SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF
Securities Exchange Act of 1934
(Amendment No. )
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☐ Preliminary Proxy Statement ☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) ☒ Definitive Proxy Statement ☐ Definitive Additional Materials ☐ Soliciting Material Pursuant to Section 240.14a-12 Eloxx Pharmaceuticals, Inc. (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): ☒ No fee required. ☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: ☐ Fee paid previously with preliminary materials. ☐ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed:
![[MISSING IMAGE: lg_eloxx-4clr.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-20-041842/lg_eloxx-4clr.jpg) NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS April 1, 2020
By order of the ![[MISSING IMAGE: sg_neil-belloff.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-20-041842/sg_neil-belloff.jpg) Neil S. Belloff Chief Operating Officer, General Counsel and
TABLE OF TABLE OF CONTENTS
i ELOXX PHARMACEUTICALS, INC. 950 Winter Street Waltham, Massachusetts 02451 PROXY STATEMENT FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS To Be Held on May 20, 2020 General Information This We mailed the Notice of Internet Availability of Proxy Materials, or the Notice, on or about April 1, 2020 to all stockholders of record
Questions and Answers About the Annual Meeting 1. Why is Eloxx conducting a virtual Annual Meeting? We are pleased to 2. What if there are technical difficulties during the Annual Meeting? In the event of a technical malfunction or other problem that disrupts the Annual Meeting, the Company may adjourn, recess, or expedite the Annual Meeting, or take such other action that the Company deems appropriate considering the circumstances. Representatives of Broadridge Financial Solutions will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the Meeting, please call toll free: 1-800-586-1548; if calling from the United States, or if calling internationally, please call: (303) 562-9288. 3. Why did I receive a notice regarding the availability of proxy materials on the Internet? We are providing access to our proxy materials over the Internet. Accordingly, we have sent you the Notice because the Board of Directors, or the Board, of the Company is soliciting your proxy to vote at the Annual Meeting, including any adjournments or postponements of the Annual Meeting. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a You are invited to virtually attend the Annual Meeting to vote on the proposals described in this Proxy 1 4. I want to attend the Virtual Annual Meeting. What procedures must I follow? You may virtually attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/ELOX2020, where stockholders may vote and submit questions during the Meeting. Please have your 16-Digit Control Number to join the Annual Meeting. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are
5. How can I submit a question at the Annual Meeting? Only holders of To allow us to answer questions from as many stockholders as possible, we may limit each stockholder to two (2) questions. Questions from multiple stockholders on the same topic or that are otherwise related may be grouped, summarized and answered together. More information on submitting questions at the Annual Meeting will be posted on the internet website www.virtualshareholdermeeting.com/ELOX2020 in advance of the Meeting. 6. Who can vote at the Annual Meeting? Only holders of our common stock at the close of business on March 25, 2020 will be entitled to vote at the Annual Meeting. On the record date, there were 40,125,454 shares of common stock outstanding and entitled to vote. Stockholders may vote until the polls close, which will be announced during the conduct of the Meeting. Stockholder of Record: Shares Registered in Your Name If on March 25, 2020, your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are a stockholder of record. As a stockholder of record, you may vote online at the Annual Meeting or vote by proxy. Whether or not you plan to virtually attend the Annual Meeting, we urge you to fill out and return the proxy card that may be mailed or made available to you or vote by proxy over the telephone or on the Internet as instructed below to ensure your vote is counted. In accordance with Delaware law, for the 10 days prior to our Annual Meeting, a list of registered holders entitled to vote at our Annual Meeting will be available for inspection in our offices at 950 Winter Street, Waltham, MA 02451. Stockholders will also be able to access the list of registered holders electronically during the Annual Meeting through the virtual meeting website at www.virtualshareholdermeeting.com/ELOX2020. Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Agent If on March 25, 2020, your shares were held, not in your name, but rather in an 7. What am I being asked to vote on? There are three matters scheduled for a vote: • Election of nine (9) directors (the “Nominees”, each individually a “Nominee”) to hold office until the 2021 Annual Meeting of Stockholders (“Proposal 1”); • Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020 (“Proposal 2”); and • Advisory approval of the compensation of our named executive officers, as disclosed in this Proxy Statement (“Proposal 3”). 2 8. What if another matter is properly brought before the Annual Meeting? The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the 9. How do I vote? You may vote using any of By Mail If you have requested a paper set of By Telephone or on the Internet Eloxx has established telephone and Internet voting procedures for stockholders of record. These procedures are designed to authenticate your identity, to allow you to give your voting instructions and to confirm that those instructions have been properly recorded. Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day until 11:59 p.m., Eastern Time, on May 19, 2020. The availability of telephone and Internet voting for beneficial owners will depend on the voting processes of your broker, bank or other holder of record. We therefore recommend that you follow their voting instructions. If you vote by telephone or on the Internet, you do not have to return your proxy or voting instruction card. Telephone. You can vote by calling the toll-free telephone number on the Notice. Easy-to-follow voice prompts will allow you to vote your shares and confirm that your instructions have been properly recorded. Internet. The website for Internet voting is www.proxyvote.com. As with telephone voting, you can confirm that your voting instructions have been properly recorded. If you vote on the Internet, you also can request electronic delivery of future proxy materials. You can also scan the QR Barcode below (or on your proxy card) with your smart device to access the website for Internet voting. ![[MISSING IMAGE: tm2014098d1-icon_scan4clr.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-20-041842/tm2014098d1-icon_scan4clr.jpg){kind=icon} Online at the virtual Annual Meeting Stockholders who virtually attend the Annual Meeting may vote online at the Meeting. Any stockholder may attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/ELOX2020. We encourage you to access the Annual Meeting online prior to its start time. Stockholders may vote electronically and submit questions online while attending the Annual Meeting. Please have the Control Number we have provided to you to join the Annual Meeting. Instructions on how to attend and participate in the Annual Meeting, including how to demonstrate proof of stock ownership, are available at www.virtualshareholdermeeting.com/ELOX2020. Your vote is important. Please complete your proxy card or vote by telephone or Internet promptly to ensure that your vote is received timely. 3 10. Can I change my vote after submitting my proxy? Stockholder of Record: Shares Registered in Your Name Yes. You can revoke your proxy at any time • You may submit by mail another properly completed proxy card with a later date (which automatically revokes the earlier proxy). • You may submit a subsequent proxy by telephone or through the Internet as described above. • You may send a timely written notice that you are revoking your earlier-dated proxy to our Corporate Secretary c/o Eloxx Pharmaceuticals, Inc. at 950 Winter Street, Waltham, Massachusetts 02451. • You may attend the Annual Meeting and vote online as provided above. Simply attending the Annual Meeting will not, by itself, revoke your proxy. Your most current proxy card or telephone or Internet proxy submission is the one that will be counted. Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent If your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other agent. 11. Why did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials? We distribute our proxy materials to stockholders via the Internet under the “Notice and Access” approach permitted by rules of the U.S. Securities and Exchange Commission (SEC). This approach conserves natural resources and reduces our cost of printing and distributing the proxy materials, while providing a convenient method of accessing the materials and voting. On or about April 1, 2020, we mailed a “Notice of Internet Availability of Proxy Materials” to our stockholders containing instructions on how to access the proxy materials on the Internet. You may also request paper or e-mail delivery of the proxy materials on or before the deadline provided in the Notice by calling 1-800-579-1639, but note that it will take us at least three business days to mail or e-mail the proxy materials. You will also have the option to establish delivery preferences that will be applicable for all future mailings of proxy materials. We encourage stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact and costs of our annual meetings. If you choose to receive future proxy materials by e-mail, you will receive an e-mail message next year with instructions containing a link to those materials and a link to the 12. Can I access the proxy materials and the fiscal year 2019 Annual Report on the Internet? The Notice of Annual Meeting and Proxy Statement and the fiscal year 2019 Annual Report are available on our website at www.eloxxpharma.com and at www.proxyvote.com. Instead of receiving future proxy statements and accompanying materials by mail, most stockholders can elect to receive an e-mail that will provide electronic links to them. Opting to access your proxy materials online will conserve natural resources, will save us the cost of reproducing documents and mailing them to you, and will give you an electronic link directly to the proxy voting site. Stockholders of Record: If you vote on the Internet at www.proxyvote.com, simply follow the prompts to enroll in the electronic proxy delivery service. Beneficial Owners: You also may be able to receive copies of these documents electronically. Please check the information provided in the proxy materials sent to you by your broker, bank or other agent regarding the availability of this service. 13. What is a broker non-vote? If you are a beneficial owner whose shares are held in “street name” — that is, shares held of record by a broker — you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote, which are generally considered “non-routine” matters under applicable stock exchange rules. This is called a “broker non-vote.” In these 4 cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which the beneficial owner’s authorization is required under the applicable stock exchange rules. If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under applicable stock exchange rules to vote your shares on the ratification of Deloitte & Touche LLP, as our independent registered public accounting firm for the fiscal year 2020, even if the broker does not receive voting instructions from you. However, without specific instructions from you, your broker does not have discretionary authority to vote on the election of directors, or the advisory vote on 2019 executive compensation, in which case a broker non-vote will occur and your shares will not be voted on these matters. 14. What is the quorum requirement for the Annual Meeting? The presence of the Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on 15. What are the voting requirements to elect the directors and to approve each of the proposals discussed in this Proxy Statement? If you abstain from voting or there is a broker non-vote on a matter requiring a majority of the votes cast, your abstention or the broker non-vote will not affect the outcome of such vote, because abstentions and broker non-votes are not considered to be votes cast.
Election of Directors Directors must be elected by a majority of the votes cast in uncontested elections, such as the election of directors at the Annual Meeting. This means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee. Abstentions and broker non-votes are not counted as votes “for” or “against” a director nominee. In a contested election, the required vote would be a plurality of votes cast. Ratification of Deloitte & Touche LLP The votes cast “for” must exceed the votes cast “against” to approve the ratification of Deloitte & Touche LLP as our independent registered public accounting firm. Abstentions are not counted as votes “for” or “against” this proposal. Advisory Vote on our 2019 Named Executive Officer Compensation The votes cast “for” must exceed the votes cast “against” to approve, on an advisory basis, the compensation of our named executive officers. Abstentions and broker non-votes are not counted as votes “for” or “against” this proposal. 16. How will my shares be voted at the Annual Meeting? At the Meeting, the Board of Directors (through the persons named in the proxy card or, if applicable, their substitutes) will vote your shares as you instruct. If you sign a proxy card and return it without indicating how you would like to vote your shares, your shares will be voted as the Board of Directors recommends, which is: 5 • FOR the election of each of the director nominees named in this Proxy Statement; • FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2020; and • FOR the approval, on an advisory basis, of the 2019 compensation of our named executive officers. 17. Could other matters be decided at the Annual Meeting? As of the date of this Proxy Statement, we did not know of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement. If you return a signed and completed proxy card or vote by telephone or on the Internet and other matters are properly presented at the Annual Meeting for 18. How can I find out the results of Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a 19. Who will pay for
The Company will pay the 6 PROPOSAL 1 ELECTION OF DIRECTORS Nominees for Election as a Director At the Annual Meeting, nine directors, who have been nominated by our Board of Directors, based on the recommendation of the Nominating and Corporate Governance Committee of the Board of Directors (referred to as the Nominating Committee), are Each nominee has consented to being named as a nominee in this Proxy Statement and to serve as a director if elected. If any nominee listed in the
Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the majority of the remaining directors of the Board to fill a vacancy, including vacancies created by an increase in the number of directors, shall serve until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal. If a quorum is present, each nominee receiving more votes in favor of his or her election than against, will be elected as director. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominees named herein.
(1) As of May 20, 2020. 7 ![[MISSING IMAGE: tm2014098d1-pc_tenure4c.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-20-041842/tm2014098d1-pc_tenure4c.jpg) ![[MISSING IMAGE: tm2014098d1-pc_gender4c.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-20-041842/tm2014098d1-pc_gender4c.jpg) Director Nominees
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH NOMINEE UNDER PROPOSAL 1. 12 INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE Independence of the Board of Directors As required under Nasdaq Stock Market (“Nasdaq”) listing rules, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the company’s board. The Board consults with the Company’s counsel to ensure that the Board’s determinations 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, as in effect from time to time. Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the Company, our senior management and our independent registered public accounting firm, the Board has affirmatively determined that the following seven directors are independent directors within the meaning of the applicable Nasdaq listing standards: Messrs. Kariv, Kleijwegt, Nussbaum, Rubin and Veinrib, and Drs. Avnur and Seehra. In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with us. Dr. Williams and Dr. Noiman are not independent by virtue of their current and prior executive officer positions, respectively, with the Company. Board Leadership Structure The Board has a Chairman, Mr. Kariv, who has authority, among other things, to call and preside over Board meetings, to set meeting agendas and to determine materials to be distributed to the Board. Accordingly, the Chairman has substantial ability to shape the work of the Board. Role of the Board in Risk Oversight One of the Board’s key functions is informed oversight of our 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, our Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for our Company. Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and risk management is undertaken. Our Nominating Committee monitors the effectiveness of our Corporate Governance Guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. The Strategic Finance Committee assists the Board in fulfilling its responsibilities to review, among other things, the Company’s long-term strategy, risks and opportunities relating to such strategy, major financial objectives and potential transactions. It is Meetings of the Board of Directors The Board met six times during fiscal year 2019. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he or she served, held during the portion of the last fiscal year for which he or she was a director or committee member. The Board also met several times during the year on an informal basis where members received regular operational updates concerning the Company. Additional actions of the Board and the committees of the Board were adopted by written consent, which are not included in the total number of meetings held for the Board and each committee. Insider Trading Policy Approved by the Board of Directors The Board has approved an Insider Trading Policy (the “Policy”), which, among other matters, addresses transactions that present a heightened legal risk and the potential appearance of improper or inappropriate conduct. It is the Company’s policy that covered persons, which include all Company directors, officers and employees, may not engage in any of the following transactions: • Short-Term Trading. Short-term trading of Company securities may be distracting to the person trading and may unduly focus the person on the Company’s short-term performance instead of the Company’s long-term business objectives. For these reasons, and consistent with Section 16(b) of the Securities Exchange Act of 1934, as amended 13 (the “Exchange Act”), any director or executive officer of the Company who purchases Company securities may not sell any Company securities of the same class during the six months following the purchase (or vice versa). • Short Sales. Short sales of Company securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the seller that the securities will decline in value and therefore might signal to the market that the seller lacks confidence in the Company’s prospects and are prohibited. In addition, Section 16(c) of the Exchange Act prohibits executive officers and directors from engaging in short sales. • Publicly Traded Options. Given the relatively short term of publicly traded options, transactions in options may create the appearance that a director, officer or employee is trading based on material nonpublic information and focus such person’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in put options, call options or other derivative securities on an exchange or in any other organized market, are prohibited. • Hedging Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may permit a director, officer or employee to continue to own Company securities obtained through employee benefit plans or otherwise, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as the Company’s other stockholders. Therefore, directors, officers and employees are prohibited from engaging in any such transactions. • Margin Accounts and Pledged Securities. Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company securities, directors, officers and other employees are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan. • Standing and Limit Orders. Standing and limit orders (except standing and limit orders under Rule 10b5-1 Plans) create heightened risks for insider trading violations, similar to the use of margin accounts. There is no control over the timing of purchases or sales that result from standing instructions to a broker, and as a result the broker could execute a transaction when a director, officer or other employee is in possession of material nonpublic information. The Company therefore discourages placing standing or limit orders on Company securities other than pursuant to Rule 10b5-1 Plans, and a covered person must contact the Company’s Compliance Officer for clearance to place the order. 14 INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS The Board has four committees: Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Strategic Finance Committee. Each of the committees has authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities. The Board has determined that each member of each committee meets the applicable Nasdaq rules and regulations regarding “independence” and each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company. Each committee acts pursuant to a separate written charter, and each such charter has been adopted and approved by the Board of Directors. A copy of the charter of each of our committees, as well as our Corporate Governance Guidelines, are available on our website at www.eloxxpharma.com by choosing the “Investors” link and clicking on the “Corporate Governance” section. Committee Memberships
(1) As of March 25, 2020. ![[MISSING IMAGE: tm2014098d1-icon_chairbw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-20-041842/tm2014098d1-icon_chairbw.jpg){kind=icon} = Denotes Chair Audit Committee For fiscal year 2019, the Audit Committee was composed of three directors: Messrs. Kleijwegt and Rubin and Dr. Seehra, with Mr. Kleijwegt serving as the chairman of the committee. The Audit Committee met six times during fiscal year 2019. The Audit Committee was established by the Board in accordance with Section 3(a)(58)(A) of the Exchange Act to oversee our corporate accounting and financial reporting processes and audits of our financial statements. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of and assesses the qualifications of the Company’s independent registered public accounting firm; determines and approves the engagement of the independent registered public accounting firm; determines whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm; reviews and approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent registered public accounting firm on the Company’s audit engagement team as required by law; reviews and approves or disapproves transactions between the Company and any related persons; confers with management, and the Company’s independent registered public accounting firm, as appropriate, regarding the effectiveness of internal control over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and meets to review the Company’s annual and quarterly financial statements with management and the independent registered public accounting firm, including a review of the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Exchange Act reports filed with the SEC. The Board reviews the Nasdaq listing standards definition of independence for Audit Committee members on an annual basis and has determined that all of the current members of the Audit Committee are independent (as independence is currently defined under Rule 5605(a)(2) of the Nasdaq listing rules and under Rule 10A-3 under the Exchange Act). The Board has also determined that Mr. Rubin qualifies as an “audit committee financial expert,” as defined in applicable 15 SEC rules. The Board made a qualitative assessment of Mr. Rubin’s level of knowledge and experience based on a number of factors, including formal education and experience as an executive officer and director for publicly and privately held companies. Report of the Audit Committee of the Board of Directors The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2019 with management of the Company. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee of the Board of Directors has recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for fiscal year 2019. Respectfully submitted, Martijn Kleijwegt Steven D. Rubin Jasbir Seehra, Ph.D. The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. Compensation Committee For fiscal year 2019, the Compensation Committee was composed of three directors: Mr. Veinrib and Drs. Avnur and Seehra, with Dr. Avnur serving as the chairwoman of the committee. All members of our Compensation Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing rules). The Compensation Committee met five times during fiscal year 2019. The Compensation Committee acts on behalf of the Board to review, adopt and approve the Company’s compensation strategy, policies, plans and programs, including: • reviewing and approving corporate performance goals and objectives relevant to the compensation of our executive officers and other senior management, as appropriate; • reviewing and recommending to the Board the type and amount of compensation to be paid or awarded to Board members; • evaluating and approving the compensation plans and programs advisable for the Company, as well as evaluating and approving the modification or termination of existing plans and programs; • establishing policies with respect to equity compensation arrangements with the objective of appropriately balancing the perceived value of equity compensation and the dilutive and other costs of that compensation; • reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements (including, without limitation, perquisites and any other form of compensation) for our executive officers and, as appropriate, other senior management; and • administration of our equity compensation plans, pension and profit-sharing plans, stock purchase plans, bonus plans, deferred compensation plans and other similar plans and programs, if any. Compensation Committee Processes and Procedures The Compensation Committee holds regularly scheduled meetings and such special meetings as circumstances dictate. The agenda for each meeting is usually developed by the Chairperson of the Compensation Committee, in consultation with our Chief Executive Officer. The Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisers or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding his compensation. In addition, under the charter, the Compensation Committee has the authority to obtain, at our expense, advice and assistance from 16 compensation consultants and internal and external legal, accounting or other advisers and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. The Compensation Committee has direct responsibility for the oversight of the work of any consultants or advisers engaged for the purpose of advising the Compensation Committee. In particular, the Compensation Committee has the authority to retain, in its discretion, compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. Under the charter, the Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Compensation Committee, other than in-house legal counsel and certain other types of advisers, only after assessing the independence of such person in accordance with SEC and Nasdaq requirements that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent. The Compensation Committee considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of our compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year. Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. The Compensation Committee has the authority to delegate to the Chief Executive Officer and/or the officers of the Company who report directly to the Chief Executive Officer and all officers who are “insiders” subject to Section 16 of the Exchange Act (the “Senior Officers”), the determination of compensation under approved compensation programs, except that compensation action affecting the Chief Executive Officer or the Senior Officers may not be delegated. The Committee has direct responsibility and power to review and approve corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer, evaluate the performance of the Chief Executive Officer in light of those goals and objectives, and approve the compensation level for the Chief Executive Officer based on this evaluation. Compensation Committee Consultant The Compensation Committee has retained Radford, an Aon Hewitt Company, to which we refer as “Radford,” as its independent compensation consultant during fiscal year 2019. Based on the six factors for assessing independence and identifying potential conflicts of interest that are set forth in SEC Rule 10C-1(b)(4) under the Exchange Act, the Nasdaq Listing Rules and such other factors as were deemed relevant under the circumstances, our Compensation Committee has determined that Radford is independent and the work Radford performed on behalf of the Compensation Committee did not raise any conflict of interest. Radford regularly meets with the Compensation Committee and provides advice regarding the design and implementation of our executive compensation programs, as well as our director compensation programs. In particular, Radford: • reviews and makes recommendations regarding executive and non-employee director compensation; • provides market data and performs competitive market analyses, including peer group analyses; and • assists in the preparation of certain of our compensation-related disclosures included in this Proxy Statement. In providing its services to the Compensation Committee, with the Compensation Committee’s knowledge, Radford may contact our management from time to time to obtain data and other information from us and to work together in the development of proposals and alternatives for the Compensation Committee to review and consider. In fiscal year 2019, the cost of Radford’s executive compensation and director compensation consulting services was $55,439 (exclusive of the purchase of certain Radford surveys at a cost of $12,600). In order to ensure that Radford is independent, Radford is engaged by, takes direction from, and reports to, only the Compensation Committee and, accordingly, only the Compensation Committee has the right to terminate or replace Radford at any time. Compensation Committee Interlocks and Insider Participation Each member of the Compensation Committee is an independent director within the meaning of the Nasdaq Listing Rules. There were no interlocks among any of the members of the Compensation Committee and any of our executive officers. Nominating and Corporate Governance Committee For fiscal year 2019, the Nominating and Corporate Governance Committee, or Nominating Committee, was composed of three directors: Messrs. Nussbaum and Kariv and Dr. Avnur, with Mr. Nussbaum serving as the Chairman of the 17 Nominating Committee. All members of the Nominating Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing rules). The Nominating Committee met three times during fiscal year 2019. The Nominating Committee of the Board is responsible for identifying and evaluating candidates to serve as directors of the Company (consistent with criteria approved by the Board), reviewing and evaluating incumbent directors, recommending to the Board for selection candidates for election to the Board, making recommendations to the Board regarding the membership of the committees of the Board, assessing the performance of management and the Board and developing a set of corporate governance principles for the Company. The Nominating Committee believes that candidates for director should have certain minimum qualifications and have the highest personal integrity and ethics. The Nominating Committee believes that each director should possess the requisite ability, judgment and experience to oversee the Company’s business, and should contribute to the overall diversity of the Board. Accordingly, the Nominating Committee considers the qualifications of directors and director candidates individually and in the broader context of its overall composition and the Company’s current and future needs. Candidates for director nominees are reviewed in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating Committee typically considers diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability. In the case of new director candidates, the Nominating Committee also determines whether the nominee is independent for Nasdaq purposes, which determination is based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board and the Company. The Nominating Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the Board by majority vote. The Nominating Committee will consider director candidates recommended by stockholders. The Nominating Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Any such stockholder recommendations must be delivered to our Corporate Secretary, together with the information required to be filed in a proxy statement with the SEC regarding director nominees, and each such nominee must consent to serve as a director if elected, no later than the deadline for submission of stockholder nominations as set forth in our By-laws and under the section of this Proxy Statement entitled “Stockholder Nominations — Advance Notice.” Stockholder Communications with the Board of Directors Historically, the Company has not provided a formal process related to stockholder communications with the Board. Nevertheless, every effort has been made 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. The Company believes its responsiveness to stockholder communications to the Board has been excellent. The Nominating Committee will consider adoption of a formal process for stockholder communications with the Board as appropriate and, if adopted, publish it promptly and post it to the Company’s website. Currently, communications with the Board should be made in writing and directed to the Company’s Corporate Secretary at our principal executive offices. Code of Ethics We have adopted the Eloxx Pharmaceuticals, Inc. Code of Business Conduct and Ethics that applies to all of our officers, directors and employees. The Code of Business Conduct and Ethics is available on our website at https://investors.eloxxpharma.com/corporate-governance/governance-overview. If we make any substantive amendments to the Code of Business Conduct and Ethics or we grant any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website. Corporate Governance Guidelines In December 2017, the Board adopted our Corporate Governance Guidelines to assure that the Board will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Guidelines set forth the practices the Board intends to follow 18 with respect to Board composition and selection, Board meetings and involvement of senior management, Chief Executive Officer performance evaluation and succession planning, and Board committees and compensation. The Corporate Governance Guidelines, as well as the charters for each committee of the Board, may be viewed on our website at https://investors.eloxxpharma.com/corporate-governance/governance-overview. Stockholder Nominations — Advance Notice Our By-laws provide that nominations for the election of directors and proposals for other business to be transacted by the stockholders may be made at an annual meeting: (a) pursuant to the Company’s notice with respect to such meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) by any stockholder who (i) is a stockholder of record on the date of the giving of the notice and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) complies with the notice procedures set forth in the By-laws and summarized below. The following summary is qualified in its entirety by reference to Section 1.2 of our By-laws, which contains additional information and requirements that must be adhered to. In addition to any other applicable requirement for a nomination or proposal to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to our Corporate Secretary. To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed and received at our principal executive offices not less than 90 days nor more than 120 days prior to the anniversary date of the annual meeting of the preceding year; provided that in the event that the date of the annual meeting for the current year is more than 30 days before or after the anniversary date of the prior year’s annual meeting, then on or before 10 days after the day on which the date of the current year’s annual meeting is first disclosed in a public announcement. To be in proper written form, a stockholder’s notice to the Corporate Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director: (i) all information relating to such nominee that would be required to be disclosed in solicitations of proxies for the election of such nominee as a director pursuant to Regulation 14A under the Exchange Act and such nominee’s written consent to serve as a director if elected; (ii) a description of all direct and indirect compensation and other material monetary arrangements, agreements or understandings during the past three years, and any other material relationship, if any, 19 PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has selected Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year 2020 and has further directed that management submit the selection of our independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Deloitte & Touche LLP was initially appointed in June 2018 as our independent registered public accounting firm to audit our financial statements for the year ended December 31, 2018. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be Neither our By-laws, as amended, nor other governing documents or law require stockholder ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of Deloitte & Touche LLP to the stockholders for ratification as a
The votes cast “for” must exceed the Principal Accountant Fees and Services The following
(1) Represents fees billed for
(2) Represents fees billed for
Represents fees billed for tax compliance and (4)
Represents fees billed for professional services related to All such services and
Pre-Approval Policy and Procedures The Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual, explicit, case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the
full Audit Committee at its next scheduled meeting. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 2. 20 PROPOSAL 3 ADVISORY VOTE ON EXECUTIVE COMPENSATION The
This vote is not intended to address any specific item of compensation, but rather the
Accordingly, the Board is asking our stockholders to indicate their support for the compensation of our named executive officers as described in this Proxy Statement by casting a non-binding advisory vote “FOR” Proposal 3. If a quorum is present, the votes cast “for” must exceed the votes cast “against” to approve, on an advisory basis, the compensation of our named executive officers. Abstentions and broker non-votes are not counted as votes “for” or Because the vote is THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
21 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following
(1) As of We note that Robert E. Ward, former CEO, resigned as an officer and director effective February 25, 2020 and from the Company effective February 29, 2020, David Snow, former Chief Business Officer, resigned from the Company effective February 29, 2020, and Gregory Weaver, former CFO, resigned from the Company effective March 15, 2020. Each of Messrs. Ward, Snow and Weaver, along with Dr. Williams, were named executive officers for fiscal year 2019. Gregory C. Williams — Chief Executive Officer Dr. Gregory C. Williams became our Chief Executive Officer and a director on February 25, 2020 and had served as our Chief Operating Officer since June 2018. See “Proposal 1 — Election of Directors” for a discussion of Dr. Williams’ business experience. Neil S. Belloff — Chief Operating Officer, General Counsel & Corporate Secretary Mr. Neil S. Belloff became our Chief Operating Officer on February 25, 2020 and has served as our General Counsel and Corporate Secretary since June 2018. Prior to
22 TABLE OF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information relating to the beneficial ownership of our common stock as of The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or dispositive power as well as any shares that the individual has the right to acquire within 60 days of March 25, 2020 through the exercise of any stock option, warrants or other rights. Restricted stock units (RSUs) and stock options that will vest within 60 days of March 25, 2020 are deemed outstanding and reflected in the Shares of Common Stock Beneficially Owned column and for computing the ownership percentage of the stockholder holding such securities, but are not deemed outstanding for computing the ownership percentage of any other stockholder. Vested RSUs are included as common stock. Shares underlying Performance Stock Units are not deemed outstanding until earned and are not included in the table. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and dispositive power with respect to all shares of common stock held by that person. The percentage of shares beneficially owned is computed on the basis of 40,125,454 shares of our common stock outstanding as of March 25, 2020. Shares of common stock that a person has the right to acquire within 60 days of March 25, 2020, are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise noted below, the address of the persons listed on the table is c/o Eloxx Pharmaceuticals, Inc., 950 Winter Street, Waltham, MA 02451.
* Represents beneficial ownership of less than 1%. (1) Based on a Schedule 13D/A filed with the SEC on June 26, 2019 and subsequent Form 4 filings, Pontifax Management III G.P. (2011) Ltd. (“Management III”) has shared voting and dispositive power with respect to 7,188,186 shares of common stock; Pontifax Management Fund III L.P. has shared voting and dispositive power with respect to 7,188,186 shares of common stock; Pontifax (Cayman) III, L.P. has shared voting and dispositive power with respect to 2,287,937 shares of common stock; Pontifax (Israel) III, 23 L.P. has shared voting and dispositive power with respect to 4,900,249 shares of common stock; Pontifax Management 4 G.P. (2015) Ltd. (“Management 4”) has shared voting and dispositive power with respect to 2,151,485 shares of common stock; Pontifax IV GP L.P. has shared voting and dispositive power with respect to 2,151,485 shares of common stock; Pontifax (Cayman) IV L.P. has shared voting and dispositive power with respect to 510,846 shares of common stock; Pontifax (Israel) IV, L.P. has shared voting and dispositive power with respect to 1,049,310 shares of common stock; and Pontifax (China) IV L.P. has shared voting and dispositive power with respect to 567,329 shares of common stock. The managing partners of Management III and Management 4 are Tomer Kariv and Ran Nussbaum. The address of the entities affiliated with Pontifax Funds is 14 Shenkar St., Herzeliya, Israel. (2) Based on a Schedule 13D/A filed with the SEC on March 13, 2020. Consists of 2,953,673 shares of common stock held by LSP V Coöperatieve U.A. LSP V Management B.V. is the director and manager of LSP V Coöperatieve U.A. and shares voting power and investment control over shares held by LSP V Coöperatieve U.A. The managing directors of LSP V Management B.V. are Martijn Kleijwegt, Rene Kuijten and Joachim Rothe. The address of LSP is Johannes Vermeerplein 9, 1071 DV Amsterdam, the Netherlands. (3) Based on a Schedule 13G/A filed with the SEC on February 12, 2020, Menora Mivtachim Holdings Ltd. has shared voting and dispositive power with respect to 2,094,208 shares of common stock. The address of Menora Mivtachim Holdings Ltd. is Menora House, 23 Jabotinsky St., Ramat Gan 5251102, Israel. (4) Consists of 244,267 shares of common stock, 531,670 shares of common stock underlying stock options, and 50,000 shares of common stock held by a family foundation of which Mr. Ward is a trustee. (5) Consists of 2,263 shares of common stock held in an IRA indirectly by spouse, and 38,333 shares of common stock underlying stock options. (6) Includes 9,339,671 shares of common stock of the Pontifax Funds as to which Mr. Kariv may be deemed to share voting power and investment control in his capacity as a managing partner of Management III and Management 4. Mr. Kariv disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. This total also includes 38,333 shares of common stock underlying stock options. (7) Includes 2,953,673 shares of common stock held by LSP V Coöperatieve U.A. as to which Mr. Kleijwegt may be deemed to share voting power and investment control in his capacity as a managing director of LSP V Management B.V. Mr. Kleijwegt disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. This total also includes 38,333 shares of common stock underlying stock options. (8) Consists of 490,789 shares of common stock and 355,793 shares of common stock underlying stock options. (9) Includes 9,339,671 shares of common stock held by the Pontifax Funds as to which Mr. Nussbaum may be deemed to share voting power and investment control in his capacity as a managing partner of Management III and Management 4. Mr. Nussbaum disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. This total also includes 38,333 shares of common stock underlying stock options. (10) Consists of 97,453 shares of common stock underlying stock options. (11) Consists of 38,333 shares of common stock underlying stock options. (12) Consists of 38,333 shares of common stock underlying stock options. (13) Consists of 10,431 shares of common stock and 275,791 shares of common stock underlying stock options. (14) Consists of 4,910 shares of common stock and 183,125 shares of common stock underlying stock options. (15) Consists of 7,359 shares of common stock and 178,228 shares of common stock underlying stock options. (16) Each of Mr. Kariv and Mr. Nussbaum report the shares held by the Pontifax Funds due to their potential deemed shared voting and dispositive power over those shares. The shares held by the Pontifax Funds are only included once in the number reported in this row. 24 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during fiscal year 2019, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with. 25 EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth information regarding compensation awarded to, earned by or paid to our principal executive officer, principal financial officer, and the next two most highly compensated executive officers during the years ended December 31, 2019 and 2018 (our “named executive officers”). Summary Compensation Table
(1) Reflects the position held by the named executive officer at the end of 2019. Messrs. Ward, Snow and Weaver have since left the Company. Dr. Williams has been appointed as our Chief Executive Officer. (2) Amounts reflect the aggregate grant date fair value of restricted stock units granted during the relevant fiscal year calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 11 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. These amounts do not reflect the actual economic value that may be realized by the named executive officer upon the vesting of the restricted stock unit or the sale of the common stock underlying such restricted stock unit. The grant date fair value was not adjusted to take into account any estimated forfeitures. (3) Amounts reflect the aggregate grant date fair value of option awards granted during the relevant fiscal year calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 11 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. These amounts do not reflect the actual economic value that may be realized by the named executive officer upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options. The grant date fair value was not adjusted to take into account any estimated forfeitures. (4) Except as noted in note (6) below, amounts represent amounts payable upon the achievement of pre-established annual corporate goals. The Company’s Compensation Committee determined to pay Mr. Ward, Mr. Weaver, Dr. Williams, and Mr. Snow annual cash incentive plan awards equal to 0%, 50%, 100% and 50%, respectively, of such named executive officer’s target award for performance in 2019. (5) Amounts shown in the “All Other Compensation” column include the Company’s contributions to a tax qualified 401(k) plan and insurance premiums for life insurance and medical payments that were paid consistent with the Company’s policies and available to all employees. (6) Amount consists of a transaction bonus totaling $200,000 made pursuant to the terms of Mr. Ward’s employment agreement. (7) Dr. Williams was appointed Chief Operating Officer, effective June 25, 2018, and received a pro-rated amount of his annual salary of $375,000 and his annual cash incentive plan award for his service in 2018. (8) Amounts represent sign-on bonus payments paid in 2018 pursuant to the terms of Dr. Williams’ employment agreement. (9) Amount consists of an equity award received pursuant to the terms of the named executive officer’s respective employment agreement. Amounts reflect the aggregate grant date fair value of option awards calculated in accordance with note (3) above and reflect corrections to previously reported values, which used the grant date strike price to calculate the values. (10) Mr. Snow was appointed Chief Business Officer, effective June 25, 2018, and received a pro-rated amount of his annual salary of $375,000 and his annual cash incentive plan award for his service in 2018. (11) Amount includes consulting fees of $61,355 paid prior to Mr. Snow’s appointment as Chief Business Officer on June 25, 2018. 26 Outstanding Equity Awards at Fiscal Year-End The following table shows the equity awards held by our named executive officers, as of December 31, 2019.
(1) The market value of the stock awards is determined by multiplying the number of shares subject to such award times by $7.36, which was the closing market price of the Company’s common stock on December 31, 2019, the last business day of 2019. Employment Arrangements The initial terms and conditions of employment for each of our named executive officers are set forth in either employee offer letters or employment agreements. Each of our named executive officers served as at-will employees, subject to the terms of applicable offer letters or employment agreements. We entered into agreements with each of our named executive officers setting forth the terms of their employment with us. Below is a description of the material terms of each of the agreements. Former Executives: Employment Agreement with Robert E. Ward (Chief Executive Officer until February 25, 2020) Pursuant to his employment agreement with us effective as of December 26, 2017, Mr. Ward’s annual base salary of $450,000 was increased to $500,000 effective January 1, 2019 following the successful consummation of the Company’s capital raise in April 2018. Mr. Ward was also eligible to earn an annual cash bonus, with a target of 50% of his annual base salary, subject to the achievement of performance milestones determined by our Board. Mr. Ward was also eligible to earn transaction bonuses as follows: (i) a bonus of $200,000 following the consummation of a first transaction between the Company and a strategic pharmaceutical company, and (ii) a bonus of $200,000 following the successful consummation of a fundraising by the Company which exceeds $10 million, in each case, as determined by our Board in its reasonable discretion. Mr. Ward was also eligible to participate in the Company’s benefit programs as made generally available to other senior executives and was eligible to receive annual equity grants, in the discretion of our Board or any committee thereof. Following the termination of Mr. Ward’s employment by the Company, Mr. Ward will receive (1) continued payments of his base salary for 12 months, (2) payments for COBRA coverage at applicable rates for 12 months, (3) any annual bonus earned but unpaid for the year immediately prior to his termination date, (4) accelerated vesting of 25% of his unvested shares subject to all stock options, restricted stock units and other equity awards, and (5) an additional nine months in which to exercise any vested stock options (but not to exceed the original term of the award). Mr. Ward is also eligible for certain tax gross up benefits in the event that payments to him under the employment agreement are subject to Section 280G and 4999 of the Internal Revenue Code. 27 Employment Agreement with Gregory Weaver (Chief Financial Officer until March 15, 2020) On March 12, 2018, we entered an employment agreement with Mr. Weaver, pursuant to which he was entitled to receive a base salary at an annual rate of $345,000 and was eligible to earn an annual performance-based bonus of up to 40% of his base salary at the discretion of the Board or any committee thereof. Following the termination of Mr. Weaver’s employment agreement, Mr. Weaver will receive (1) continued payments of his base salary for 12 months, (2) payments for COBRA coverage at applicable rates for 12 months, (3) any Annual Bonus (as defined in the employment agreement) earned but unpaid for the year immediately prior to the date his employment terminated, (4) accelerated vesting of 25% of the unvested shares subject to all of his stock options, restricted stock units and other equity awards, and (5) a post-termination stock option exercise period for the shorter of 9 months or for the remaining term of the award. Employment Agreement with David Snow (Chief Business Officer until February 29, 2020) The Company entered into an employment agreement with Mr. Snow effective as of June 25, 2018 wherein he agreed to serve as the Company’s Chief Business Officer reporting to the Chief Executive Officer of the Company. Pursuant to the agreement, Mr. Snow was entitled to an annual base salary of $375,000 and was also eligible to earn an annual cash bonus, with a target of 40% of his annual base salary, based upon the achievement of performance milestones determined by our Board. Mr. Snow’s agreement also provided for the grant of stock options to purchase 200,000 shares of common stock at an exercise price of $18.85 (the closing market price on the date of grant). The stock options were issued under the 2018 Plan and were scheduled to vest and become exercisable with respect to one-third of the shares on the first anniversary of the effective date of the Agreement and with respect to an additional one-twelfth of the remaining shares on each quarterly anniversary of the grant date thereafter, subject to continued employment with the Company through each such date. Mr. Snow was entitled to participate in all employee benefit plans that the Company generally makes available to its senior executives (other than severance plans) from time to time. Following the termination of Mr. Snow’s employment agreement by the Company, Mr. Snow will receive (1) continued payments of his base salary for 12 months, (2) payments for COBRA coverage at applicable rates for 12 months, (3) any Annual Bonus (as defined in the employment agreement) earned but unpaid for the year immediately prior to the date his employment terminated, (4) pursuant to the 2018 Plan, accelerated vesting of 25% of the unvested shares subject to stock options, restricted stock units and other equity awards, and (5) a post-termination stock option exercise period for the shorter of 9 months or for the remaining term of the award. Current Executives: Employment Agreement with Gregory Williams The Company entered into an employment agreement with Dr. Williams effective as of February 25, 2020 wherein he agreed to serve as the Company’s Chief Executive Officer. Pursuant to the agreement, Dr. Williams is entitled to an annual base salary of $475,000 and is also eligible to earn an annual cash bonus, with a target of 50% of his annual base salary, based upon the achievement of performance milestones determined by our Board. Dr. Williams is also eligible to earn a performance bonus of $125,000 upon the achievement of complete Phase 2 study enrollment (US, EU and IL) by July 2020. Dr. Williams’ agreement also provided for the grant of stock options to purchase 400,000 shares of common stock at an exercise price of $3.59 (the closing market price on the date of grant) and restricted stock units for 200,000 shares of Common Stock. The stock options and restricted stock units were issued under the 2018 Plan and will vest and become exercisable over a four year period as follows: one-fourth of the shares on the first anniversary of the effective date of the Agreement and the remaining shares equally on each quarterly anniversary of the grant date thereafter, subject to continued employment with the Company through each such date. In addition, the vesting of the stock options granted, and any future stock options, restricted stock units or other equity compensation awards will be accelerated and become fully vested and exercisable or payable, as the case may be, upon the occurrence of a Significant Event (as defined in the 2018 Plan). Dr. Williams will be entitled to participate in all employee benefit plans that the Company generally makes available to its senior executives (other than severance plans) from time to time. Upon the termination of Dr. Williams’ employment agreement by the Company without Cause or a resignation by Dr. Williams for Good Reason (each such term as defined in the employment agreement), Dr. Williams will be entitled to (1) a lump sum payment of an amount equal to 12 months of his base salary, (2) payments for COBRA coverage at applicable rates for 12 months, (3) any Annual Bonus (as defined in the employment agreement) earned but unpaid for the year immediately prior to the date his employment terminated, (4) a pro-rata portion of the Target Bonus (as defined in the 28 employment agreement) based on the number of days that Dr. Williams was employed during such performance year or achievement of performance goals as determined by the Board in good faith, depending on whether performance goals were established as of the date of termination, and (5) pursuant to the 2018 Plan, accelerated vesting of 25% of the unvested shares subject to stock options, restricted stock units and other equity awards, and a post-termination stock option exercise period for the shorter of 9 months or for the remaining term of the award. If Dr. Williams’ employment is terminated by the Company without Cause or Dr. Williams resigns for Good Reason within 24 months following a Significant Event, he will be entitled to (1) a lump sum payment of an amount equal to 18 months of his base salary, (2) payments for COBRA coverage at applicable rates for 18 months, (3) any Annual Bonus (as defined in the employment agreement) earned but unpaid for the year immediately prior to the date his employment terminated, (4) the full Target Bonus (as defined in the employment agreement) for the performance year in which his employment terminated, and (5) pursuant to the 2018 Plan, accelerated vesting of all of the unvested shares subject to stock options, restricted stock units and other equity awards, and a post-termination stock option exercise period for the shorter of 12 months or for the remaining term of the award. If Dr. Williams’ employment is terminated by the Company for Cause or by Dr. Williams without good reason, the Company shall pay Dr. Williams (1) any unpaid base salary through the date of termination and any accrued vacation; (2) reimbursement for any unreimbursed expenses owed to Dr. Williams; and (3) all other payments and benefits to which Dr. Williams is entitled under the terms of any applicable compensation arrangement or benefit, equity or other plan or program, including but not limited to any applicable insurance benefits, payable on the next regularly scheduled Company payroll date following the date of termination or earlier if required by applicable law only, and shall not be obligated to make any additional payments. Employment Agreement with Neil Belloff The Company entered into an employment agreement with Mr. Belloff effective as of February 25, 2020 wherein he agreed to serve as the Company’s Chief Operating Officer, General Counsel and Corporate Secretary. Pursuant to the agreement, Mr. Belloff is entitled to an annual base salary of $420,000 and is also eligible to earn an annual cash bonus, with a target of 40% of his annual base salary, based upon the achievement of performance milestones determined by our Board. Mr. Belloff is entitled to an annual housing allowance equal to a net after-tax amount of $36,000. Mr. Belloff’s agreement also provided for the grant of stock options to purchase 200,000 shares of common stock at an exercise price of $3.59 (the closing market price on the date of grant) and restricted stock units for 100,000 shares of Common Stock. The stock options and restricted stock units were issued under the 2018 Plan and will vest and become exercisable over a four year period as follows: one-fourth of the shares on the first anniversary of the effective date of the Agreement and the remaining shares equally on each quarterly anniversary of the grant date thereafter, subject to continued employment with the Company through each such date. In addition, the vesting of the stock options granted, and any future stock options, restricted stock units or other equity compensation awards will be accelerated and become fully vested and exercisable or payable, as the case may be, upon the occurrence of a Significant Event (as defined in the 2018 Plan). Mr. Belloff will be entitled to participate in all employee benefit plans that the Company generally makes available to its senior executives (other than severance plans) from time to time. Upon the termination of Mr. Belloff’s employment agreement by the Company without Cause or a resignation by Mr. Belloff for Good Reason (each such term as defined in the employment agreement), Mr. Belloff will be entitled to (1) a lump sum payment of an amount equal to 12 months of his base salary, (2) payments for COBRA coverage at applicable rates for 12 months, (3) any Annual Bonus (as defined in the employment agreement) earned but unpaid for the year immediately prior to the date his employment terminated, (4) a pro-rata portion of the Target Bonus (as defined in the employment agreement) based on the number of days that Mr. Belloff was employed during such performance year or achievement of performance goals as determined by the Board in good faith, depending on whether performance goals were established as of the date of termination, and (5) pursuant to the 2018 Plan, accelerated vesting of 25% of the unvested shares subject to stock options, restricted stock units and other equity awards, and a post-termination stock option exercise period for the shorter of 9 months or for the remaining term of the award. If Mr. Belloff’s employment is terminated by the Company without Cause or Mr. Belloff resigns for Good Reason within 24 months following a Significant Event, he will be entitled to (1) a lump sum payment of an amount equal to 18 months of his base salary, (2) payments for COBRA coverage at applicable rates for 18 months, (3) any Annual Bonus (as defined in the employment agreement) earned but unpaid for the year immediately prior to the date his employment terminated, (4) the full Target Bonus (as defined in the employment agreement) for the performance year in which his employment terminated, and (5) pursuant to the 2018 Plan, accelerated vesting of all of the unvested shares subject to 29 stock options, restricted stock units and other equity awards, and a post-termination stock option exercise period for the shorter of 12 months or for the remaining term of the award. If Mr. Belloff’s employment is terminated by the Company for Cause or by Mr. Belloff without good reason, the Company shall pay Mr. Belloff (1) any unpaid base salary through the date of termination and any accrued vacation; (2) reimbursement for any unreimbursed expenses owed to Mr. Belloff; and (3) all other payments and benefits to which Mr. Belloff is entitled under the terms of any applicable compensation arrangement or benefit, equity or other plan or program, including but not limited to any applicable insurance benefits, payable on the next regularly scheduled Company payroll date following the date of termination or earlier if required by applicable law only, and shall not be obligated to make any additional payments. Executive Benefits and Perquisites All of our full-time employees, including our named executive officers, are eligible to participate in our health and welfare plans, including medical, dental and vision benefits. Our named executive officers participate in these plans on the same basis as other eligible employees. The value of these benefits is included above in the “All Other Compensation” column of the summary compensation table. Retirement Plans We maintain a 401(k) plan in which U.S. employees of the Company who meet certain eligibility requirements, including our named executive officers, are eligible to participate. The 401(k) plan is a U.S. tax-qualified defined contribution retirement plan under which eligible employees may defer their eligible compensation, subject to the limits imposed by the U.S. Internal Revenue Code, and the Company may, in its discretion, make a matching contribution of 100% on the first 3% of employee contributions and 50% on the employee contributions from 3% to 5%. Elements of Our Compensation Programs for Named Executive Officers The goal of our compensation plans and programs is to deliver appropriate, fiscally responsible compensation to named executive officers that focuses their efforts on delivering results against short- and long-term objectives, provides sustained value to stockholders and encourages the taking of responsible, appropriate and balanced risks. Accordingly, we have designed our compensation programs to include the following components: Pay Mix The Compensation Committee believes that compensation for our named executive officers must be a mix of variable compensation (both short- and long-term) and fixed compensation (base salary) in order to reinforce our executives’ responsibility to balance short- and long-term performance while maintaining focus on delivering value for our stockholders. As such, our programs offer opportunity for higher compensation for successful performance and lower compensation in the absence of success. Base Salary Base salaries for our named executive officers provide a fixed rate of pay and serve as the basis for calculating targets in certain variable pay programs. Starting salaries and subsequent increases are determined based on the following factors: • performance, experience, expected future contribution and ability to deliver value to stockholders; • analysis of internal pay relationships; and • market conditions and competitive positioning. Annual Bonus Our variable pay plan is designed to focus our named executive officers on annual goals and objectives that are established in order to contribute to the short- and long-term success of our business. The Compensation Committee reviews and approves each plan year’s targets and performance metrics to ensure that they are challenging and commensurate with our short- and long-term business plan. Actual payments made are calculated based on performance in relation to the Compensation Committee approved goals. Equity Grants The Compensation Committee maintains that equity awards must align the interests of our named executive officers with those of our stockholders through rewarding exceptional corporate performance, stockholder returns and ensuring 30 that decisions made in the short-term solidify a strong future for us. As such, awards granted pursuant to the 2018 Plan are an essential component of our total compensation strategy. The equity pool of awards available to grant to all employees (including our named executive officers) in any given year is approved at the end of the prior year by the Compensation Committee, subject to the overall maximum amount of shares of our common stock available under the 2018 Plan. Equity awards may take the form of, among others, stock options, restricted stock units or performance stock units. 31 DIRECTOR COMPENSATION The following table sets forth information concerning the compensation awarded to, earned by or paid our non-employee directors during fiscal year 2019.
(1) Amounts reflect the aggregate grant date fair value of option awards granted during the relevant fiscal year calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 11 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. These amounts do not reflect the actual economic value that may be realized by the non-employee director upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock upon the vesting of underlying such stock options. The grant date fair value was not adjusted to take into account any estimated forfeitures. These awards had a grant date fair value of $5.98 per share. (2) In May 2019, each non-employee director received an option award grant of 20,000 shares upon their re-election to the Board. The option awards vest over a two-year period from the date of grant. (3) Payment was made to Global Health Science Fund which is a portfolio company of Quark Venture Inc. where Dr. Avnur serves as Chief Scientific Officer. (4) Payments were directed to the Pontifax Funds as to which Mr. Kariv and Mr. Nussbaum may be deemed to share voting power and investment control in their capacity as managing partners of the general partners of the Pontifax Funds. (5) Payments were directed to Life Science Partners V as to which Mr. Kleijwegt may be deemed to share voting power and investment control in his capacity as managing partner of LSP V Management B.V. The following sets forth the cash and equity compensation to be paid to our non-employee directors, in the year beginning immediately following the 2020 Annual Meeting, for service on our Board or Committees thereof. Cash Compensation
Equity Compensation Each non-employee director will receive an equity grant of 40,000 stock options upon initial election to the Board and annual equity grants of 20,000 stock options upon each re-election to the Board. The equity will be granted upon election or re-election at each annual meeting, with an exercise price equal to the closing stock price on the grant date. The equity will vest as to 50% of the stock options on the first anniversary of the grant date and the remainder in twelve (12) equal monthly installments thereafter (an aggregate of two-year vesting). 32 EQUITY COMPENSATION PLAN INFORMATION The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2019.
(1) On January 1 of each calendar year the 2018 Plan’s share reserve will automatically increase by 5% of the Company’s shares of common stock outstanding on the immediately preceding December 31, up to an annual maximum of 10,000,000 shares of common stock available for future issuance. An additional 2,001,538 shares were added on January 1, 2020. (2) Represents warrants to purchase 323,894 shares of common stock with a weighted-average exercise price of $4.32 per share, along with time-based restricted stock units for 284,794 shares of common stock, 22,427 performance-based restricted stock units, 709,785 time-vesting options to purchase our common stock with a weighted-average exercise price of $7.87 per share and 22,427 performance-based options to purchase our common stock with an exercise price equal to $8.00 per share. 33 TRANSACTIONS WITH RELATED PERSONS Related Person Transactions Policy and Procedures We adopted a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will have a material interest in which the amount involves exceeds the lesser of $120,000 or one percent of the average of our assets for the last two completed fiscal years. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our Audit Committee, or, if Audit Committee approval would be inappropriate, to another independent body of our Board, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related person transactions and to effectuate the terms of the policy. In considering related person transactions, the Audit Committee, or other independent body of our Board, takes into account the relevant available facts and circumstances including, but not limited to (a) the risks, costs and benefits to us, (b) the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated, (c) the availability of other sources for comparable services or products and (d) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our Audit Committee, or other independent body of our Board, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our Audit Committee, or other independent body of our Board, determines in the good faith exercise of its discretion. Certain Related Person Transactions Except as described below, there have been no transactions since January 1, 2019 in which we are a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our assets for the last two completed fiscal years, and in which any of our directors, executive officers or holders of more than 5% of our common stock, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements which are described under “Executive Compensation” and “Director Compensation.” Policy for Approval of Related Person Transactions Pursuant its charter, our Audit Committee is responsible for reviewing on an ongoing basis and approving all “related party transactions” in accordance with the policy described herein. Under the Company policy, our Audit Committee is responsible for reviewing and approving related person transactions. In the course of its review and approval of related person transactions, our Audit Committee will consider the relevant facts and circumstances to decide whether to approve such Director and Officer Indemnification We entered into indemnification agreements with each of our directors 34 under Delaware law against liabilities that may arise by reason of their service to us or at our
When are stockholder proposals and director nominations due for next year’s Annual Meeting? To be considered for inclusion in next year’s proxy materials, you must submit your proposal, in writing, by December 2, 2020 to our Corporate Secretary c/o Eloxx Pharmaceuticals, Inc. at 950 Winter Street, Waltham, Massachusetts 02451, and you must comply with all applicable requirements of Rule 14a-8 promulgated under the Exchange Act.
Pursuant to our 35 DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS To the
We will promptly deliver, upon oral or written request, a separate copy of 950 Winter Street, Waltham, Massachusetts 02451. OTHER MATTERS Upon written request addressed to our Corporate Secretary at Eloxx Pharmaceuticals, Inc. at 950 Winter Street Waltham, Massachusetts 02451 from any person solicited herein, we will provide, at no cost, a paper copy of our fiscal year 2019 Annual Report on Form 10-K filed with the SEC. Our
Neil S. Belloff Chief Operating Officer, General Counsel and
April 1, 2020
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