be received by us not later than
December 27, 2017. Under our bylaws, stockholder proposals to be
considered at our next annual meeting, including nominees for
director, must be received by us not later than 60 days prior to
that meeting. All submissions must comply with all of the
requirements of our bylaws and Rule 14a-8 of the Exchange Act.
Proposals should be mailed to Antony E. Pfaffle, Corporate
Secretary, CorMedix Inc., 1430 U.S. Highway 206, Suite 200,
Bedminster, New Jersey 07921.
28
Management’s
proxy holders for the next annual meeting of stockholders will have
discretion to vote proxies given to them on any stockholder
proposal of which we do not have notice prior to March 12,
2018.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN
ADDRESS
The SEC
has adopted rules that permit companies to deliver a single copy of
proxy materials to multiple stockholders sharing an address unless
a company has received contrary instructions from one or more of
the stockholders at that address. Upon request, we will promptly
deliver a separate copy of proxy materials to one or more
stockholders at a shared address to which a single copy of proxy
materials was delivered. Stockholders may request a separate copy
of proxy materials by contacting us either by calling (908)
517-9500 or by mailing a request to 1430 U.S. Highway 206, Suite
200, Bedminster, New Jersey 07921. Stockholders at a shared address
who receive multiple copies of proxy materials may request to
receive or a single copy of proxy materials in the future in the
same manner as described above.
ANNUAL
REPORT ON FORM 10-K
Our
Annual Report on Form 10-K for the fiscal year ended December 31,
2016 as filed with the SEC is accessible free of charge on its
website at www.sec.gov. It contains audited financial statements
covering the fiscal years ended December 31, 2016 and 2015.
You can request a copy of our
Annual Report on Form 10-K free of charge by calling (908) 517-9500
or by mailing a request to our Corporate Secretary, 1430 U.S.
Highway 206, Suite 200, Bedminster, New Jersey 07921. Please
include your contact information with the
request.
29
DIRECTIONS TO CORMEDIX INC. ANNUAL MEETING AT THE COMPANY’S
OFFICE
AT 1545 U.S HIGHWAY 206, FIRST FLOOR CONFERENCE ROOM, BEDMINSTER,
NEW JERSEY 07921
Directions from US-202/206 North
Merge
onto US-202/206 North. Keep left to stay on US-202 N/US-206
N. Continue for approximately 1 mile. Pass the fourth traffic light
and turn left at the driveway after the Shell gas station. Park at
the back of the building.
Directions from Areas North Of Bedminster via
I-287
Follow
ROUTE 287 SOUTH to EXIT 22 (U.S. 202/206 NORTH) towards
Bedminster. Follow directions from US-202/206 North
above.
Directions from Areas South Of Bedminster via I-287
Follow
ROUTE 287 NORTH to EXIT 22B (U.S. 202/206 NORTH) towards
Bedminster. Follow directions from US-202/206 North
above.
Directions Jersey City, Newark (Airport), New York, and Areas East
of Bedminster via I-78
Follow I-78
to Exit 29 to I-287 North toward US 202/206/Morristown, stay right
at the fork onto I-287. Follow ROUTE 287 NORTH to EXIT 22B
(U.S. 202/206 NORTH) towards Bedminster. Follow directions
from US-202/206 North above.
Directions from Pennsylvania, Phillipsburg, Clinton, and Areas West
of Bedminster via I-78
Follow I-78
to Exit 29 to I-287 North toward US 202/206/Morristown, stay left
at the fork onto I-287. Follow ROUTE 287 NORTH to EXIT 22B
(U.S. 202/206 NORTH) towards Bedminster. Follow directions
from US-202/206 North above.
Directions from I-80, East or West.
Follow
I-80 (East-bound or West-bound) to the juncture with I-287
South. Follow I-287 South to Exit 22 Bedminster. Follow
directions from US-202/206 North above.
30
Appendix
A
CORMEDIX INC.
Proposed Amendment to the Amended and Restated Certificate of
Incorporation
CERTIFICATE OF AMENDMENT
TO
THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION, AS AMENDED
OF
CORMEDIX INC.
The undersigned, for purposes of amending the
Amended and Restated Certificate of Incorporation, as amended (the
“
Certificate
”), of CorMedix Inc., a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify as
follows:
FIRST
: The name of the corporation is
CorMedix Inc. (the “
Corporation
”).
SECOND
: The Certificate was filed with the
Office of the Secretary of State of the State of Delaware on
December 3, 2012.
THIRD
: Article FOURTH of the Certificate is
hereby amended to read, in its entirety, as
follows:
“The
total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 202,000,000
shares. The Corporation is authorized to have two classes of
shares, designated as Common Stock and Preferred Stock. The total
number of shares of Common Stock which the Corporation is
authorized to issue is 200,000,000 shares, and the par value of
each of the shares of Common Stock is $0.001. The total number of
shares of Preferred Stock which the Corporation is authorized to
issue is 2,000,000 shares, and the par value of each of the shares
of Preferred Stock is $0.001.
The
Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the
Corporation’s Board of Directors may determine. Each series
of Preferred Stock shall be so designated as to distinguish the
shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Amended and Restated
Certificate of Incorporation, as amended, different series of
Preferred Stock shall not be construed to constitute different
classes of shares for the purpose of voting by
classes.
The
Board of Directors is expressly authorized to provide for the
issuance of all or any shares of any authorized but undesignated
Preferred Stock in one or more series, each with such designations,
preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and
such qualifications, limitations or restrictions thereof as shall
be stated in the resolution or resolutions adopted by the Board of
Directors to create such series, and a certificate of said
resolution or resolutions shall be filed in accordance with the
General Corporation Law of the State of Delaware. The authority of
the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide
that the shares of each such series may: (i) have such distinctive
designation and consist of such number of shares; (ii) be subject
to redemption at such time or times and at such price or prices;
(iii) be entitled to the benefit of a retirement or sinking fund
for the redemption of such series on such terms and in such
amounts; (iv) be entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions,
and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or
any other series of stock; (v) be entitled to such rights upon the
voluntary or involuntary liquidation, dissolution or winding up of
the affairs, or upon any distribution of the assets of the
Corporation in preference to, or in such relation to, any other
class or classes or any other series of stock; (vi) be convertible
into, or exchangeable for, shares of any other class or classes or
any other series of stock at such price or prices or at such rates
of exchange and with such adjustments, if any; (vii) be entitled to
the benefit of such conditions, limitations or restrictions, if
any, on the creation of indebtedness, the issuance of additional
shares of such series or shares of any other series of Preferred
Stock, the amendment of this Amended and Restated Certificate of
Incorporation, as amended, or the Corporation’s By-Laws, the
payment of dividends or the making of other distributions on, or
the purchase, redemption or other acquisition by the Corporation
of, any other class or classes or series of stock, or any other
corporate action; or (viii) be entitled to such other preferences,
powers, qualifications, rights and privileges, all as the Board of
Directors may deem advisable and as are not inconsistent with law
and the provisions of this Amended and Restated Certificate of
Incorporation, as amended.”
FOURTH
: Except as expressly amended herein, all
provisions of the Certificate filed with the Office of the
Secretary of State of the State of Delaware on December 3, 2012,
shall remain in full force and effect.
1
FIFTH
:
The foregoing amendment was duly adopted by the
Board of Directors and by the stockholders of the Corporation in
accordance with Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS
WHEREOF
, the undersigned, being
a duly authorized officer of the Corporation, does hereby execute
this Certificate of Amendment to the Amended and Restated
Certificate of Incorporation, as amended, this ___ day of
_______________, 2017.
|
|
CORMEDIX INC.
|
|
|
|
|
|
By:__________________________________________
|
|
|
Name: Khoso
Baluch
|
|
|
Title: Chief
Executive Officer
|
2
|
CORMEDIX INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – JUNE 6, 2017 AT 11:00 AM EASTERN
TIME
|
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|
|||||||
|
CONTROL ID:
|
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|||||
|
REQUEST ID:
|
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|||||
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|||||
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||||||
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The
undersigned hereby appoints Khoso Baluch and Robert Cook and each
of them, as proxies, each with full power of substitution, and
hereby authorizes them to represent and to vote, as designated
below, all the shares of common stock of CorMedix Inc., a Delaware
corporation, held of record by the undersigned on April 13, 2017,
at the Annual Meeting of Stockholders to be held at 1545 U.S.
Highway 206, First Floor Conference Room, Bedminster, New Jersey,
on Monday, June 6, 2017, at 11:00 a.m, or at any adjournment(s)
thereof. The following proposals to be brought before the meeting
are more specifically described in the proxy
statement.
|
||||||||||||
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
|
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VOTING
INSTRUCTIONS
|
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
|
Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
|
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|||||
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FAX:
|
Complete the reverse portion of this Proxy Card
and Fax to
202-521-3464.
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INTERNET:
|
https://www.iproxydirect.com/CRMD
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL MEETING OF THE STOCKHOLDERS OF
CORMEDIX INC.
|
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:
☒
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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|||||||||
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Proposal 1
|
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FOR ALL
|
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WITHHOLD
ALL
|
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FOR ALL
EXCEPT
|
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Election of Directors:
|
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☐
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☐
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Khoso
Baluch
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☐
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Janet
M. Dillione
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☐
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CONTROL ID:
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Michael
W. George
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☐
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REQUEST ID:
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Myron
Kaplan
|
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☐
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Taunia
Markvicka
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☐
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Cora
M. Tellez
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☐
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Proposal 2
|
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FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
|
|
|
|
Approval of an amendment to our Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of
capital stock from 82,000,000 shares to 202,000,000 shares and to
increase the number of authorized shares of common stock from
80,000,000 shares to 200,000,000 shares.
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☐
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☐
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☐
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Proposal 3
|
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FOR
|
|
AGAINST
|
|
ABSTAIN
|
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|
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Ratification of the appointment of Friedman LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2017.
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☐
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MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING:
☐
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MARK HERE FOR ADDRESS CHANGE
☐
New Address (if applicable):
____________________________________________________________________________________
IMPORTANT:
Please sign exactly
as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
Dated:
________________________, 2017
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(Print
Name of Stockholder and/or Joint Tenant)
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(Signature
of Stockholder)
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(Second
Signature if held jointly)
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