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 You are cordially invited to attend the virtual meeting. Whether or not you expect to attend the meeting, please complete, date, sign and return the proxy card, or vote over the telephone or the internet as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) has been provided for your convenience. Even if you have voted by proxy, you may still vote during the virtual meeting via the virtual meeting website—www.virtualshareholdermeeting.com/EGLT2018, where stockholders may vote and submit questions during the meeting. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.proxyvote.com. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote during the meeting, you must obtain a proxy issued in your name from that record holder. Your broker, bank or nominee cannot vote your shares for any proposals deemed "non-routine" unless you provide voting instructions. Therefore, if your shares are held by a broker, bank or other nominee, we highly encourage you to instruct them regarding how to vote your shares.

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        This proxy statement contains forward-looking statements within

EXPLANATORY NOTE

We are an “emerging growth company” under applicable federal securities laws and therefore are permitted to take advantage of certain reduced public company reporting requirements. As an emerging growth company, we provide in this Proxy Statement the meaning of Section 27A ofscaled disclosure permitted under the SecuritiesJumpstart Our Business Startups Act of 1933,2012 (the “JOBS Act”), including the compensation disclosures required of a “smaller reporting company,” as amended, and Section 21E ofthat term is defined in Rule 12b‑2 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), and. In addition, as an emerging growth company, we are subjectnot required to conduct votes seeking approval, on an advisory basis, of the safe harbor created by those sections. We have identified somecompensation of these forward-looking statements with words like "may," "might," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "project," "potential," "continue," "seek to" and "ongoing,"our named executive officers or the negativefrequency with which such votes must be conducted. We will remain an “emerging growth company” until the earliest of these terms,(i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or other comparable terminology intended to identify statements aboutmore; (ii) December 31, 2019; (iii) the future. Forward-looking statements involve risks and uncertainties. These uncertainties include factors that affect all businesses as well as matters specific to us. Forward-looking statements by their nature address matters thatdate on which we have issued more than $1.07 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are to different degrees, uncertain. Uncertainties and risks may cause our actual resultsdeemed to be materially different than those expressed in or implied by our forward-looking statements. For us, particular uncertainties and risks include, among others, including, but not limited to, risks related to: our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; our current and future indebtedness; our ability to obtain additional financing; our current inability to issue additional equity securities due toa large accelerated filer under the limited number of authorized shares available for issuance under our Charter; the level of commercial success of our products and, if approved, our product candidates; our ability to execute on our sales and marketing strategy, including developing relationships with customers, physicians, payers and other constituencies; the continued development of our currently limited commercialization capabilities, including sales and marketing capabilities and the outcomerules of the internalization of our previously external sales force; the success of competing products that are or become available; the accuracy of our estimates of the size and characteristics of the potential markets for our products and product candidates and our ability to serve those markets; the rate and degree of market acceptance of our products and product candidates; the difficulties in obtaining and maintaining regulatory approval of our products and product candidates, and any related restrictions, limitations and/or warnings in the product label under any approval we may obtain; the performance of third parties, including contract research organizations, manufacturers and collaborators; our success with regard to any business development initiatives; the success and timing of our preclinical studies and clinical trials; our ability to recruit or retain key scientific or management personnel or to retain our executive officers, including as a result of most of our outstanding employee stock options being underwater; regulatory developments in the U.S. and foreign countries; obtaining and maintaining intellectual property protection for our product candidates and our proprietary technology; our ability to operate our business without infringing the intellectual property rights of others; recently enacted and future legislation regarding the healthcare system; our ability to integrate and grow any businesses or products that we may acquire; our stock price and ability to meet the continued listing requirements of the NASDAQ Global Market; the impact of the anti-dilution features in our warrant agreements on our ability to raise additional capital; and changes in tax laws or our effective tax rate and other risks and uncertainties described in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K as amended and supplemented by our subsequent QuarterlySEC.

Reports

PROPOSAL 1

ELECTION OF DIRECTORS

Each of the members of our Board is standing for re-election for a one-year term, or until their successors are duly elected and qualified or until such director’s earlier death, resignation, removal or incapacity.  Vacancies on From 10-Q. All forward-looking statementsthe Board may be filled only by persons elected by a majority of the remaining directors.

On October 30, 2018, the Company entered into a definitive asset purchase agreement (the “Purchase Agreement”) to acquire five commercial products from Iroko Pharmaceuticals, Inc. and its subsidiaries (collectively, “Iroko”). To facilitate the transactions contemplated by the Purchase Agreement (the “Iroko Products Acquisition”) and to reorganize its financial structure, the Company and its wholly-owned subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in this proxy statement speak onlythe U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and a related Joint Plan of Reorganization (the “Bankruptcy Plan”) on October 30, 2018 (the “Bankruptcy”).  On January 14, 2019, the Bankruptcy Court entered the Confirmation Order confirming the Plan under Chapter 11 of the Bankruptcy Code. On January 31, 2019 (the “Effective Date”), and substantially concurrent with the consummation of the Iroko Products Acquisition, the Bankruptcy Plan became effective.  The Company entered into a Stockholders’ Agreement on the Effective Date with Iroko and certain of its affiliates (the “Stockholders Agreement”), which contains customary provisions and sets forth the initial composition of the Board after the Effective Date.

The Board presently has seven members.  Under Section 8(b)(i) of the Stockholders’ Agreement, two of our directors were initially designated for nomination by Iroko Pharmaceuticals, Inc.,  our largest debt holder and stockholder on the Effective Date.  Under section 8(b)(ii) of the Stockholders Agreement, the members of the Ad Hoc Secured Noteholder Committee (as defined in the Bankruptcy Plan), after consultation with our Chief Executive Officer, were entitled to initially designate one of our directors for nomination.  Pursuant to Section 8(b)(iii) of the Stockholders Agreement, the members of the Ad Hoc Convertible Noteholder Committee formed as part of our Bankruptcy Plan, after consultation with our Chief Executive Officer, were entitled to initially designate one of our directors for nomination.  Under Section 8(b)(iv) of the Stockholders Agreement, the members of the Ad Hoc Secured Noteholder Committee, the members of the Ad Hoc Convertible Noteholder Committee (each, as defined in our Bankruptcy Plan) and Iroko, after consultation with our Chief Executive Officer, were jointly  (by mutual agreement) entitled to designate one of our directors for nomination. Finally, our chairman and our chief executive officer were also designated as directors. Our Bylaws contain requirements relating to the succession of the designated directors.

The following table sets forth information regarding each of the Board’s nominees as of October 24, 2019.

The nominees listed below are currently directors of the dateCompany. All of this proxy statementthe nominees, other than Dr. Phillips and are basedMr. Smith, were appointed to the Board upon the Company’s emergence from Bankruptcy on January 31, 2019. Dr. Phillips was appointed to the Board on June 18, 2019 to fill a vacancy created when a previous director resigned. Dr. Phillips was designated by Iroko,  then Zyla’s largest stockholder, pursuant to the Stockholders Agreement. Mr. Smith was appointed to the Board in October 2019 to fill a vacancy created when Robert Radie, our current beliefsformer President and expectations. We undertake no obligation to updateChief Executive Officer, resigned.

If elected at the Annual Meeting, Messrs. Holmes, McInnis, Pauls,  Smith and Walbert,  Dr. Phillips and Ms. Smiley would serve until the 2020 Annual Meeting, in each case, until his or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.her successor has been duly elected

PROPOSAL 1
AMENDMENT TO OUR THIRD AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK
and qualified, or, if sooner, until his or her death, resignation or removal. Our directors are expected to attend our Annual Meeting, either in person or telephonically.

        Our Third AmendedDirectors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and Restated Certificateentitled to vote on the election of Incorporation,directors. Accordingly, each of Messrs. Holmes, McInnis, Pauls,  Smith and Walbert,  Dr. Phillips and Ms. Smiley will be elected if he or she receives a plurality of the votes cast. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of each of the nominees. If any of Messrs. Holmes, McInnis, Pauls,  Smith and Walbert,  Dr. Phillips or Ms. Smiley becomes unavailable for election as amended (the "Charter") currently authorizes us to issue a total of 75,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, $0.001 par value. Our Board has approved, and is seeking stockholder approvalresult of an amendmentunexpected occurrence, shares that would have been voted for him or her will instead be voted for the election of a substitute nominee proposed by our Board. With respect to each of Mr. Holmes and Dr. Phillips, each initially designated for nomination by Iroko, LSH, the successor to Iroko and currently our Charter (the "Authorized Shares Amendment")largest stockholder, retains the right to implement an increase innominate a successor director under the number of shares of authorized Common Stock from 75,000,000 sharesStockholders Agreement.  Messrs. Holmes, McInnis, Pauls,  Smith and Walbert,  Dr. Phillips and Ms. Smiley have each agreed to 275,000,000.

        The Boardserve if elected. Our management has unanimously determinedno reason to believe that the Authorized Shares Amendment is advisable and in the best interestsany of the Companynominees will be unable to serve.

Timothy P. Walbert has been a member of our Board since March 2014 and has served as the Chairman of our stockholders,Board since June 2015. Mr. Walbert has been the president and recommends that our stockholders approvechief executive officer of Horizon Therapeutics plc, a public biopharmaceutical company (“Horizon”),  since June 2008 and has been the Authorized Shares Amendment. In accordance with the General Corporation Lawchairman of the StateHorizon board since 2010. Previously, he served as president, chief executive officer, and director of Delaware, we are hereby seeking approvalIDM Pharma, Inc., a public biopharmaceutical company (“IDM”) which was acquired by Takeda America Holdings, Inc., in June 2009. Prior to IDM, Mr. Walbert served as executive vice president, commercial operations, at NeoPharm, Inc., a public biopharmaceutical company. From 2001 to 2005, Mr. Walbert served as divisional vice president and general manager, immunology, where he led the global development and launch of the Authorized Shares Amendment by our stockholders.

        Other than the potential Reverse Stock Split describedmulti-indication biologic HUMIRA, which had almost $20 billion in Proposal 2, no other changes2018 sales and divisional vice president, global cardiovascular strategy, at a division of Abbott,  a healthcare company, now AbbVie Inc. From 1998 to our Charter are being proposed, including2001, Mr. Walbert served as director, CELEBREX North America, and arthritis team leader, Asia Pacific, Latin America and Canada at G.D. Searle & Company, a pharmaceuticals company (“G.D. Searle”). From 1991 to 1998, Mr. Walbert also held sales and marketing roles with respect to the number of authorized shares of preferred stock. Other than the proposed increaseincreasing responsibility at G.D. Searle (now Pfizer)  Merck & Co., Inc. and Wyeth (now Pfizer). Mr. Walbert received his B.A. in the number of authorized shares of Common Stock, the Authorized Shares Amendment is not intended to modify the rights of existing stockholders in any material respect. The additional shares of Common Stock to be authorized pursuant to the proposed Authorized Shares Amendment will be identical to the shares of Common Stock currently authorized and outstanding under our Charter, none of which have preemptive or similar rights to acquire the newly authorized shares.

        Under the Delaware General Corporation Law, our stockholders are not entitled to appraisal rights with respect to the proposed Authorized Shares Amendment to increase the number of authorized shares of Common Stock, and we will not independently provide stockholders with any such rights.

        The full text of the proposed Authorized Shares Amendment is attached hereto as ANNEX A.

Reasons for the Authorized Shares Amendment

        The Board is proposing the Authorized Shares Amendment to increase the number of authorized shares of our Common Stockbusiness from 75,000,000 shares to 275,000,000 shares. Of the 75,000,000 shares of Common Stock that are currently authorized to be issued under the Charter, as of January 2, 2018, 45,943,684 shares are issued and outstanding, 5,714,754 are reserved for issuance under our equity plans (including our inducement plan) and employee stock purchase plan, 17,666,667 are issuable upon the exercise of our outstanding warrants, 1,657,700 are issuable upon conversion of our outstanding 5.50% Notes (hereafter defined) and 4,017,195 are reserved for issuance under our 6.50% Notes (hereafter defined).Muhlenberg College. In addition to being a member of the extent that any shares currently reservedBoard, Mr. Walbert serves on the Exicure (Nasdaq, ECUR), Biotechnology Innovation Organization (BIO), Illinois Biotechnology Innovation Organization (iBIO), World Business Chicago and Greater Chicago Arthritis Foundation boards. He is a member of the Illinois Innovation Council, the National Organization for issuance are releasedRare Disorders (NORD) Advisory Board, the Board of Trustees of Muhlenberg College and is co-chairman of MATTER, a healthcare focus incubator. Mr. Walbert has prior public board experience on the boards of XOMA (Nasdaq, XOMA) from such reserve, we have agreed2009 to 2017, Sucampo (Nasdaq, SCMP, acquired by Mallinckrodt) from 2016 to 2018 and Raptor (Nasdaq, RPTP, acquired by Horizon) from 2010 to 2014. The Board believes Mr. Walbert’s perspective and experience in senior management and board positions with companies in our industry, as well as his educational background, provide him with the indenture governingqualifications and skills necessary to serve as a director. Mr. Walbert was nominated to become our 6.50% Notes to promptly reserve such shares for issuance underdirector in accordance with Section 8(b)(v) of the 6.50% Notes. Therefore, we currently have no authorized shares of Common Stock available for future issuance. In fact, more shares are potentially issuable upon conversionStockholders Agreement.

Todd N. Smith has been our President and Chief Executive Officer and a member of our 6.50% Notes than we currently have authorized. Other than issuances pursuantBoard of Directors since October 2019.  Before joining the Company, from 2017 through February 2019, Mr. Smith served as the Chief Executive Officer and a director of Iroko Pharmaceuticals Inc., a privately-owned pharmaceutical company.  During the period October 2014 through June 2015, Mr. Smith served as the Chief Commercial Officer of Ophthotech Corporation, a public biopharmaceutical company focused on developing novel therapeutics to equity incentive planstreat ophthalmic diseases.  Since 2014, Mr. Smith has also held multiple senior roles at privately owned pharmaceutical and currently outstanding warrantsmedical device companies, including as a Chief Executive Officer and convertible notes (as described above),a director.  Additionally, he has held a variety of senior commercial and marketing roles at organizations including Horizon Therapeutics plc, a public biopharmaceutical company focused on rare and rheumatic diseases, and Abbott Laboratories, a public healthcare products company.  The Board believes that Mr. Smith’s extensive business and management experience operating pharmaceutical companies such as the Company provide him with the skills necessary to serve as a director.

Todd Holmes has served as a member of the dateBoard since February 2019.  He serves as a Principal at CRG, a healthcare-focused investment firm. Prior to joining CRG, Mr. Holmes was an investor and founding member of this proxy statement, we have no current plans, arrangements or understandings regarding the issuance of any additional shares of Common Stock that would be authorized pursuant to this proposal and there are no negotiations pending with respect to the issuance thereof for any purpose. The Board does not intend to issue any Common Stock except on terms which the Board deems to be in the best interests of the Company and its then existing stockholders.Gurnet 

        On December 20, 2017, we entered into exchange agreementsPoint Capital, an investment firm, where he led investments and acquisitions and was actively involved on company boards.  Previously, Mr. Holmes was a member of Third Rock Ventures, a venture capital firm, where he held investment and operational roles and was part of the founding team at Ember Therapeutics Inc., a publicly traded clinical stage therapeutic company, an investor at BVF Partners, a biotechnology-focused hedge fund, and a member of the commercial lending practice at Silicon Valley Bank, a commercial bank. Mr. Holmes received a bachelor’s degree in Economics from Colgate University and an M.B.A. from the Wharton School at the University of Pennsylvania.  The Board believes that Mr. Holmes’ financial acumen and business leadership skills gained during his tenure at CRG, as well as his experience in the healthcare space, provide him with certain holdersthe qualifications and skills necessary to serve as a director.  Pursuant to section 8(b)(i) of the Stockholders Agreement, Mr. Holmes is one of our outstanding 5.50% senior convertible notes ("5.50% Notes"two directors who were initially designated for nomination by Iroko.

Joseph McInnis has served as a member of the Board since February 2019.  He is a Principal at Murrin Construction, a privately-held construction company, a position he has held since July 2015.  Prior to joining Murrin Construction, Mr. McInnis served as Managing Director and Investment Analyst at Greywolf Capital, an investment firm, from 2004 to 2015 and as an Investment Analyst in Goldman Sachs’ Special Situations Investing Group, an investment firm, from 2001 to 2004. Mr. McInnis currently serves on the boards of Aspire Oil & Gas, a privately held oil and gas exploration and production company, and the Washington Mutual, Inc. Liquidating Trust, a liquidating trust for a former bank holding company, and the owner of Washington Mutual Bank, a commercial bank, positions he has held since November 2015. Mr. McInnis previously served on the board of Lumara Healthcare, a provider of women’s specialty pharmaceuticals, from September 2013 to November 2014. Mr. McInnis earned his Bachelor of Commerce in Finance from the University of British Columbia.  The Board believes that Mr. McInnis’ financial acumen and business leadership skills, as well as his service on other boards, provide him with the qualifications and skills necessary to serve as a director.  Pursuant to section 8(b)(iii) of the Stockholders Agreement, Mr. McInnis is the independent director who was initially designated for nomination by the members of the Ad Hoc Convertible Noteholder Committee formed as part of our Bankruptcy Plan after consultation with our Chief Executive Officer.

Matthew Pauls has served as a member of the Board since February 2019.  He was the Chief Executive Officer of Strongbridge Biopharma plc, a global commercial-stage biopharmaceutical company (“Strongbridge”) due,  from  August 2014 to October 2019 and a member of its board of directors from September 2015 to October 2019.  Mr. Pauls has served as a member of the board of directors of Savara Inc. (formerly Mast Therapeutics, Inc.), a publicly traded biopharmaceutical company, since October 2015. Prior to joining Strongbridge,  Mr. Pauls was Chief Commercial Officer of Insmed, Inc. (“Insmed”), a publicly traded biopharmaceutical company, from April 1, 2020. Holders2013 to August 2014. Prior to Insmed,  Mr. Pauls worked at Shire plc, a publicly traded specialty biopharmaceutical company, beginning in 2007 until March 2013, most recently as Senior Vice President, Head of Global Commercial Operations. Mr. Pauls also held positions at Bristol-Myers Squibb, a publicly traded pharmaceutical company, in brand management and payor marketing, and at Johnson & Johnson, a publicly traded medical devices, pharmaceutical and consumer packaged goods manufacturer, in various U.S. and global commercial roles. He is a volunteer board member of the Pennington School in Pennington, New Jersey, and the Boys & Girls Clubs of Philadelphia. Mr. Pauls holds B.S. and M.B.A. degrees from Central Michigan University and a J.D. from Michigan State University College of Law. The Board believes that Mr. Pauls’ strong business skills and experience, his extensive knowledge of financial and operational matters in the aggregate, approximately $36.4 million of outstanding principal amountpharmaceutical industry and his service on other boards provide him with the qualifications and skills necessary to serve as a director.  Pursuant to section 8(b)(iv) of the 5.50% Notes agreedStockholders Agreement, Mr. Pauls is the independent director who was initially designated for nomination jointly by mutual agreement of the members of the Ad Hoc Secured Noteholder Committee, the members of the Ad Hoc Convertible Noteholder Committee (each, as defined in our Bankruptcy Plan) and Iroko, after consultation with our Chief Executive Officer.

Gary M. Phillips, M.D. has served as a member of our Board since June 2018. Dr. Phillips has served as President and Chief Executive Officer at OrphoMed, Inc. since April 2018. He served as Executive Vice President and Chief Strategy Officer at Mallinckrodt Pharmaceuticals plc from October 2013 to exchange those notes for,April 2018 and was President of Reckitt Benckiser Pharmaceuticals, Inc. from 2011 to 2012. He served as President of U.S. Surgical and Pharmaceuticals at Bausch & Lomb Incorporated from 2002 to 2008. Dr. Phillips has also held executive roles at Merck Serono SA from 2008 to 2011, Novartis Corporation from 2000 to 2002, and Wyeth Pharmaceuticals, Inc. (now Pfizer, Inc.) from 1999 to 2000. He was Head of Global Health & Healthcare Industries at the World Economic Forum in Geneva from January 2012 to September 2013. Dr. Phillips was also healthcare strategy managing consultant at Towers Perrin from

1997 to 1999, and practiced as a general medicine clinician/officer in the aggregate, US Navy, from which he was honorably discharged as a lieutenant commander. Dr. Phillips was educated at the University of Pennsylvania, where he received an M.D. (Alpha Omega Alpha) from the School of Medicine in 1992, an MBA from the Wharton School in 1991, and B.A. (summa cum laude, Phi Beta Kappa) in biochemistry from the College of Arts and Sciences in 1987. He completed postgraduate medical education at Naval Medical Center San Diego and maintains an active medical license.  He has served on the Board of Directors of Aldeyra Therapeutics, Inc. (ALDX) since May 2009.  The Board believes Dr. Phillips’ perspective and experience in senior management and board positions with companies in our industry, as well as his educational background, provide him with the qualifications and skills necessary to serve as a director. Pursuant to section 8(b)(i) approximately $23.9 million of 6.50% convertiblethe Stockholders Agreement,  Dr. Phillips was designated for nomination by his predecessor, Luke Düster.

Andrea Heslin Smiley has served as a member of the Board since April 2018. Since January 2011, she has served as President and Chief Executive Officer of VMS BioMarketing, a provider of clinical educator solutions, which she joined in 2008 as Vice President, Strategic Marketing.  Prior to joining VMS BioMarketing,  Ms. Smiley served in various positions at Eli Lilly and Company. She currently serves on the boards of several nonprofit corporations, including the Indiana Chapter of the Alzheimer’s Association. Ms. Smiley earned her B.A. in Economics from DePauw University.  The Board believes that Ms. Smiley’s perspective and experience in senior notes due 2024 ("6.50% Notes")management positions with a healthcare company provide her with the qualifications and skills necessary to serve as a director.  Under section 8(b)(ii) of the Stockholders Agreement, Ms. Smiley is the independent director who was initially designated for nomination by the members of the Ad Hoc Secured Noteholder Committee (as defined in the Bankruptcy Plan) after consultation with our Chief Executive Officer.

CORPORATE GOVERNANCE

Independence of the Board of Directors

The Board consults with our counsel to ensure that the Board’s determinations with regard to independence are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of Nasdaq (which the Company has chosen to use, as it is not listed on a national securities exchange), (ii) a warrant exercisable for 3.5 million sharesas in effect from time to time. In 2018, the Board reviewed the independence of our Common Stockdirectors and (iii) payments, in cash, ofdetermined that all accrued but unpaid interest asdirectors except Mr. Radie were independent under the Nasdaq listing standards. The Board undertook another review of the closing onindependence of our directors in April 2019 after the 5.50% Notes exchanged in the transaction (the "Exchange"). As noted above, we currently do not have a sufficient numberreconstitution of shares of authorized and unissued Common Stock to reserve for issuance the number of shares required to be reserved under the indenture governing the 6.50% Notes. Accordingly, we are required thereby to use our reasonable best efforts to (i) seek stockholder approval of an amendment to our Charter to increase the number of authorized shares available for issuance thereunder, and (ii) if and when such approval is obtained, to reserve from such number the number of shares that may be issued in respect of the 6.50% Notes and any other securities issuedBoard in connection with our bankruptcy and restructuring and has determined that all directors, except Mr. Holmes, are independent under the Exchange. InNasdaq listing standards. Mr. Holmes is a principal at CRG,  which together with its affiliates, is a significant stockholder of the exchange agreements,Company.  Mr. Smith is also not an independent director under these rules because he is our President and Chief Executive Officer.

Board Leadership Structure

The Board has appointed Mr. Walbert as our independent Chairman of the holders granted us a proxy authorizing us to vote any shares of Common Stock they hold in favor of such a Charter amendment at any applicable meeting of our stockholders. If we are unable to obtain stockholder approval on or prior to July 1, 2018,Board. The Chairman has the interest rate on the 6.50% Notes will increase to 10.0% unless and until such stockholder approval is obtained. We are seeking approval for the Authorized Shares Amendment at this time, forauthority, among other reasons,things, to comply with our obligations under the indenture for the 6.50% Notes.

        In additionpreside over Board meetings, to the increase in our authorized shares of Common Stock necessitated by the Exchange, the Board believes that the proposed increase in the number of authorized shares of Common Stock will also benefit the Company by improving our flexibility in considering opportunities that require the issuance of shares of Common Stock. The additional authorized shares will be available for issuanceset meeting agendas and to perform all other duties delegated to him from time to time to enable us to respond to future business opportunities requiringby the issuanceBoard. We believe that separation of shares, including stock dividends, the consummationpositions of equity-based financings involving Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock derivatives") includingBoard Chair and Chief Executive Officer reinforces the Company's "at-the-market" equity offering facility, re-financingsindependence of current or future indebtedness involving the issuance of Common Stock or Common Stock derivatives, acquisition or strategic joint venture transactions involving the issuance of Common Stock or Common Stock derivatives, grants of Common Stock and Common Stock derivatives to the Company's current and future employees and consultants, or for other general purposes that the Board may deem advisable from time to time. Without an increase in the number of authorized shares of Common Stock over and above the amount required under the indenture governing the 6.50% Notes, the Company may be constrained in its oversight of our business and affairs. In addition, we believe that having an independent Chairman creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board to raise capitalmonitor whether management’s actions are in our best interests and the best interests of our stockholders. As a timely fashion or at all and may lose important business opportunities, which could adversely affectresult, we believe that having an independent Chairman can enhance the effectiveness of the Board as a whole.

Role of the Board in Risk Oversight

One of the Board’s key functions is informed oversight of our financial performance and growth.risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as

a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight. In particular, although the Company has availability under its "at-the-market" equity offering facility to raise additional capital, because the Company has no authorized Common Stock available, it cannot utilize the facility to raise such capital.

        In determining the sizeour Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the proposed authorized share increase,nature and level of risk appropriate for us. Our Audit Committee has the Board considered a number of factors,responsibility to review and discuss with management and Ernst & Young LLP, as appropriate, our guidelines and policies with respect to risk assessment and risk management, including the factors set forth above, the Company's historical issuances of sharesour major financial risk exposures and the Company's potential future needs, including that over a numbersteps taken by management to monitor and control these exposures. Our Nominating and Corporate Governance Committee (the “Nominating Committee”) is responsible for periodically reviewing our corporate governance guidelines. Our Compensation Committee reviews our practices and policies of years the Company may potentially need additional shares in connection with one or more future equity transactions, acquisitions or other strategic transactionsemployee compensation as they relate to risk management and future issuances under equityrisk‑taking incentives, to determine whether such compensation plans. If the stockholders do not approve the proposal, then, in additionpolicies and practices are reasonably likely to the ramifications under the indenture for the 6.50% Notes described above, the Company will not have needed additional shares available or would be required to seek stockholder approval in connection with any such transaction, which may delay or otherwise have a material adverse effect on us.

Meetings of the transactionBoard of Directors and Attendance at the Annual Meeting

The Board met twelve times during the 2018 fiscal year. All directors, other than Mr. Roche, attended at least 75% of the aggregate number of meetings of the Board and committees on which they served that were held during 2018 or the Company.portion thereof for which they were directors or committee members.

The Board expects directors and nominees for director to attend the Annual Meeting.  Each of our then directors, other than Mr. Weaver, attended our 2018 Annual Meeting.

Information Regarding Committees of the Board of Directors

The Board has established an Audit Committee, a Compensation Committee and a Nominating Committee. The following table provides current membership information for each of these Board committees. From time to time, our Board and committees also take action by written consent without a meeting. Each of our Board committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities.

*     Committee Chairperson

Audit Committee

Our Audit Committee currently consists of Mr. McInnis,  Mr. Pauls and Ms. Smiley, each of whom satisfies the independence requirements under the listing standards of the Nasdaq Stock Market (“Nasdaq”), OTCQX rules and SEC rules. Each member of our Audit Committee can read and understand fundamental financial statements in accordance with Nasdaq listing standards. The chairperson of our Audit Committee is Mr. McInnis, whom our Board has determined to be an “audit committee financial expert” as defined in SEC rules. In arriving at these determinations, the Board has examined each Audit Committee member’s scope of experience and the nature of their employment. The Audit Committee held five meetings in 2018.

The primary purpose of our Audit Committee is to assist the Board in the oversight of the integrity of our accounting and financial reporting process, the audits of our consolidated financial statements, our system of internal controls, our Code of Conduct and our compliance with legal and regulatory requirements. In addition, our Audit

Committee is charged with providing an avenue of communication among our independent auditors, our management and our Board.  The functions of our Audit Committee include, among other things:

The Board has adopted a charter for the Audit Committee that complies with Nasdaq listing standards. The charter is available on our website at www.Zyla.com.

Potential effectsReport of the Authorized Shares AmendmentAudit Committee of the Board of Directors

The proposed increaseAudit Committee assists the Board in performing its oversight responsibilities for our financial reporting process and audit process as more fully described in the number of authorized shares of Common Stock will not have any immediate effect onAudit Committee’s charter. Management has the rightsprimary responsibility for the financial statements and the reporting process. Our independent registered public accounting firm is responsible for performing an independent audit of our existing stockholders. However,financial statements in accordance with the auditing standards of the Public Company Accounting Oversight Board will have(United States), or the authorityPCAOB, and to issue a report thereon.

In the additional sharesperformance of Common Stock without requiring future stockholder approvalits oversight function, the Audit Committee has reviewed and discussed our audited consolidated financial statements for the year ended December 31, 2018 with management and with our independent registered public accounting firm. In addition, the Audit Committee has discussed the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees” (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the PCAOB in Rule 3200T, which includes, among other items, matters related to the conduct of such issuances, except as may bethe audit of our financial statements, with Ernst & Young LLP, our independent registered public accounting firm for the year ended December 31, 2018. The Audit Committee has also received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable law or rules of any stock exchange on which our securities may be listed, including The Nasdaq Global Market. The issuance of additional shares of Common Stock may decrease the relative percentage of equity ownership of our existing stockholders, thereby dilutingPCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence (which relates to the voting power of their Common Stock. The perception that there might be additional dilution to our existing stockholders may put pressure on our stock price.

        While it may be deemed to have potential anti-takeover effects, including by delaying or preventing a change in control of the Company through subsequent issuances of these sharesindependent registered public accounting firm’s independence from us) and the other reasons set forth above, which, among other things, could include issuances in one or more transactions that would make a change in control of the Company more difficult, and therefore, less likely, the proposal to increase the authorized Common Stock is not prompted by any specific effort of which we are aware to accumulate shares of our Common Stock or obtain control of the Company.

        The additional authorized shares of Common Stock, if and when issued, would be part of the existing class of Common Stock and would have the same rights and privileges as the shares of Common Stock currently outstanding. Stockholders do not have preemptive rightshas discussed with respect to our Common Stock. Therefore, should the Board determine to issue additional shares of Common Stock, existing stockholders would not have any preferential rights to purchase such shares in order to maintain their proportionate ownership thereof.Ernst & Young LLP its

        We can provide no assurance that we will be successful in amending our Charter to increase the number of shares of Common Stock that are available for issuance, or that the Authorized Shares Amendment will not have an adverse effect on our stock price.

Effectiveness of the Authorized Shares Amendment

        If the Authorized Shares Amendment is approved by our stockholders, it will become effective upon the acceptance by the Secretary of State of the State of Delaware of the filing of the Authorized Shares Amendment. Such filing is expected to occur promptly after stockholder approval of this proposal. If this proposal is not approved, our Charter would remain unchanged and the number of authorized shares of Common Stock would remain 75,000,000. Other than as described herein, this proposed Authorized Shares Amendment effects no other changes to our Charter.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL TO ALLOW FOR AN AMENDMENT TO OUR THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.

PROPOSAL 2
APPROVAL OF AN AMENDMENT TO OUR THIRD AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION, AS AMENDED, TO EFFECT THE REVERSE STOCK SPLITindependence from us. We have also considered whether the non‑audit services provided by the independent registered public accounting firm are compatible with maintaining its independence.

General

        TheBased on the review and discussions referenced above, the Audit Committee recommended to our Board has unanimously approved, and recommended that our stockholders approve, an amendment toaudited financial statements be included in our Charter (the "Reverse Split Amendment"), to effectAnnual Report on Form 10‑K for the Reverse Stock Split at a ratio of not less than 1-to-2 and not greater than 1-to-20, withyear ended December 31, 2018.

The foregoing report has been furnished by the final decision of whether to proceed with the Reverse Stock Split, the effective timeAudit Committee.

The foregoing Report of the Reverse Stock Split,Audit Committee does not constitute soliciting material and the exact ratioshall not be deemed filed or incorporated by reference into or a part of the Reverse Stock Split (within such range) to be determinedany other filing by the Board, in its discretion. If the stockholders approve the Reverse Stock Split, and the Board decides to implement it, the Reverse Stock Split will become effective at a time and on a date to be determined by the Board that will be specified in the Reverse Split Amendment. If the Board does not decide to implement the Reverse Stock Split within twelve (12) months from the date of the Special Meeting, the authority granted in this proposal to implement the Reverse Stock Split will terminate.

        The Reverse Stock Split will be realized simultaneously for all outstanding Common Stock. The Reverse Stock Split will affect all holders of Common Stock uniformly and each stockholder will hold the same percentage of Common Stock outstanding immediately following the Reverse Stock Split as that stockholder held immediately prior to the Reverse Stock Split, except for immaterial adjustments that may result from the treatment of fractional shares as described below. The Reverse Stock Split will not change the par value of our Common Stock and will not reduce the number of authorized shares of Common Stock.

Reasons for the Reverse Stock Split

        Our Board believes that a Reverse Stock Split is desirable for a number of reasons. First, the Board believes that a Reverse Stock Split could improve the marketability and liquidity of our Common Stock. Second, the Board believes that a Reverse Stock Split may facilitate the continued listing of our Common Stock on the NASDAQ Global Market or the listing of our Common Stock on the NASDAQ Capital Market. Third, our Board believes that a Reverse Stock Split would assist in providing us with flexibility and as many alternatives as possible to obtain financing that we may, in theCompany (including any future seek to accomplish.

Marketability

        Our Board believes that the increased market price of our Common Stock expected as a result of implementing a Reverse Stock Split could improve the marketability and liquidity of our Common Stock and could encourage interest and trading in our Common Stock. Theoretically, the number of shares outstanding and the per share price should not, by themselves, affect the marketability of our Common Stock, the type of investor who acquires it, or our reputation in the financial community. However, in practice, we believe this is not necessarily the case, as we believe that many investors view low-priced stocks as speculative, more volatile and generally avoid the purchase of such securities. Our Board believes that there is a reluctance of many brokerage firms to recommend low-priced stocks to their retail clients (whether due to internal restrictions and/or limitations or otherwise). Further, we believe that certain brokerage house policies and practices tend to discourage individual brokers who administer brokerage accounts within those firms from encouraging their clients to transact trades in low-priced stocks. In addition, institutional investors, pursuant to internal policies, often are restricted and/or limited from investing in companies whose stocks trade at low prices. Stockbrokers are also subject to certain restrictions on their ability to recommend lower priced stocks to their retail clients because of what we believe to be a general presumption in the industry that such securities are highly speculative. In addition, the structure of trading commissions tends to have an adverse impact upon

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purchasers of low-priced stocks because the brokerage commission on a sale of such securities generally represents a higher percentage of the purchase/sales price than the commission on a relatively higher-priced issue. We believe that the Reverse Stock Split will make our Common Stock a more attractive and cost effective investment for many investors, which we in turn believe would enhance the liquidity of the holders of our Common Stock.

        The Reverse Stock Split is intended, in part, to result in a price level for our Common Stock that will increase investor interest. On January 2, 2018, the closing price of our Common Stock on The NASDAQ Global Market was $1.03 per share. No assurances can be given that the market price for our Common Stock will increase in the same proportion as the Reverse Stock Split or that, if increased, such price will be maintained. In addition, no assurances can be given that the Reverse Stock Split will increase the price of our Common Stock to a sufficiently high level that is attractive to brokerage houses and retail and institutional investors.

        Further, our Board believes that a higher stock price could help us establish business development relationships with other companies. Theoretically, decreasing the number of shares of Common Stock outstanding should not, by itself, affect our reputation in our business community. In practice, however, we believe that potential business development partners may be less confident in the prospects of a company with a low stock price, and are less likely to enter into business relationships with a company with a low stock price. If the Reverse Stock Split successfully increases the per share price of our Common Stock, we believe this may increase our ability to attract business development partners.

Stock Exchange Requirements

        Our Common Stock is currently listed on The NASDAQ Global Marketfilings) under the symbol "EGLT". On November 24, 2017, we received a notice from The Nasdaq Stock Market ("Nasdaq") that we were not in compliance with Nasdaq's Listing Rule 5450(b)(2)(A) (the "Rule"),Securities Act of 1933, as the minimum market value of our Common Stock had been below $50 million for 30 consecutive business days. The notification of noncompliance had no immediate effect on the listingamended, or trading of our common stock on the NASDAQ Global Market. According to the Notice, we have 180 days, or until May 23, 2018, to achieve compliance with the minimum market value requirement. To regain compliance, the minimum market value of our Common Stock must meet or exceed $50 million for a minimum of ten consecutive business days during this 180-day grace period. Our failure to regain compliance during this period could result in delisting.

        In the event that the Company does not regain compliance with the Rule prior to the expiration of the grace period, we expect to receive written notification that our Common Stock is subject to delisting, in which case we may either apply for listing on The NASDAQ Capital Market, provided we meet the continued listing requirements of that market, or appeal the decision to a Nasdaq Hearings Panel. In the event of an appeal, our Common Stock would remain listed on The NASDAQ Global Market pending a decision by the Panel following the hearing.

        The Reverse Stock Split could enhance our ability to regain compliance with the Rule if reducing the number of outstanding shares of our Common Stock, and thereby increasing the per share market price of our Common Stock, increases demand for our Common Stock and correspondingly increases the $50 million minimum market value for our Common Stock. The additional financing flexibility described below could also provide additional alternatives for regaining compliance with the Rule following the Reverse Stock Split. However, we cannot provide any assurance that (i) any increase our stock price would remain following the Reverse Stock Split; (ii) we would again meet or exceed the $50 million minimum market value requirement; (iii) we would satisfy the other requirements for continued listing on The NASDAQ Global Market; or (iv) we would meet the listing requirements for The NASDAQ Capital Market.

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Financing Flexibility

        In addition, we believe the Reverse Stock Split will provide us with the ability to support our present capital needs and future anticipated growth. The Reverse Stock Split alone would have no effect on our authorized capital stock, and absent the approval and implementation of the Authorized Shares Amendment, the total number of authorized shares would remain the same as before the Reverse Stock Split. This would have the effect of increasing the number of shares of Common Stock available for issuance, which the Board feels is important to provide us with additional flexibility and as many alternatives as possible to obtain financing. We have historically met our capital needs primarily through the sale of our debt and equity securities. While we are also asking for the approval of a Charter amendment to increase our authorized shares of Common Stock, approximately 12.7 million shares would be immediately reserved for issuance under the indenture for the 6.50% Notes. At this time, we do not have any plans, arrangements or understandings, whether written or oral, to issue any of the additional shares that will be made available if the Reverse Stock Split is approved and the Board implements the Reverse Stock Split, unless the proposal to approve the Authorized Shares Amendment increasing the number of authorized shares of our Common Stock is not approved. In that case, we would be obligated to use additional shares made available if the Reverse Stock Split is approved to help satisfy our obligations with respect to the reservation of shares under the indenture governing the 6.50% Notes and, in addition, may also remain subject to the increased 10.0% interest rate thereunder, as described in Proposal 1 above.

        If the Reverse Stock Split is approved, the availability of additional shares of Common Stock would provide us with the flexibility to consider and respond to future business opportunities and needs as they arise, including public or private financings, subscription rights offerings, mergers, acquisitions, stock dividends, stock splits and the granting of equity incentive awards. The additional available shares would be available for issuance from time to time at the discretion of the Board when opportunities arise, without further stockholder action or the related delays and expenses, except as may be required for a particular transaction by law, the rules of any exchange on which our securities may then be listed, or other agreements or restrictions. There are no preemptive rights relating to the Common Stock. As such, any issuance of additional shares of our Common Stock would increase the number of outstanding shares of our Common Stock and (unless such issuance was pro-rata among existing stockholders) the percentage ownership of existing stockholders would be diluted accordingly.

        Reducing the number of outstanding shares of our Common Stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of our Common Stock. However, other factors, such as events relating to our financial results, general market conditions and the market perception of our Company, may adversely affect the market price of our Common Stock. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above, that the market price of our Common Stock will increase following the Reverse Stock Split or that the market price of our Common Stock will not decrease in the future. In addition, we cannot assure you that the market price per share of our Common Stock after a Reverse Stock Split will increase in proportion to the reduction in the number of shares of our Common Stock outstanding before the Reverse Stock Split. Accordingly, the total market capitalization of our Common Stock after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split.

Determination of Ratio

        The ratio of the Reverse Stock Split, if approved and implemented, will be a ratio of not less than 1-to-2 and not more than 1-to-20, as determined by our Board in its sole discretion. The Board believes that stockholder adoption of a range of Reverse Stock Split ratios (as opposed to adoption of a single Reverse Stock Split ratio or a set of fixed ratios) provides maximum flexibility to achieve the purposes of a Reverse Stock Split and, therefore, is in the best interests of the Company. In determining a ratio

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following the receipt of stockholder adoption, the Board (or any authorized committee of the Board) may consider, among other things, factors such as:

•

the historical trading price and trading volume of our Common Stock;



•

the number of shares of our Common Stock outstanding;



•

the then-prevailing market price and trading volume of our Common Stock and the anticipated impact of the Reverse Stock Split on the trading market for our Common Stock;



•

the impact of the Reverse Stock Split on our ability to regain compliance with the listing standards for The NASDAQ Global Market;



•

the anticipated impact of the Reverse Stock Split on our ability to raise additional financing;



•

the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; and



•

prevailing general market and economic conditions.

        The Board (or any authorized committee of the Board) reserves the right to elect to abandon the Reverse Stock Split, notwithstanding stockholder adoption thereof, if it determines, in its sole discretion, that the Reverse Stock Split is no longer in the best interests of the Company and its stockholders. The Reverse Stock Split, if authorized pursuant to this resolution and if deemed by the Board to be in the best interests of the Company and its stockholders, will be effected, if at all, at a time that is not later than twelve (12) months from the date of the Special Meeting.

Reverse Stock Split Amendment to the Charter

        If the Reverse Stock Split is approved, the following paragraph shall be added at the end of subsection (a) of ARTICLE IV of the Charter:

        "Effective upon the effective time of this Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of the State of Delaware (the "Effective Time"), each             shares of Common Stock issued and outstanding immediately prior to the Effective Time shall, automatically and without the necessity of any further action, be changed, reclassified and combined into one (1) share of Common Stock (the "Reverse Stock Split"). No fractional shares shall be issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares of Common Stock shall have rounded up to one additional whole share.

        The Certificate of Amendment attached hereto as ANNEX B reflects the changes that will be implemented to our Charter if the Reverse Stock Split is approved.

Principal Effects of the Reverse Stock Split

        If the stockholders approve the proposal to authorize the Board to implement the Reverse Stock Split and the Board implements the Reverse Stock Split, we will amend the existing provision of Article IV of our Charter in the manner set forth above.

        By approving this amendment, stockholders will approve the combination of any number of shares of Common Stock between and including 2 and 20, with the exact number to be determined by the Board, into one (1) share. The Certificate of Amendment to be filed with the Secretary of State of the State of Delaware will include only that number determined by the Board to be in the best interests of the Company and its stockholders. In accordance with these resolutions, the Board will not implement any amendment providing for a different split ratio.

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        As explained above, the Reverse Stock Split will be effected simultaneously for all issued and outstanding shares of Common Stock and the exchange ratio will be the same for all issued and outstanding shares of Common Stock. The Reverse Stock Split will affect all of our stockholders uniformly and will not affect any stockholder's percentage ownership interests in the Company, except to the extent that the Reverse Stock Split results in any of our stockholders having his or her shares rounded up to a whole share in lieu of owning a fractional share, as described in the section titled "Fractional Shares," below.

        The Reverse Stock Split will not change the terms of our Common Stock. After the Reverse Stock Split, the shares of our Common Stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to our Common Stock now authorized. Common stock issued pursuant to the Reverse Stock Split will remain fully paid and non-assessable. The Reverse Stock Split will not affect the Company's continuing obligations under the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). Followingexcept to the Reverse Stock Split, unless we are delisted from The NASDAQ Global Market, our Common Stock will continue to be quoted on The NASDAQ Global Market under the symbol "EGLT."

        The shares that are authorized but unissued after the Reverse Stock Split will be available for issuance, and, if we issue these shares, the ownership interest of holders of our Common Stock may be diluted. We may issue such shares to raise capital and/or as consideration in acquiring other businesses or establishing strategic relationships with other companies. Such acquisitions or strategic relationships may be effected using shares of Common Stock or other securities convertible into Common Stock and/or by using capital that may need to be raised by selling such securities. We do not have any agreement, arrangement or understanding at this time with respect to any specific transaction or acquisition for which the newly unissued authorized shares would be issued.

Effect on Authorized but Unissued Shares

        The Reverse Stock Split will have the effect of significantly increasing the number of authorized but unissued shares of Common Stock available for issuance. The number of shares of Common Stock that we are authorized to issue will not be decreased and will remain at 75,000,000 (or 275,000,000, if the Authorized Shares Amendment increasing the number of authorized shares of Common Stock is approved). Because the number of outstanding shares will be reduced as a result of the Reverse Stock Split, the number of shares available for future issuance by us will be increased. As of January 2, 2018 we have 29,056,316 authorized and unissued shares of Common Stock, all of which are currently reserved for issuance.

Procedure for Effecting Reverse Stock Split

        If the Reverse Stock Split is approved by the Company's stockholders, and if at such time the Board still believes that the Reverse Stock Split is in the best interests ofextent the Company specifically incorporates such report by reference therein.

Compensation Committee

Our Compensation Committee currently consists of Mr. Walbert,  Mr. Holmes and its stockholders, the Board will determine the ratio of the Reverse Stock Split to be implemented. The Reverse Stock Split will become effective as of 12:01 A.M., Eastern Time on the date specified in the Certificate of Amendment as filed with the office of the Secretary of State of the State of Delaware (the "effective time"). The Board will determine the exact timing of the filing of the Certificate of Amendment based on its evaluation as to when the filing would be the most advantageous to the Company and its stockholders. If the Board does not decide to implement the Reverse Stock Split within twelve (12) months from the date of the Special Meeting, the authority granted in this proposal to implement the Reverse Stock Split will terminate.

        Except as described below under the section titled "Fractional Shares," at the effective time, each number of issued and outstanding pre-reverse split shares that theMr. Pauls. Our Board has determined will bethat each of the members of our Compensation Committee, other than Mr. Holmes, is independent under Nasdaq listing standards and that each of our Compensation Committee members is a “non‑employee director” as defined in Rule 16b‑3 promulgated under the Exchange Act, and an “outside director” as that term is defined in Section 162(m) of the Internal Revenue Code. The chairperson of our Compensation Committee is Mr. Walbert. The Compensation Committee held three meetings in 2018.

The primary purpose of our Compensation Committee is to assist the Board in exercising its responsibilities relating to compensation of our executive officers and employees and to administer our equity compensation and other benefit plans. In carrying out these responsibilities, the Compensation Committee reviews all components of executive officer and employee compensation for consistency with its compensation philosophy, as in effect from time to time. The functions of our Compensation Committee include, among other things:

combined

Under the under the Amended and Restated 2019 Stock Based Incentive Compensation Plan (the “2019 Stock Plan”), the Compensation Committee has the authority to delegate some or all of its powers under the Stock Plan to any executive officer of the Company or any other person designated by the Compensation Committee.  However, the Compensation Committee may not delegate its authority to grant Awards to (i) “officers” as defined in Rule 16a‑1(f) under the Exchange Act or (ii) employees who have been delegated authority to grant awards under the 2019 Stock Plan.  The Compensation Committee delegated the authority to the Chief Executive Officer to grant equity awards under the 2019 Stock Plan to employees who do not fall into one post-reverse split share,the categories listed above, subject to certain limitations and other parameters.

The Board has adopted a charter for the Compensation Committee that complies with Nasdaq listing standards. The charter is available on our website at www.Zyla.com.

Compensation Consultant’s Role in Executive Compensation

While the Compensation Committee or Board ultimately makes executive compensation decisions, the Compensation Committee engages the services of outside advisors for assistance. The Compensation Committee has engaged Compensia as its independent compensation consultant each year since 2014.

The Compensation Committee utilized Compensia throughout this period to provide independent, objective analysis, advice and information and to generally assist the Compensation Committee in the performance of its duties.  The Compensation Committee will automaticallytypically request information and without any further actionrecommendations directly from the compensation consultant as it deems appropriate to structure and evaluate Zyla’s compensation programs, practices and plans. As part of its engagement, at the direction of the Compensation Committee, the compensation consultant will work, and exchange information, with the Chief Executive Officer in his work on the partCompensation Committee’s behalf.

At the direction of the Compensation Committee, Compensia provided services to the Compensation Committee, including the following items:

Independence of the Compensation Consultant

The Compensation Committee assesses the compensation consultant’s independence each year. In assessing independence, the Compensation Committee considers:

In addition, the Compensation Committee received a letter from Compensia providing appropriate assurances and confirmation of independence.  The Compensation Committee determined that Compensia was independent under applicable Nasdaq listing standards.

The Compensation Committee annually reviews and evaluates its relationship with its compensation consultant.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee has ever been an executive officer or employee of ours. None of our officers currently serves, or served during fiscal year 2018, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of the Board or Compensation Committee.

Nominating and Corporate Governance Committee

Our Nominating Committee consists of Ms. Smiley,  Mr. McInnis and Dr. Phillips, each of whom our Board has determined to be independent under The Nasdaq listing standards. The chairperson of our Nominating Committee is Ms. Smiley. The Nominating Committee held three meetings in 2018.

The primary purpose of our Nominating Committee is to assist the Board in promoting our best interests and the best interests of our stockholders through the implementation of sound corporate governance guidelines and practices. The functions of our Nominating Committee include, among other things:

The Board has adopted a charter for the Nominating Committee that complies with Nasdaq listing standards. The charter is available on our website at www.Zyla.com.

Process for Selecting and Nominating Directors

The Nominating Committee identifies candidates through a variety of means, including recommendations from members of the Board, suggestions from our management, including our executive officers, and candidates identified through a retained third-party search firm.

Under special provisions of our Bylaws, at the 2020 Annual Meeting, the directors other than the Chairman of the Board, the Chief Executive Officer and the Iroko-designated directors can nominate their successors or can choose to

be combined intonominated for an additional term and become one sharethe Board must take all necessary action (subject to applicable law) to nominate such successor director for election to the Board in accordance with our Certificate of Common Stock.

Fractional Shares

        No fractional sharesIncorporation (“Charter”) and Bylaws and fully support the election of such nominees by our stockholders.  If there is a vacancy prior to the 2020 Annual Meeting, the vacancy may be filled by a majority of the directors then in office, with the director being replaced, the Iroko-designated directors and, in some cases, the jointly appointed director, abstaining.  After the 2020 Annual Meeting, the directors will be issuednominated pursuant to the routine provisions of our Charter and Bylaws.

In the ordinary course, once a potential candidate has been identified, the Nominating Committee reviews the background of new director candidates and presents them to the Board for consideration before selection. Director nominees should have a reputation for integrity, honesty and adherence to high ethical standards, should have demonstrated business acumen, experience and ability to exercise sound judgments in connectionmatters that relate to our current and long‑term objectives, should be willing and able to contribute positively to our decision‑making process, should have a commitment to understand our Company and our industry and to regularly attend and participate in meetings of the Board and its committees, should have the interest and ability to understand the sometimes conflicting interests of the various constituencies of our Company, which include stockholders, employees, customers, creditors and the general public, and to act in the interests of all stockholders. Director nominees should not have, nor appear to have, a conflict of interest that would impair the nominee’s ability to represent the interests of all our stockholders and to fulfill the responsibilities of a director. Nominees will not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis proscribed by law. While the Board does not have a formal diversity “policy”, it values diversity in the membership of the Board and seeks Board candidates that represent diversity in all aspects, including diversity of background and array of talents and perspectives. We believe that the Nominating Committee’s existing nominations process is designed to identify the best possible nominees for the Board, regardless of the nominee’s gender, racial background, religion, or ethnicity.

The Nominating Committee also considers director candidates recommended by our stockholders. The Nominating Committee does not intend to alter the manner in which it evaluates candidates, including the criteria set forth above, based on whether or not the candidate was recommended by a stockholder. In fact, the Nominating Committee gives the same consideration to candidates recommended by stockholders as those candidates recommended by members of our Board. Stockholders who wish to recommend individuals for consideration by the Nominating Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating Committee at the following address: 600 Lee Road, Suite 100, Wayne, PA 19087 no earlier than the close of business on September 17, 2020, and no later than the close of business on October 17, 2020. Submissions must be made in accordance with our bylaws and must include the Reverse Stock Split. Instead, stockholders who otherwise would be entitled to receive fractional shares because they holdfull name and business address of the proposed nominee, a description of the proposed nominee’s principal occupation or employment, the class and series and number of shares not evenly divisibleof our stock owned by such stockholder, and a description of all arrangements or understandings between the stockholder and each nominee. Any such submission must be accompanied by the split ratiowritten consent of the proposed nominee to be named as a nominee and to serve as a director if elected. Please refer to Article II of our Amended and Restated Bylaws for a description of the formal process to recommend director candidates to the Nominating Committee.

Stockholder Communications with the Board of Directors

We strive to ensure that the views of stockholders are heard by the Board or individual directors, as applicable, and that appropriate responses are provided to stockholders in a timely manner. We believe our responsiveness to stockholder communications to the Board has been excellent. If you wish to send a communication to the Board, its Chairman or the Chairperson of any committee, please send your communication to our Secretary at Zyla Life Sciences, 600 Lee Road, Suite 100, Wayne, PA 19087, who will automatically be entitledforward all appropriate communications as requested.

Code of Ethics

We have adopted a code of business conduct and ethics, or our Code of Conduct, applicable to receiveour employees, executive officers and directors. Our Code of Conduct is available on our website at www.Zyla.com. The Audit Committee is responsible for overseeing our Code of Conduct.  Only the Board may grant a waiver for a director, executive officer, or an officer covered under the additional sharecode of Common Stock. Inethics provisions for chief executive officer and senior financial officers (“Code of Ethics Officer”). The Audit Committee or the Board may grant a waiver of any

provision of our Code of Conduct for any member of our leadership team who is not an executive officer or a Code of Ethics Officer. Our chief compliance officer may grant a waiver of any provision of our Code of Conduct for other words,employees. We expect that any fractional shareamendments to our Code of Conduct, or any waivers of its requirements with regard to directors, executive officers or Code of Ethics Officers, will be rounded updisclosed on our website.

Director Compensation

Our independent directors receive a combination of cash and equity compensation for their service on the Board and Board committees in accordance with our independent director compensation program. No such director’s aggregate cash and equity compensation may exceed $300,000 annually.

Annual Cash Compensation

The following chart summarizes the retainer compensation provided to non-employee directors for their ongoing service on the Board during 2018. Cash payments are made in equal, quarterly installments in arrears on the last day of the fiscal quarter in which such service occurred.

In addition to the nearest whole number. Stockholders of record atannual Board retainer, the effective timeChairman of the Reverse Stock Split who otherwise would be entitled toBoard receives a $40,000 cash retainer annually for his service as Chairman.

No such director may receive fractional shares because they hold a numbermore than an aggregate of pre-split shares not evenly divisible by the number of pre-split shares$120,000 annually in cash compensation for which each post-split share is to be exchanged, will, in lieu of a fractional share, be entitled, upon surrender to the exchange agent of certificate(s) representing such pre-split shares, to entitled to receive an additional share of Common Stock. In other words, any fractional share will be rounded up to the nearest whole number.

Risks Associated with the Reverse Stock Split

        We cannot predict whether the Reverse Stock Split will increase the market price for our Common Stock. The history of similar stock split combinations for companies in like circumstances is varied, and the market price of our Common Stock will also be basedservice on our performance and other factors, some of which are unrelated to the number of shares outstanding. Further, there are a number of risks associated with the Reverse Stock Split, including:

•

The market price per share of our shares of Common Stock post-Reverse Stock Split may not ever exceed or remain in excess of the minimum price per share necessary such that the aggregate market value of our Common Stock exceeds $50,000,000, and the Company may fail to meet the other requirements for continued listing on The NASDAQ Global Market.



•

Although the Board believes that a higher stock price may help generate the interestand Board committees.

Equity Compensation

For 2018, non-employee directors received grants of new investors, the Reverse Stock Split may not result in a per-share price that will successfully attract certain types of investors and such resulting share price may not satisfy the investing guidelines of institutional investors or investment funds. Further, other factors, such as our financial results, market conditions and the market perception of our business, may adversely affect the interest of new investors in the shares of our Common Stock. As a result, the trading liquidity of theoptions to purchase shares of our Common Stock may not improve as a resultpursuant to the terms and conditions of the Reverse Stock Split and there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above.



•

The Reverse Stock Split could be viewed negatively by the market, and other factors, such as those described above, may adversely affect the market price of the shares of our Common Stock. Consequently, the market price per post-Reverse Stock Split shares may not increase in proportion to the reduction of the number of shares of our Common Stock outstanding before the implementation of the Reverse Stock Split. Accordingly, the total market capitalization of our shares of Common Stock after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split. Any reduction in total market capitalization as the result of the Reverse Stock Split may make it more difficult for us to meet the requirements of the Rule regarding minimum market value of listed securities, which could prevent our shares from continuing to be listed on the NASDAQ.



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The Reverse Stock Split may result in some stockholders owning "odd lots" of less than 100 shares of Common Stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in "round lots" of even multiples of 100 shares.

Book-Entry Shares

        AllAfter our emergence from bankruptcy and the reconstitution of our outstanding CommonBoard, non-employee directors other than Mr. Holmes each received an initial grant of 20,000 Restricted Stock is uncertificated, or heldUnits that vest ratably over three years.

Director Compensation Table for 2018

The table below summarizes the compensation paid by the Company to each non-employee director for the year ended December 31, 2018. Mr. Varian joined the Board in book-entry (i.e., sharesJune 2018 and therefore received pro-rated fees for his service during the year. Mr. Radie  did not represented by a physical stock certificate). Ifreceive any additional compensation for his service on the Reverse Stock Split is effected, stockholders who hold uncertificated shares, either as direct or beneficial owners, will have their holdings electronically adjusted automatically byBoard.  In connection with our transfer agent (and, for beneficial owners, by their brokers or banks that hold in "street name" for their benefit, as the case may be) to give effectemergence from bankruptcy, pursuant to the Reverse Stock Split. Stockholders who hold uncertificated sharesStockholders’ Agreement, our Board was replaced by the Board as direct owners will be sent a statement of holdingset forth above.

EXECUTIVE OFFICERS

The following table sets forth information regarding our transfer agent that indicates the number of post-reverse stock split shares of our Common Stock owned in book-entry form.

Principal Effects of Reverse Stock Split on Outstanding Options, Outstanding Convertible Debt, Warrants, and Option Plan

        As of January 2, 2018, there were outstanding stock options to purchase an aggregate of 4,125,612 shares of our Common Stock with a weighted average exercise price of $6.40 per share and warrants to purchase an aggregate of 17,666,667 shares of Common Stock with a weighted average exercise price of $2.02 per share. In addition,executive officers as of January 2, 2018 we had $48,538,000 in convertible debt outstanding entitlingOctober 24, 2019. Biographical information for Mr. Smith, our President, Chief Executive Officer and Director, is included above with the holders thereof to acquire 22,250,803 shares of our Common Stock. When the Reverse Stock Split becomes effective, the number of shares of Common Stock covered by such rights will be reduced to between and including one-twentieth and one-half of the number currently covered (rounded up to the nearest whole number), and the exercise or conversion price per share will be increased by between and including two and 20 times the current exercise or conversion price (rounded down to the nearest $0.01), resulting in the same aggregate price being required to be paid therefor upon exercise or conversion thereof as was required immediately preceding the Reverse Stock Split.

        In addition, the number of shares of Common Stock and number of shares of Common Stock subject to stock options or similar rights authorizeddirector biographies under the Company's equity incentive plan will automatically be proportionately adjusted for the Reverse Stock Split ratio, such that fewer shares will be subjectcaption, “Election of Directors.”

Mark Strobeck, Ph.D. is our Executive Vice President and Chief Operating Officer, a position he has held since September 2015, and previously served as our Chief Business Officer from January 2014 to such plans. Further, the per share exercise price under such plans will automatically be proportionately adjusted for the Reverse Stock Split.

Accounting MattersSeptember 2015. Prior to his

        The Reverse Stock Split will not affect the Common Stock capital account on our balance sheet. However, because the par value of our Common Stock will remain unchanged at the effective time of the split, the components that make up the Common Stock capital account will change by offsetting amounts. Depending on the size of the Reverse Stock Split the Board decides to implement, the stated capital component will be reduced proportionately based upon the Reverse Stock Split and the additional paid-in capital component will be increased with the amount by which the stated capital is reduced. Immediately after the Reverse Stock Split, the per share net income or loss and net book value of our Common Stock will be increased because there will be fewer shares of Common Stock outstanding. All historic share and per share amounts in our financial statements and related footnotes will be adjusted accordingly for the Reverse Stock Split.

Effect on Par Value

        The proposed Reverse Split Amendment will not affect the par value of our Common Stock, which will remain at $0.001 per share.

employment at Zyla, he served as our advisor from June 2012 to December 2013.  From January 2012 to December 2013, Dr. Strobeck served as President and Chief Executive Officer and a director of Corridor Pharmaceuticals, Inc., which was acquired by AstraZeneca in 2014. From December 2010 to October 2011, Dr. Strobeck served as Chief Business Officer of Topaz Pharmaceuticals Inc., a specialty pharmaceutical company acquired by Sanofi Pasteur in the fourth quarter of 2011. From June 2010 to November 2010 and October 2011 to January 2012, Dr. Strobeck worked as a consultant. From January 2008 to May 2010, Dr. Strobeck served as Chief Business Officer of Trevena, Inc., a pharmaceutical company. Prior to joining Trevena, Dr. Strobeck held management roles at GlaxoSmithKline, SR One Limited and EuclidSR Partners, L.P. Dr. Strobeck currently serves on the Board of Directors of Horse Power For Life, a non‑profit organization dedicated to improving the quality of life for individuals diagnosed with cancer, a position he has held since 2012. Dr. Strobeck received his B.S. in Biology from St. Lawrence University and his Ph.D. in Pharmacology from the University of Cincinnati, and completed his post‑doctoral fellowship at the University of Pennsylvania.

No Going Private TransactionMegan Timmins has been our Senior Vice President and General Counsel since March 2018 and our Secretary since June 2018.  From September 2017 until March 2018, she served as our Vice President and Acting General Counsel.  From October 2016 to August 2017, Ms. Timmins served as our Deputy General Counsel and from April 2016 to October 2016, she served as our consultant.  Prior to joining us, Ms. Timmins was an independent consultant from April 2015 to March 2016.  Prior to that, she served in positions of increasing responsibility at Aramark, most recently as Vice President, Associate General Counsel and Assistant Secretary from January 2011 until March 2015. Ms. Timmins received her B.A. in Government and Economics from the University of Notre Dame and her J.D. from the William and Mary School of Law.

H. Jeffrey Wilkins, M.D., has been our Senior Vice President and Chief Medical Officer since June 2019.  Prior to joining Zyla, he served as Chief Clinical Advisor and Chief Medical Officer at Onspira Therapeutics, Inc. form December 2018 to June 2019.  Prior to that, Dr. Wilkins served as Chief Medical Officer at Lycera, a biopharmaceutical company developing treatments for autoimmune diseases and cancers, from March 2015 to December 2018. From January 2014 to  February 2015, he was a clinical advisor and partner at Nexeption Therapeutics, which works to bring together product opportunities, management teams and funding. Before his time at Nexeption,  Dr. Wilkins served as Chief Medical Officer and head of medical affairs at Ceptaris Therapeutics, which was purchased by Actelion. Prior to those positions, Dr. Wilkins held senior level positions at Cephalon and GlaxoSmithKline. Dr. Wilkins was in clinical practice for approximately ten years. He received his bachelor’s degree from Bucknell University and his medical degree from Temple University, where he also did his internship and residency.

 Notwithstanding the decrease in the number of outstanding shares following the proposed Reverse Stock Split, our Board does not intend for this transaction to be the first step in a "going private transaction" within the meaning of Rule 13e-3 of the Exchange Act.

Potential Anti-Takeover Effect

        Although the increased proportion of unissued authorized shares to issued shares could, under certain circumstances, have an anti-takeover effect (for example, by permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of the Board or contemplating a tender offer or other transaction for the combination of the Company with another company), the Reverse Stock Split proposal is not being proposed in response to any effort of which we are aware to accumulate shares of our Common Stock or obtain control of the Company, nor is it part of a plan by management to recommend a series of similar amendments to the Board and stockholders. Other than the Reverse Stock Split proposal, the Board does not currently contemplate recommending the adoption of any other actions that could be construed to affect the ability of third parties to take over or change control of the Company.

No Dissenters' Appraisal Rights

        Under the Delaware General Corporation Law, our Charter or Bylaws, the Company's stockholders are not entitled to dissenters' appraisal rights with respect to the Reverse Stock Split, and we will not independently provide stockholders with any such right.

Material United States Federal Income Tax Consequences of the Reverse Stock Split

        The following is not intended as tax or legal advice. Each holder should seek advice based on his, her or its particular circumstances from an independent tax advisor.

        The following is a summary of certain United States federal income tax consequences of the Reverse Stock Split generally applicable to beneficial holders of shares of our Common Stock. This summary addresses only such stockholders who hold their pre-split shares as capital assets and will hold the post-split shares as capital assets. This discussion does not address all United States federal income tax considerations that may be relevant to particular stockholders in light of their individual circumstances or to stockholders that are subject to special rules, such as financial institutions, trusts, estates, entities treated as partnerships for U.S. federal income tax purposes, tax-exempt organizations, regulated investment companies, REITs, insurance companies, dealers in securities, and foreign stockholders. The following summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations thereunder, judicial decisions and Internal Revenue Service ("IRS") rulings, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. Tax consequences under state, local, foreign, and other laws are not addressed herein. Each stockholder should consult their tax advisor as to the particular facts and circumstances which may be unique to such stockholder and also as to any estate, gift, state, local or foreign tax considerations arising out of the Reverse Stock Split.

Exchange Pursuant to Reverse Stock Split

        The Reverse Stock Split is intended to qualify as a tax-free recapitalization under the Code. Assuming the Reverse Stock Split so qualifies, then generally, for U.S. federal income tax purposes, no gain or loss will be recognized by the Company in connection with the Reverse Stock Split, and no gain or loss will be recognized by the stockholders that exchange their pre-split shares for post-split shares. The post-split shares in the hands of a stockholder following the Reverse Stock Split will generally have an aggregate tax basis equal to the aggregate tax basis of the pre-split shares held by that stockholder

immediately

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information for the fiscal years ended December 31, 2018 and 2017 concerning compensation of our principal executive officer and our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers as of December 31, 2018. Also included in the table is our former Chief Financial Officer, who resigned prior to the Reverse Stock Split, and a stockholder's holding period for its post-split shares generally will be the same as its holding period for the pre-split shares.

Whole Shares in Lieu of Fractional Shares

        A stockholder who receives a whole share of Common Stock in lieu of a fractional share generally may recognize gain in an amount not to exceed the excess of the fair market value of such whole share over the fair market value of the fractional share to which the stockholder was otherwise entitled. Any such recognition of gain may affect the holding period and adjusted tax basis of the stockholder's whole share received in lieu of a fractional share. Stockholders should consult with their own tax advisors regarding the U.S. federal income tax consequences to them of the Reverse Stock Split. Backup withholding may apply to a stockholder who receives a whole share of Common Stock in lieu of a fractional share unless the stockholder provides the exchange agent with appropriate documentation establishing that backup withholding is not required

Interests of Directors and Executive Officers

        Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this proposal except to the extent of their ownership of sharesend of our Common Stock.

Reservation of Rightfiscal year 2018. We refer to Abandon Reverse Stock Split

        We reserve the right to not file the Reverse Split Amendment and to abandon the Reverse Stock Split without further action bythese individuals as our stockholders at any time before the effectiveness of the filing with the Secretary of the State of Delaware of the Reverse Split Amendment, even if the authority to effect the amendment is approved by our stockholders at the Special Meeting. By voting in favor of a Reverse Stock Split, you are expressly also authorizing the Board to delay, not proceed with, and abandon, the proposed amendment if it should so decide, in its sole discretion, that such action is in the best interests of our stockholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO OUR THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT THE REVERSE STOCK SPLIT.named executive officers.

PROPOSAL 3—ADJOURNMENT OF SPECIAL MEETING, IF NECESSARY OR APPROPRIATE,
TO SOLICIT ADDITIONAL PROXIES IF THERE ARE INSUFFICIENT
VOTES IN FAVOR OF PROPOSAL 1 AND/OR 2

Narrative to Summary Compensation Table

        IfWe entered into employment agreements with Mr. Radie, our former President and Chief Executive Officer who resigned his position in October 2019,  Dr. Strobeck, our Executive Vice President and Chief Operating Officer, and Mr. Shea, our former Senior Vice President and Chief Commercial Officer who left the Company in June 2019, as described in more detail below. Mr. Musial, our former Executive Vice President and Chief Financial Officer, resigned his employment with us effective November 9, 2018. During the 2017 and 2018 fiscal years, our named executive officers were also eligible to participate in the Egalet Corporation 2013 Stock-Based Incentive Compensation Plan (the “2013 Stock Plan”), pursuant to which we failgranted restricted stock and restricted stock units (“RSUs”) as part of fiscal year 2018 compensation, as described below. See the description below for additional information regarding these awards. The 2013 Stock Plan was cancelled upon our emergence from bankruptcy on January 31, 2019, and the Board adopted the 2019 Stock Plan.

Employment Agreements

Employment Agreements with Mr. Radie,  Dr. Strobeck and Mr. Shea

Mr. Radie,  Dr. Strobeck and Mr. Shea are/were employed by us under the terms of individual employment agreements. In each case, the term of employment under the agreement continues on an at-will basis until the executive’s employment with us terminates for any reason. Each employment agreement sets forth the executive’s initial annual base salary and target bonus opportunity expressed as a percentage of base salary, as well as the executive’s right to receive a sufficient number of votesparticipate in our employee benefit plans on the same terms and conditions as may be applicable to approve Proposal 1 and/or Proposal 2—approvalour other executive officers. Mr. Radie’s 2019 annual base salary was $580,000, Dr. Strobeck’s current annual base salary is $423,000, and Mr. Shea’s  2019 base salary was $382,000, in each case subject to annual review and increase at the discretion of the Authorized Shares Amendment and/Board. Mr. Radie had an annual target bonus opportunity equal to 60% of his annual base salary, Dr. Strobeck has an annual target bonus opportunity equal to 40% of his annual base salary and Mr. Shea had an annual target bonus opportunity equal to 35% of his annual base salary. The executives’ annual bonus opportunities are subject to the terms and conditions of our Annual Incentive Bonus Plan, and the determination of these amounts are discussed in greater detail below. The executives must be employed by us on the payment date to be paid any such bonus except as otherwise described below in the section entitled “Potential Payments Upon a Termination or Change in Control.”

Each employment agreement also provides for certain severance payments and benefits to be provided in connection with the Reverse Split Amendment—we may propose to adjournexecutive’s termination of employment, as described below in the Special Meetingsection entitled “Potential Payments upon a Termination or Change in Control.” Each employment agreement provides that, during the term of employment and for a period of 12 months thereafter (or 24 months if we terminate the executive’s employment without cause or the executive terminates his employment for good reason, in either case, within 24 months following a change in control), the executive will not morecompete with us or solicit our customers or employees. Each employment agreement also contains provisions requiring the executive to safeguard our confidential information and to assign to us any intellectual property developed by the executive during his employment by us. In connection with our Bankruptcy and acquisition of five marketed products from Iroko, each of our named executive officers entered into an amendment to his employment agreement providing that neither the Iroko Products Acquisition, nor our Bankruptcy, constituted a change of control under the applicable employment agreement. Other than thirty (30) days,this amendment, the employment agreements for our named executive officers remain in effect in accordance with their terms.

At the purposetime of soliciting additional proxieshis resignation from employment, Mr. Musial was party to approve one or bothan employment agreement with us that was substantially similar in general terms to the employment agreements of those Proposals. We currently do not intend to propose adjournment ofour other named executive officers (other than the Special Meeting if there are sufficient votes to approve those Proposals.amendment), as described above.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL 3 TO ADJOURN THE SPECIAL MEETING, IF NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF PROPOSAL 1 AND/OR 2.

2018 Cash Incentive Compensation

Annual bonuses paid to our named executive officers are provided pursuant to our Annual Incentive Bonus Plan. In 2018, Mr. Radie’s bonus was based 100% on the achievement of our 2018 corporate goals. Dr. Strobeck’s and Mr. Shea’s bonuses were based 80% on the achievement of our 2018 corporate goals and 20% on the achievement of individual objectives. Prior to his resignation, Mr. Musial’s 2018 bonus opportunity was also based 80% on the achievement of our 2018 corporate goals and 20% on the achievement of individual objectives.

Our 2018 Corporate Goals contained objectives in the following areas: commercial/financial, business development, and operational. Specifically, our 2018 Corporate Goals related to: achievement of certain net sales and earnings targets, acquisition and out-license or copromotional activities, clinical development activities, certain manufacturing actions, government affairs endeavors and quality and compliance targets.

The bonuses paid to our named executive officers for the 2018 fiscal year are reflected in the “Non-Equity Incentive Plan Compensation” column in the summary compensation table above.

Stock Awards

In 2018, we made grants of RSUs and restricted stock to each of our named executive officers. On March 6, 2018, we made a grant of 500,000 RSUs to Mr. Radie, we made grants of 225,000 RSUs to each of Dr. Strobeck and Mr. Musial and we made a grant of 150,000 RSUs to Mr. Shea. Each RSU represents the right to receive one share of our Common Stock upon settlement. The RSUs granted to our named executive officers were subject to vesting in four equal installments on each of the first four anniversaries of the grant date, provided that, if 75% or greater of the 2018 corporate goals approved by the Board were attained on or prior to the first anniversary of the grant date, as determined by the Board in its sole discretion, then 100% of the RSUs would vest, and the restrictions applicable thereto lapse, on the first anniversary of the grant date. On June 13, 2018, we made a grant of 100,000 shares of restricted stock to Mr. Radie and we made grants of 80,000 shares of restricted stock to each of Dr. Strobeck and Messrs. Shea and Musial. These grants of restricted stock were scheduled to vest on the first anniversary of the grant date.

All of the restricted stock and RSUs held by Mr. Musial were forfeited and cancelled upon his resignation from employment on November 9, 2018. All outstanding equity compensation awards, including awards granted in 2018, were cancelled upon our emergence from Bankruptcy on January 31, 2019.

Outstanding Equity Awards at Fiscal Year‑End

The table below sets forth the number of securities underlying outstanding equity awards for each named executive officer as of December 31, 2018.

Potential Payments Upon a Termination or Change in Control

Under the terms of their respective employment agreements, Dr. Strobeck, prior to his resignation, Mr. Radie, and, prior to his termination, Mr. Shea, are/were entitled to payments and benefits in connection with the termination of their employment with us under specified circumstances. Upon the termination of the executive’s employment for any reason, we will pay the executive or the executive’s estate, as applicable, the executive’s accrued but unpaid base salary and accrued but unused vacation time. If the executive’s employment were terminated due to death or disability, we will also pay the executive (or the executive’s estate, as applicable) any bonus earned but not paid under the Annual Incentive Bonus Plan for the preceding fiscal year. In addition, under the employment agreements with Mr. Radie,  Dr. Strobeck and Mr. Shea, if the executive’s employment is terminated by us without cause, but not due to the executive’s death or disability, or by the executive for good reason: (i) we agreed to pay the executive any bonus earned but not paid under the Annual Incentive Bonus Plan for the preceding fiscal year;  (ii) the executive will be entitled to accelerated vesting of outstanding equity awards under certain circumstances pursuant to any written agreement with us, on the terms and conditions set forth therein (there are no such agreements currently in effect); (iii) subject to the executive’s execution of a general release of claims and his continued compliance with the restrictive covenants described above, we will continue to pay the executive his annual base salary for a period of 12 months (or 24 months if such termination occurs within 24 months following a change in control); and (iv) we will reimburse the executive for the costs of continued health coverage for himself and his eligible dependents under COBRA or a private health insurance policy, less the amount that, absent such termination, the executive would have been required to pay for such coverage under our health plan. Such payments with regard to health insurance would continue for 12 months (or 24 months if such termination occurs within 24 months following a change in control) or, if earlier, until the executive becomes eligible for coverage under another medical plan. In connection with our Bankruptcy and the Iroko Products Acquisition, each of our named executive officers entered into an amendment to his employment agreement providing that neither the Iroko Products Acquisition, nor our Bankruptcy, constituted a change of control under the applicable employment agreement. Mr. Shea entered into a Separation Agreement and General Release with the Company upon his termination of employment and received the benefits described above related to a termination without cause.  Mr. Radie entered into a Separation Agreement and General Release with the Company in October 2019 pursuant to which he is entitled to receive the benefits described above related to a termination without cause not in connection with a change in control.

The following table sets forth potential amounts payable to our named executive officers upon a termination of employment without cause or resignation for good reason or termination of employment without cause or resignation for good reason, in each case, within 24 months following a change in control. The table below reflects amounts payable to our named executive officers assuming their employment was terminated on December 31, 2018 (the last business day of fiscal 2018) and, if applicable, a change in control also occurred on such date. Mr. Musial is not included in the tables

below because he resigned on November 9, 2018. As a result of his resignation, he was not eligible to receive any severance benefits from us, whether under his employment agreement or otherwise.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information regarding our equity compensation plans as of December 31, 2018.

SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our Common Stock as of January 2, 2018October 24, 2019 by: (i) each director and nominee for director; (ii) each of our named executive officers; (iii) all of our executive officers and directors as a group; and (iv) all stockholders known us to be beneficial owners of more than five (5%) percent of our Common Stock.

The amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. This information does not necessarily indicate beneficial ownership for any other purpose.  Under SEC rules, a person is deemed to be a "beneficial owner"“beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of, or to direct the disposition of, such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within sixty (60)60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person'sperson’s ownership percentage, but not for purposes of computing any other person'sperson’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.