SECURITIES AND EXCHANGE COMMISSION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨ Check the appropriate box:
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| ¨ | | Preliminary Proxy Statement |
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| ¨ | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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| x | | Definitive Proxy Statement |
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| ¨ | | Definitive Additional Materials |
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| ¨ | | Soliciting Material Pursuant to §240.14a-12 |
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Alimera Sciences, Inc. |
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| ¨ | | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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| | (4) | | Proposed maximum aggregate value of transaction: |
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| ¨ | | Fee paid previously with preliminary materials. |
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| ¨ | | 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. |
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Alpharetta, Georgia 30005
NOTICE OF
A SPECIALANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
SEPTEMBER 20, 2012JUNE 18, 2013
To the Stockholders of Alimera Sciences, Inc.:
You are cordially invited to attend a special
The annual meeting of stockholders
offor Alimera Sciences, Inc.
to(the “Company”) will be held at
our offices at 6120
WinwardWindward Parkway, Suite 290, Alpharetta, Georgia
30005, on
September 20, 2012Tuesday, June 18, 2013 at
11:009:30 a.m. local time.
As previously announced, on July 17, 2012, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a group of institutional investors, including both existing and new investors (the “Investors”) for the sale (the “Transaction”) of shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and warrants (the “Warrants”) to purchase shares of the Company’s Series A Preferred Stock, which is expected to result in gross proceeds to the Company of $40,000,000. For each share of Series A Preferred Stock being purchased, the Investors will receive Warrants to purchase 0.30 shares of Series A Preferred Stock. The Transaction will provide critical capital necessary for us to commercialize our product, ILUVIEN®, in Europe on our own, which we believe will increase stockholder value.
In summary, pursuant to the Purchase Agreement, at the closing of the Transaction and upon the approval of our stockholders, we will sell 1,000,000 shares of the Company’s Series A Preferred Stock and the Warrants to purchase 300,000 shares of the Company’s Series A Preferred Stock, which will carry the right to be converted into approximately 36.24% of our common stock, par value $0.01 per share (our “Common Stock”), based on our current capitalization. Therefore, if the proposal in the attached proxy statement is approved, the Investors would have beneficial ownership of our Common Stock, assuming the conversion of all shares of Series A Preferred Stock and the exercise and subsequent conversion of all Warrants, of approximately 43.62% (including Common Stock already held by certain Investors) along with certain other rights.
The terms of this important financing require us to submit certain matters for stockholder approval in accordance with applicable NASDAQ listing rules. The proxy statement and proxy card accompanying this notice of special meeting describe in detail the Transaction and the matters to be acted upon at the meeting. We urge you to read these materials carefully. In summary, the purposepurposes of the meeting is:
are:
1. To elect three Class III directors (Proposal 1);
2. To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013 (Proposal 2);
3. To approve,
on an advisory basis, the
issuancecompensation of
Series A Preferred Stock convertible into our
Common Stock under circumstances which require stockholder approval pursuant to applicable NASDAQ Listing Rules.There are no “dissenters”named executive officers (Proposal 3); and
4. To transact such other business as may properly come before the annual meeting or
“appraisal” rights available to our stockholders in connection with this proposal.any adjournments or postponements thereof.
Our board of directors has fixed the close of business on
August 10, 2012April 26, 2013 as the record date for determining holders of our
Common Stockcommon stock and preferred stock entitled to notice of, and to vote at, the
specialannual meeting or any adjournments or postponements thereof. A complete list of such stockholders will be available for examination at our offices in Alpharetta, Georgia during normal business hours for a period of ten days prior to the
specialannual meeting.
This year we are again using the Internet as our primary means of furnishing proxy materials to stockholders. Accordingly, most stockholders will not receive copies of our proxy materials. We instead are mailing a notice with instructions for accessing the proxy materials and voting via the Internet (the “Notice of Internet Availability”). We encourage you to review these materials and vote your shares. This delivery method allows us to conserve natural resources and reduce the cost of delivery while also meeting our obligations to you, our stockholders, to provide information relevant to your continued investment in the Company. If you received the Notice of Internet Availability by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability.
This notice of
specialannual meeting of stockholders and accompanying proxy statement are being distributed or made available to stockholders on or about
August 27, 2012.April 29, 2013.
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on September 20, 2012:June 18, 2013: The proxy statement isand annual report are available atwww.proxyvote.com.
www.proxyvote.com. |
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| By order of the Board of Directors, |
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Secretary of the Company |
Date:
August 24, 2012April 29, 2013
Your vote is important. Please vote by using the Internet or by telephone or,
if you received a paper copy of the proxy card by mail, by signing and returning the enclosed proxy card. Instructions for your voting options are described
inon the
Notice of Internet Availability of Proxy Materials or proxy
statement.card.
For
a Specialthe Annual Meeting of Stockholders
To Be Held on
September 20, 2012June 18, 2013
Alpharetta, Georgia 30005
PROXY STATEMENT FOR THE SPECIAL
2013 ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 20, 2012
This proxy statement and proxy card are furnished in connection with the solicitation of proxies to be voted at the
special meeting2013 Annual Meeting of
stockholders to be held on September 20, 2012Stockholders (the
“Special“Annual Meeting”) of Alimera Sciences, Inc. (sometimes referred to as “we”, the “Company” or “Alimera”), which will be held at
our offices at 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005,
on Tuesday, June 18, 2013 at
11:009:30 a.m.
local time.
We are making this proxy statement
and our annual report available to stockholders at www.proxyvote.com. On
August 27, 2012,April 29, 2013, we will begin mailing to our stockholders
(i) a notice (the “Notice”) containing instructions on how to access and review this proxy statement and our annual report or (ii) a copy of this proxy statement,
and a proxy
card.card and our annual report. The Notice also instructs you how you may submit your proxy over the Internet. If you received a Notice and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting those materials included in the Notice.
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving
thisthese proxy
statement and proxy card?materials?
You have received these proxy materials because you owned shares of Alimera common stock
or Series A Convertible Preferred Stock (“Series A Preferred Stock”) as of
August 10, 2012,April 26, 2013, the record date for the
SpecialAnnual Meeting, and our board of directors is soliciting your proxy to vote at the
SpecialAnnual Meeting. This proxy statement describes matters on which we would like you to vote at the
SpecialAnnual Meeting. It also gives you information on these matters so that you can make an informed decision.
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission, we are permitted to furnish our proxy materials over the Internet to our stockholders by delivering a Notice in the mail. As a result, only stockholders that specifically request a printed copy of the proxy statement will receive one. Instead, the Notice instructs stockholders on how to access and review the proxy statement and annual report over the Internet at www.proxyvote.com. The Notice also instructs stockholders on how they may submit their proxy over the Internet or via phone. If a stockholder who received a Notice would like to receive a printed copy of our proxy materials, such stockholder should follow the instructions for requesting these materials contained in the Notice.
How may I vote at the
SpecialAnnual Meeting?
You are invited to attend the
SpecialAnnual Meeting to vote on the
proposalproposals described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply follow the instructions below to submit your proxy via telephone
or on the
InternetInternet. If you received or
requested a printed set of materials, you may also vote by mail by signing, dating and returning the proxy card.
When you vote by using the Internet or by telephone or by signing and returning the proxy card, you appoint C. Daniel Myers and Richard S. Eiswirth, Jr. as your representatives (or proxyholders) at the
SpecialAnnual Meeting. They will vote your shares at the
SpecialAnnual Meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the
SpecialAnnual Meeting.
Who is entitled to vote at the
SpecialAnnual Meeting?
Only stockholders of record at the close of business on
August 10, 2012,April 26, 2013, the record date for the
SpecialAnnual Meeting, will be entitled to vote at the
SpecialAnnual Meeting. On the record date, there were
31,432,44531,556,075 shares of the Company’s common stock
and 1,000,000 shares of the Company’s Series A Preferred Stock outstanding. All of these outstanding shares are entitled to vote at the
SpecialAnnual Meeting (one vote per share of common
stock)stock and one vote per share of common stock underlying the Series A Preferred Stock on an as-converted basis (based on a deemed conversion price of $2.95 per share) as of the record date) in connection with the matters set forth in this proxy statement.
In accordance with Delaware law, a list of stockholders entitled to vote at the meeting will be available at the place of the
Special Meetingannual meeting on
September 20, 2012June 18, 2013 and will be accessible for ten days prior to the meeting at our principal place of business, 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005, between the hours of 9:00 a.m. and 5:00 p.m. local time.
If on
August 10, 2012,April 26, 2013, your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, then you are a stockholder of record. Stockholders of record may vote by using the Internet, by telephone or
(if you received a proxy card by mail) by mail as described below. Stockholders also may attend the meeting and vote in person. If you hold shares through a bank or broker, please refer to your proxy card, Notice or other information forwarded by your bank or broker to see which voting options are available to you.
You may vote by using the Internet. The address of the website for Internet voting is www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on September 19, 2012. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.
You may vote by telephone. The toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on September 19, 2012. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.
You may vote by mail. If you choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope. Your proxy card must be received by the close of business on September 19, 2012.
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| • | You may vote by using the Internet. The address of the website for Internet voting is www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on June 17, 2013. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded. |
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| • | You may vote by telephone. The toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on June 17, 2013. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. |
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| • | You may vote by mail. If you received a proxy card by mail and choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope. Your proxy card must be received by the close of business on June 17, 2013. |
The method you use to vote will not limit your right to vote at the
SpecialAnnual Meeting if you decide to attend in person. Written ballots will be passed out to anyone who wants to vote at the
SpecialAnnual Meeting. If you hold your shares in “street name,” you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the
SpecialAnnual Meeting.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the
SpecialAnnual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:
You may submit a subsequent proxy by using the Internet, by telephone or by mail with a later date;
You may deliver a written notice that you are revoking your proxy to the Secretary of the Company at 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005; or
You may attend the Special Meeting and vote your shares in person. Simply attending the Special Meeting without affirmatively voting will not, by itself, revoke your proxy.
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| • | You may submit a subsequent proxy by using the Internet, by telephone or by mail with a later date; |
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| • | You may deliver a written notice that you are revoking your proxy to the Secretary of the Company at 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005; or |
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| • | You may attend the Annual Meeting and vote your shares in person. Simply attending the Annual Meeting without affirmatively voting will not, by itself, revoke your proxy. |
If you are a beneficial owner of your shares, you must contact the broker or other nominee holding your shares and follow their instructions for changing your vote.
How many votes do you need to hold the
SpecialAnnual Meeting?
A quorum of stockholders is necessary to conduct business at the
SpecialAnnual Meeting. Pursuant to our
amended and restated bylaws, a quorum will be present if a majority of the voting power of outstanding shares of the Company entitled to vote generally
in the election of directors is represented in person or by proxy at the
SpecialAnnual Meeting. On the record date, there were
31,432,44531,556,075 shares of common stock outstanding and entitled to
vote and 13,559,322 shares of common stock underlying the outstanding Series A Preferred Stock (based on a deemed conversion price of $2.95 per share) entitled to vote. Thus,
15,716,22322,557,699 shares must be represented by stockholders present at the
SpecialAnnual Meeting or represented by proxy to have a quorum.
The holders of the common stock and the Series A Preferred Stock (on an as converted basis based on a deemed conversion price of $2.95 per share) vote together as a single class for the proposals in this proxy statement.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you attend the
SpecialAnnual Meeting and vote in person. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present for the transaction of business. If a quorum is not present, the
chairman of the meeting or holders of a majority of the votes present at the
SpecialAnnual Meeting may adjourn the
SpecialAnnual Meeting to another date.
What matters will be voted on at the
SpecialAnnual Meeting?
The following
matter ismatters are scheduled to be voted on at the
SpecialAnnual Meeting:
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| | • | | Proposal: ApprovalProposal 1: To elect three Class III directors nominated by our board of the issuance of preferred stock convertible into our common stock under circumstances which require stockholder approval pursuant to applicable NASDAQ Listing Rules, as describeddirectors and named in this proxy statement.statement to serve a term of three years until our 2016 annual meeting of stockholders;
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| • | Proposal 2: To ratify the appointment of Grant Thornton LLP as our independent registered public accountants for the year ending December 31, 2013; and |
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| • | Proposal 3: To approve, on an advisory basis, the compensation of our named executive officers. |
No cumulative voting rights are authorized, and dissenters’ rights are not applicable to these matters.
Could other matters be decided at the
SpecialAnnual Meeting?
Alimera does not know of any other matters that may be presented for action at the
SpecialAnnual Meeting. Should any other matter be properly presented at the
SpecialAnnual Meeting, the persons named on the proxy card will have discretionary authority to vote the shares represented by proxies in accordance with their best judgment. If you hold shares through a broker, bank or other nominee as described above, they will not be able to vote your shares on any other business that comes before the
SpecialAnnual Meeting unless they receive instructions from you with respect to such other business.
What will happen if I do not vote my shares?
Stockholder of Record: Shares Registered in Your Name. If you are the stockholder of record of your shares and you do not vote by proxy card, by telephone, via the Internet or in person at the SpecialAnnual Meeting, your shares will not be voted at the SpecialAnnual Meeting. Beneficial Owner: Shares Registered in the Name of Broker or Bank. Brokers or other nominees who hold shares of our common stock or preferred stock for a beneficial owner have the discretion to vote on routine proposals when they have not received voting instructions from the beneficial owner at least ten days prior to the SpecialAnnual Meeting. A “broker non-vote”broker non-vote occurs when a broker or other nominee does not receive voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares. Under the rules that govern brokers who are voting shares held in street name, brokers have the discretion to vote those shares on routine matters but not on non-routine matters. The proposalProposal 2 is a non-routine matter.the only routine matter in this proxy statement. As such, your broker does not have discretion to vote your shares on the proposal.Proposals 1 or 3. We encourage you to provide instructions to your bank or brokerage firm by voting your proxy. This action ensures your shares will be voted at the meeting in accordance with your wishes.
How may I vote for theeach proposal and what is the vote required for each proposal?
Proposal 1: Election of three Class III directors.
With respect to the proposal?election of nominees for director, you may:
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| • | vote “FOR” the election of the three nominees for director; |
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| • | “WITHHOLD” your vote for one or two of the nominees and vote “FOR” the remaining nominee(s); or |
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| • | “WITHHOLD” your vote for the three nominees. |
Directors will be elected by a plurality of the votes cast at the Annual Meeting, meaning the three nominees who are properly nominated in accordance with our amended and restated bylaws, and receive the most “FOR” votes will be elected. Only votes cast “FOR” a nominee will be counted. An instruction to “WITHHOLD” authority to vote for one or more of the nominees will result in those nominees receiving fewer votes, but will not count as a vote against the nominees. Abstentions and broker non-votes will have no effect on the outcome of the election of directors. Because the election of directors is not a matter on which a broker or other nominee is generally empowered to vote, broker non-votes are expected to exist in connection with this matter.
Proposal 2: Ratification of the appointment of Grant Thornton LLP as our independent registered public accountants for the year ending December 31, 2013.
You may vote“FOR” or“AGAINST” or abstain from voting. To approveratify the issuanceselection by the audit committee of preferred stock convertible into our common stock under circumstances which require stockholder approval pursuant to applicable NASDAQ Listing Rules,board of directors of Grant Thornton LLP as described in this proxy statement,the independent registered public accounting firm of the Company for the year ending December 31, 2013, the Company must receive a“FOR” vote from a majority of all those outstanding shares that are present in person, or represented by proxy, and that are cast either affirmatively or negatively on the proposal at the SpecialAnnual Meeting. Abstentions and “broker non-votes”broker non-votes will not be counted“FOR” or“AGAINST” the proposal and will have no effect on the proposal. Because the approvalratification of the issuanceappointment of preferred stock convertible into our common stock under circumstances requiring stockholder approval pursuantthe independent registered public accounting firm is a matter on which a broker or other nominee is generally empowered to applicable NASDAQ Listing Rulesvote, no broker non-votes are expected to exist in connection with this matter.
Proposal 3: Advisory vote on executive compensation.
You may vote “FOR” or “AGAINST” or abstain from voting. To approve, by non-binding vote, the compensation of the Company’s named executive officers as set forth in this proxy, the Company must receive a “FOR” vote from a majority of all those outstanding shares that are present in person, or represented by proxy, and that are cast either affirmatively or negatively on the proposal at the Annual Meeting. Abstentions and broker non-votes will not be counted “FOR” or “AGAINST” the proposal and will have no effect on the proposal. Because Proposal 3 is a non-routine matter, broker non-votes are expected to exist in connection with this matter. What happens if a director nominee is unable to stand for election?
If a nominee is unable to stand for election, our board of directors may either:
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| • | reduce the number of directors that serve on the board or |
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| • | designate a substitute nominee. |
If our board of directors designates a substitute nominee, shares represented by proxies voted for the nominee who is unable to stand for election will be voted for the substitute nominee.
How does
ourthe board of directors recommend that I vote?
Our board recommends a
vote“FOR” the approval of the issuance of preferred stock convertible into our common stock under circumstances which requires stockholder approval pursuant to NASDAQ Listing Rules.vote:
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| • | Proposal 1: “FOR” the election of each of Mark J. Brooks, Brian K. Halak, Ph.D. and Peter J. Pizzo, III as Class III directors to serve a term of three years until our 2016 annual meeting of stockholders; |
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| • | Proposal 2: “FOR” the ratification of the appointment of Grant Thornton LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2013; and |
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| • | Proposal 3: “FOR” the approval, in an advisory manner, of the compensation of our named executive officers as set forth in this proxy statement. |
What happens if I sign and return my proxy card but do not provide voting instructions?
If you return a signed and dated proxy card without marking any voting selections, your shares will be
voted“FOR” the approval of the issuance of preferred stock convertible into our common stock under circumstances which requires stockholder approval pursuant to applicable NASDAQ Listing Rules.voted:
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| • | Proposal 1: “FOR” the election of each of Mark J. Brooks, Brian K. Halak, Ph.D. and Peter J. Pizzo, III as Class III directors; |
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| • | Proposal 2: “FOR” the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2013; and |
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| • | Proposal 3: “FOR” the approval, in an advisory manner, of the compensation of our named executive officers as set forth in this proxy statement. |
If any other matter is properly presented at the
SpecialAnnual Meeting, the proxyholders for shares voted on the proxy card (i.e. one of the individuals named as proxies on your proxy card) will vote your shares using his or her best judgment.
What do I need to show to attend the
SpecialAnnual Meeting in person?
You will need proof of your share ownership (such as a recent brokerage statement or letter from your broker showing that you owned shares of
ourAlimera Sciences, Inc. common
stock or preferred stock as of
August 10, 2012)April 26, 2013) and a form of photo identification. If you do not have proof of ownership and valid photo identification, you may not be admitted to the
SpecialAnnual Meeting. All bags, briefcases and packages will be held at registration and will not be allowed in the meeting. We will not permit the use of cameras (including cell phones with photographic capabilities) and other recording devices in the meeting room.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. We may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
The accompanying proxy is being solicited by the board of directors of the Company. In addition to this solicitation, directors and employees of the Company may solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. In addition, the Company may also retain one or more third parties to aid in the solicitation of brokers, banks and institutional and other stockholders.
We will pay for the entire cost of soliciting proxies. We may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What happens if the
SpecialAnnual Meeting is postponed or adjourned?
Unless the polls have closed or you have revoked your proxy, your proxy will still be in effect and may be voted once the
SpecialAnnual Meeting is reconvened. However, you will still be able to change or revoke your proxy with respect to any proposal until the polls have closed for voting on such proposal.
How can I find out the results of the voting at the
SpecialAnnual Meeting?
Preliminary voting results are expected to be announced at the
SpecialAnnual Meeting. Final voting results will be reported on a Current Report on Form 8-K filed with the SEC no later than
September 26, 2012.June 24, 2013.
How can I find Alimera’s proxy materials
and annual report on the Internet?
This proxy statement
isand the 2012 annual report are available at our corporate website at www.alimerasciences.com. You also can obtain
a copycopies without charge at the SEC’s website at www.sec.gov. Additionally, in accordance with SEC rules, you may access these materials at www.proxyvote.com, which does not have “cookies” that identify visitors to the site.
How do I obtain a separate set of Alimera’s proxy materials if I share an address with other stockholders?
In some cases, stockholders holding their shares in a brokerage or bank account who share the same surname and address and have not given contrary instructions
receivedreceive only one copy of the
proxy materials.Notice. This practice is designed to reduce duplicate mailings and save printing and postage costs as well as natural resources. If you would like to have a separate copy of the
Notice or our annual report and/or proxy statement mailed to you or to receive separate copies of future mailings, please submit your request to the address or phone number that appears on your
Notice or proxy card. We will deliver such additional copies promptly upon receipt of such request.
In other cases, stockholders receiving multiple copies of the
proxy materialsNotice at the same address may wish to receive only one. If you would like to receive only one copy if you now receive more than one, please submit your request to the address or phone number that appears on your
Notice or proxy card.
Can I receive future proxy materials
and annual reports electronically?
Yes. This proxy statement
isand the 2012 annual report are available on our investor relations website located at http://investor.alimerasciences.com. Instead of receiving paper copies in the mail, stockholders can elect to receive an email that provides a link to our future
annual reports and proxy materials on the Internet. Opting to receive your proxy materials electronically will save us the cost of producing and mailing documents to your home or business, will reduce the environmental impact of our
annual meetings and will give you an automatic link to the proxy voting site.
Whom should I call if I have any questions?
If you have any questions, would like additional Alimera proxy materials or proxy cards, or need assistance in voting your shares, please contact Investor Relations, Alimera Sciences, Inc., 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005 or by telephone at (310) 954-1105.
Can I submit a proposal for inclusion in the proxy statement for the
20132014 annual meeting?
Stockholders of the Company may submit proper proposals (other than the nomination of directors) for inclusion in our proxy statement and for consideration at our 20132014 annual meeting of stockholders by submitting their proposals in writing to the Secretary of the Company in a timely manner. In order to be considered for inclusion in our proxy materials for the 20132014 annual meeting of stockholders, stockholder proposals must:be received by the Secretary of the Company no later than the close of business on December 31, 2012; and
otherwise comply with the requirements of Delaware law, Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and our bylaws.
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| • | be received by the Secretary of the Company no later than the close of business on December 30, 2013 (which is the 120th day prior to the first anniversary of the date that we released this proxy statement to our stockholders for the Annual Meeting); and |
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| • | otherwise comply with the requirements of Delaware law, Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and our amended and restated bylaws. |
Unless we receive notice in the foregoing manner, the proxy holdersproxyholders shall have discretionary authority to vote for or against any such proposal presented at our 20132014 annual meeting of stockholders. If we change the date of the 2014 annual meeting of stockholders by more than 30 days from the anniversary of this year’s Annual Meeting, stockholder proposals must be received a reasonable time before we begin to print and mail our proxy materials for the 2014 annual meeting of stockholders.
Can I submit a nomination for director candidates and proposals not intended for inclusion in the proxy statement for the 2014 annual meeting?
Stockholders of the Company who wish to nominate persons for election to the board of directors at the 2014 annual meeting of stockholders or who wish to present a proposal at the 2014 annual meeting of stockholders, but who do not intend for such proposal to be included in our proxy materials for such meeting, must deliver written notice of the nomination or proposal to Alimera Sciences, Inc., 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005, Attention: Secretary no earlier than February 13, 2014 and no later than March 15, 2014. However, if the 2014 annual meeting of stockholders is held earlier than May 19, 2014 or later than July 18, 2014, nominations and proposals must be received no later than the close of business on the later of (a) the 90th day prior to the 2014 annual meeting of stockholders and (b) the 10th day following the day we first publicly announce the date of the 2014 annual meeting. In addition, if the number of directors to be elected to the board of directors is increased and we do not publicly announce all of the nominees for election or specify the size of the increase by March 15, 2014, then proposals with respect to nominees for any new positions created by the increase in board size must be delivered to the address listed above no later than the 10th day following such public announcement. The stockholder’s written notice must include certain information concerning the stockholder and each nominee and proposal, as specified in our amended and restated bylaws.
Where can I obtain a copy of the Company’s amended and restated bylaws?
A copy of our
amended and restated bylaw provisions governing the notice requirements set forth above may be obtained by writing to the Secretary of the Company. A current copy of our
amended and restated bylaws also is available at our corporate website at www.alimerasciences.com. Such requests and all notices of proposals and director nominations by stockholders should be sent to Alimera Sciences, Inc., 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005, Attention:
Secretary of the Company.Secretary.
Important Notice Regarding the Availability of Proxy Materials
for the Meeting to be Held on
September 20, 2012Tuesday, June 18, 2013
This proxy statement isand our annual report are available on-line atwww.proxyvote.com.
BACKGROUND
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
General
Our board of directors is currently comprised of nine (9) directors divided into three equal classes with staggered three-year terms. The term of office of our Class III directors, Brian K. Halak, Ph.D., Mark J. Brooks and Peter J. Pizzo, III, will expire at this year’s Annual Meeting. The term of office of our Class I directors, C. Daniel Myers, Calvin W. Roberts, M.D. and James R. Largent, will expire at the 2014 annual meeting of stockholders. The term of office of our Class II directors, Philip R. Tracy, Glen Bradley, Ph.D. and Garheng Kong, M.D., Ph.D., will expire at the 2015 annual meeting of stockholders. There are no family relationships among any of our directors or executive officers. It is our policy to encourage nominees for director to attend the Annual Meeting.
Nominees for Election as Class III Directors at the Annual Meeting
This year’s nominees for election to the board of directors as our Class III directors to serve for a term of three years expiring at the 2016 annual meeting of stockholders, or until their successors have been duly elected and qualified or until their earlier death, resignation or removal, are provided below. The age of each director as of April 26, 2013 is set forth below. Each of the nominees has agreed to serve as a director if elected, and we have no reason to believe that either nominee will be unable to serve if elected.
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| Name | | Age | | Positions and Offices Held with Company | | Director Since | |
| Mark J. Brooks | | 46 | | Director | | 2004 | |
| Brian K. Halak, Ph.D. | | 41 | | Director | | 2004 | |
| Peter J. Pizzo, III | | 46 | | Director | | 2010 | |
The following is additional information about each of the nominees as of the date of this proxy statement, including their business experience, director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the nominating/corporate governance committee and our board of directors to determine that the nominees should serve as one of our directors.
Mark J. Brooks has been a member of our board of directors since 2004. Since its formation in January 2007, Mr. Brooks has served as a Managing Director of Scale Venture Partners. Prior to joining Scale Venture Partners, from 1995 Mr. Brooks worked for Bank of America Ventures, ultimately serving as a Managing Director. Mr. Brooks also serves on the Board of Directors of IPC The Hospitalist Company, Inc., a publicly traded provider of hospitalist services, and also serves on the Board of four privately held companies: National Healing Corporation, LivHome, Inc., Spinal Kinetics, Inc. and Oraya Therapeutics, Inc. Mr. Brooks holds an M.B.A. from the Wharton School at the University of Pennsylvania and a B.A. in Economics from Dartmouth College. Our board of directors believes that Mr. Brooks should serve as a director of the Company, in light of its business and structure, because in addition to his valuable contributions to our Company in recent years, Mr. Brooks has experience as one of the directors of Scale Venture Partners, where Mr. Brooks led investments in healthcare services, medical devices and drug development and his service on the board of directors of a number of Scale Venture Partners’ portfolio companies.
Brian K. Halak, Ph.D. has been a member of our board of directors since 2004. Dr. Halak joined Domain Associates, L.L.C. in 2001 and has served as a Partner of Domain Associates, L.L.C. since 2006. Prior to joining Domain Associates, L.L.C., Dr. Halak served as an analyst of Advanced Technology Ventures from 2000 to 2001. From 1993 to 1995, Dr. Halak has served as an analyst of Wilkerson Group. Dr. Halak holds a Doctorate in Immunology from Thomas Jefferson University and a B.S. in Engineering from the University of Pennsylvania. Our board of directors believes that Dr. Halak should serve as a director of the Company, in light of its business and structure, because in addition to his valuable contributions to our Company in recent years, Dr. Halak has served on the board of directors of more than 10 emerging companies in the life sciences industry in the past 10 years, including Vanda Pharmaceuticals, which completed a public offering on Nasdaq, and Esprit Pharma, a company that was acquired by Allergan.
Peter J. Pizzo, III has been a member of our board of directors since April 2010. Since its formation in 2005, Mr. Pizzo has served as the Vice President, Finance and Chief Financial Officer of Carticept Medical, Inc., a private orthopedic medical device company, which he co-founded. From 2002 until its sale in 2005, Mr. Pizzo served as the Vice President, Finance and Chief Financial Officer of Proxima Therapeutics, Inc., a private medical device company that developed and marketed local radiation delivery systems for the treatment of solid cancerous tumors. From 1996 to 2001, Mr. Pizzo worked for Serologicals Corporation, a publicly traded global provider of biological products to life science companies, ultimately serving as Vice President of Finance and Chief Financial Officer. From 1995 to 1996, Mr. Pizzo served as Vice President of Administration and Controller of ValueMark Healthcare Systems, Inc., a privately held owner-operator of psychiatric hospitals. From 1992 until its sale in 1995, Mr. Pizzo served in various senior financial positions at Hallmark Healthcare Corporation, a publicly traded hospital management company, most recently as Treasurer. Mr. Pizzo holds a Bachelor of Science with Special Attainments in Commerce from Washington and Lee University. Our board of directors believes that Mr. Pizzo should serve as a director of the Company, in light of its business and structure, because Mr. Pizzo has over 19 years of experience in medical devices, biologics and healthcare services, including the past 13 years in the role of vice president, finance and chief financial officer.
Required Vote and Recommendation of the Board of Directors for Proposal 1
The affirmative vote of a plurality of the votes cast at the Annual Meeting is required for the election of our Class III directors. The three nominees receiving the most “FOR” votes among votes properly cast in person or by proxy will be elected to the board as Class III directors. You may vote “FOR” or “WITHHOLD” on each of the nominees for election as director. Shares represented by signed proxy cards will be voted on Proposal 1 “FOR” the election of Mr. Brooks, Dr. Halak and Mr. Pizzo to the board of directors at the Annual Meeting, unless otherwise marked on the card. A broker non-vote or a properly executed proxy marked “WITHHOLD” with respect to the election of a Class III director will not be voted with respect to such director, although it will be counted for purposes of determining whether there is a quorum.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE “FOR” MARK J. BROOKS, BRIAN K. HALAK, PH.D. AND
OVERVIEWPETER J. PIZZO, III
SaleContinuing Directors Not Standing for Election
Certain information about those directors whose terms do not expire at the Annual Meeting is furnished below, including their business experience, director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the nominating/corporate governance committee and our board of directors to determine that the directors should serve as one of our directors. The age of each director as of April 26, 2013 is set forth below.
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| Name | | Age | | Positions and Offices Held with Company | | Director Since | |
| C. Daniel Myers | | 59 | | Director, President and Chief Executive Officer | | 2003 | |
| Calvin W. Roberts, M.D. | | 60 | | Director | | 2003 | |
| Philip R. Tracy | | 71 | | Chairman of the Board of Directors | | 2004 | |
| Glen Bradley, Ph.D. | | 70 | | Director | | 2011 | |
| James R. Largent | | 63 | | Director | | 2011 | |
| Garheng Kong, M.D., Ph.D. | | 37 | | Director | | 2012 | |
Class I Directors (Terms Expire in 2014)
C. Daniel Myers is one of our co-founders and has served as our Chief Executive Officer and as a director since the founding of our Company in 2003. Before founding our Company, Mr. Myers was an initial employee of Novartis Ophthalmics (formerly CIBA Vision Ophthalmics) and served as its Vice President of Sales and Marketing from 1991 to 1997 and as President from 1997 to 2003. Mr. Myers holds a B.S. in Industrial Management from Georgia Institute of Technology. Our board of directors believes that Mr. Myers should serve as a director of the Company, in light of its business and structure, because in addition to his valuable contributions to our Company in recent years, Mr. Myers has over 30 years of ophthalmic pharmaceutical experience, including 15 years in the role of president or chief executive officer. In addition, Mr. Myers served on the board of directors of Ocular Therapeutix, Inc. from 2009 to 2012.
Calvin W. Roberts, M.D. has been a member of our board of directors since 2003. Dr. Roberts currently serves as an Executive Vice President and the Chief Medical Officer of Bausch + Lomb. Since 1982, Dr. Roberts has served as a Clinical Professor of Ophthalmology at Weill Medical College of Cornell University. From 1989 to 2011, Dr. Roberts also served as a consultant to Allergan, Inc., Johnson & Johnson and Novartis. Dr. Roberts holds an A.B. from Princeton University and an M.D. from the College of Physicians and Surgeons of Columbia University. Dr. Roberts completed his internship and ophthalmology residency at Columbia Presbyterian Hospital in New York and completed cornea fellowships at Massachusetts Eye and Ear Infirmary and the Schepens Eye Research Institute in Boston. Our board of directors believes that Dr. Roberts should serve as a director of the Company, in light of its business and structure, because in addition to his valuable contributions to our Company in recent years, Dr. Roberts has an understanding of the market for products in ophthalmology and the nature of the relationship between pharmaceutical companies and physicians derived from his 25 years in the practice of medicine as well as his experience in the medical market place and in the processes of drug development and regulatory approval as a consultant to other pharmaceutical companies.
James R. Largent has been a member of our board of directors since 2011. Mr. Largent has worked extensively within the medical industry. He most recently served as a medical and pharmaceutical consultant, including work with U.S. ophthalmic device company, Eyeonics Inc. While there, he led the lobbying effort that resulted in the 2005 landmark decision by the Centers for Medicare & Medicaid Services (CMS) to allow for patient shared billing for premium presbyopia-correcting intraocular lenses. Also in his role as a consultant, he assisted a multinational pharmaceutical and medical device company in the evaluation of strategic targets. Prior to this, Mr. Largent served in various senior management positions at Allergan, Inc., including as vice president of strategic planning where he fostered licensing deals to build product pipelines. Earlier in his career, he was vice president of strategic marketing at Allergan Medical Optics, Inc. Mr. Largent also held positions of increasing responsibility in the marketing and sales departments at Allergan and Pharmacia Ophthalmics. In addition to serving on Alimera’s Board, Mr. Largent is on the board of directors of Tear Science, Inc., a privately held developer of diagnostic and therapeutic devices
for the treatment of patients with dry eye disease. Mr. Largent earned a B.A. in chemistry and an M.B.A., both from the University of California, Irvine. Our board of directors believes that Mr. Largent should serve as a director of the Company, in light of its business and structure, because Mr. Largent has over 10 years of experience in pharmaceutical and medical devices, including the role of vice president of strategic marketing and as a leading industry consultant.
Class II Directors (Terms Expire in 2015)
Philip R. Tracy has been a member of our board of directors since 2004. Since 1998, Mr. Tracy has served as a Venture Partner of Intersouth Partners. He is also counsel to the Raleigh, North Carolina law firm Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. Previously, Mr. Tracy was employed by Burroughs Wellcome Co. from 1974 to 1995 and served as President and Chief Executive Officer from 1989 to 1995. Mr. Tracy holds an L.L.B. from George Washington University and a B.A. from the University of Nebraska. Our board of directors believes that Mr. Tracy should serve as a director of the Company, in light of its business and structure, because in addition to his valuable contributions to our Company in recent years, Mr. Tracy has served on the board of directors of three publicly traded companies in the biotechnology and pharmaceutical industries, has experience as president and chief executive officer of Burroughs Wellcome Co. with full responsibility for its North American pharmaceutical business, has legal training and experience as a lawyer including his service as general counsel to Burroughs Wellcome Co., and has 15 years of experience in the venture capital industry as a venture partner with Intersouth Partners.
Glen Bradley, Ph.D., M.B.A., has been a member of our board of directors since 2011. Dr. Bradley served as the Chief Executive Officer of CIBA Vision Corporation, the eye care unit of Novartis, A.G., or CIBA Vision, from 1990 to January 2003. Since 2003, Dr. Bradley has acted as a consultant to various medical device and ophthalmic drug companies. Dr. Bradley served in the positions of President and CEO from 1986 to 1989 for CIBA Vision, the United States operations of the CIBA Vision Group. Prior to CIBA Vision, he served in senior management positions in the Agricultural, Plastics & Additives and Electronic Equipment Groups of CIBA-Geigy Corporation. Dr. Bradley has been Chairman of the Board of Directors at REFOCUS Group Inc., since March 2003. He serves as a Director of Intuity Medical, Inc. He has previously held board positions with Spectra Physics, Summit Technology, Biofisica, AerovectRx, e-Dr and Biocure. He served as Chairman of the Contact Lens Institute. Dr. Bradley holds a bachelor’s degree in chemical engineering from Mississippi State University, a Ph.D. in chemical engineering from Louisiana State University, an MBA in business and finance from the University of Connecticut and is a graduate of the Advanced Management Program at Harvard Business School. Our board of directors believes that Dr. Bradley should serve as a director of the Company, in light of its business and structure, because of his significant knowledge, experience, and financial expertise in the ophthalmic industry.
Garheng Kong, M.D., Ph.D., has been a member of our board of directors since 2012. Dr. Kong has served as a General Partner at Sofinnova, a venture firm focused on life sciences, since 2010. From 2000 to 2010, he was at Intersouth Partners, a venture capital firm, most recently as a General Partner, where he was a founding investor or board member for various life sciences ventures, several of which were acquired by large pharmaceutical companies. Dr. Kong has served on the board of directors of Cempra, Inc. since September 2006 and as chairman of its board since November 2008. Dr. Kong has served on the board of directors of SARcode BioScience, Inc., a private biopharmaceutical company, since 2011 and on the board of Histogenics Corporation, a private biotechnology company, since 2012 where he also serves as the chairman of the board. Dr. Kong holds a B.S. in chemical engineering and biological sciences from Stanford University. He holds an M.D., Ph.D. in biomedical engineering and M.B.A. from Duke University. Our board of directors believes that Dr. Kong should serve as a director of the Company, in light of its business and structure, because of his knowledge and experience in the venture capital industry, as well as his medical training.
CORPORATE GOVERNANCE
Series A Preferred
StockDirector
On
July 17,October 2, 2012, we entered into a Securities Purchase Agreement
(the “Purchase Agreement”) with a group of institutional investors, including both existing and new investors (the “Investors”) for the sale
(the “Transaction”)of an aggregate of 1,000,000 units comprised of 1,000,000 shares of
a newly created series of preferred stock, designated “Series A Convertible Preferred Stock,” par value $0.01 per share (the “Series A Preferred Stock”) and warrants (the “Warrants”) to purchase 300,000 shares of the Series A Preferred Stock. For each share of Series A Preferred Stock being purchased, the Investors will receive a Warrant to purchase 0.30 shares of Series A Preferred Stock. The Series A Preferred Stock is convertible into authorized but unissued shares of our
common stock, par value $0.01 per share (the “Common Stock”).The closing of the Transaction is subject to customary closing conditions, including, but not limited to, the approval of the Transaction by the majority of the votes cast on the proposal, either in person or by proxy, as required under the applicable regulations of the NASDAQ stock market, at a special meeting of the stockholders of the Company.
For each unit consisting of a share of Series A Preferred Stock and a Warrant, the Investors have agreedWarrants exercisable for up to pay a negotiated pricean aggregate of $40.00 (the “Original Purchase Price”), which is expected to result in gross proceeds to the Company300,000 shares of $40,000,000, before deducting expenses payable by the Company. We expect to use substantially all of the proceeds from the Transaction to fund the commercialization of ILUVIEN® in Germany, the United Kingdom and France. Upon approval of the proposal described herein and the closing of the Transaction, the Investors’ ownership of our Common Stock, assuming the conversion of all shares of Series A Preferred Stock and theat an exercise and subsequent conversion of all Warrants, will represent approximately 43.62% of all outstanding shares of Common Stock.
Rationale for the Proposed Transaction
In considering whether to approve the Transaction, our Board of Directors considered the timing and extent of our needs for additional capital and alternative transactions for raising such capital. The Board of Directors determined that the Transaction is in the best interest of us and our stockholders because, among other reasons:
| • | | The proceeds from the Transaction will allow us to commercialize our product, ILUVIEN®, in Germany, the United Kingdom and France on our own;
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The initial conversion price of the Series A Preferred Stock, $2.91, was based on the average closing price$44.00 per share for gross proceeds of our Common Stock over the 30 trading-days period preceding the date of the Purchase Agreement, rather than a discount$40.0 million prior to our trading price;
A public transaction to raise capital would typically involve file-to-offer discounts to our trading price;
The Transaction does not require the payment of any investment advisor fees, underwriters’ discounts or commissions, as typically would be involved in a public transaction; and
The Transaction will enhance our capital base and provide additional certainty for the Company’s planning and operations.
Securities Purchase Agreement
The following discussion of the Purchase Agreement provides only a summary of the material terms and conditions of the Purchase Agreement, and is qualified by reference to the Purchase Agreement attached as Exhibit A hereto.
The Purchase Agreement contains representations and warranties by us relating to, among other things, our corporate organization and capitalization, the due authorization of the Purchase Agreement and the shares to be issued, the lack of required governmental consents, litigation, intellectual property, compliance with other instruments, our filings with the SEC, including the financial statements included therein, internal controls, absence of certain events and changes, lack of undisclosed liabilities, our charter documents and registration rights.
The Purchase Agreement also contains representations and warranties by the Investors relating to, among other things, each Investor’s investment intent.
Until the earlier of the closing of the Transaction or the termination of the Purchase Agreement, we have agreed to conduct our business in the ordinary course of business consistent with past practices, and, without the prior written consent of Investors purchasing at least seventy percent (70%) of the Series A Preferred Stock pursuant to the Purchase Agreement (the “Investor Approval”), we have agreed not to redeem or repurchase any shares of any capital stock of the Company or other equity security or declare or pay any dividend or other distribution with respect to our common stock; split, combine or reclassify any shares of our capital stock or issue, sell or transfer any shares of any capital stock of the Company or other equity securities or the issuance or incurrence of any additional indebtedness outside of the ordinary course of business other than issuances pursuant to the Company’s equity incentive plans or Permitted Indebtedness (as defined below); undertake any material change our accounting methods or principles, except as required by a change in GAAP or as required by law; or dispose of any property or assets of the Company other than in the ordinary course of business. Also, prior to stockholder approval of the Transaction, without the Investor Approval, we have agreed not to pursue or agree to an alternative financing to the Transaction.
The closing of the Transaction is subject to certain conditions, including the approval of the Transaction by our stockholders, and other customary closing conditions.
The Purchase Agreement automatically terminates if the closing of the Transaction has not occurred on or before November 30, 2012; provided, however, that we and any Investor, with respectrelated expenses. Pursuant to such Investor, may, by mutual written agreement extend the term of the Purchase Agreement beyond November 30, 2012.
Stockholders are not third-party beneficiaries under the Purchase Agreement and should not construe the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of us, the Investors or any of the Investors’ subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in our public disclosures.
Terms of the Series A Convertible Preferred Stock
The powers, preferences, rights, qualifications, limitations and restrictions applicable to the Series A Preferred Stock are set forth in the Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation”), to be filed in connection with the Secretary of State of the State of Delaware prior to the closing of the Transaction.
Each share of Series A Preferred Stock is convertible into Common Stock at any time at the option of the holder at the rate (the “Conversion Rate”) equal to the Original Purchase Price divided by the then current conversion price (the “Conversion Price”). The initial Conversion Price will be $2.91 and shall be subject to standard broad-based weighted average anti-dilution adjustments prior to the date on which the Company has received and publicly announces the approval by the U.S. Food and Drug Administration of the Company’s New Drug Application for ILUVIEN® (the “FDA Approval Date”), provided, that in no event shall the Conversion Price be adjusted below $1.00 (as adjusted for stock dividends, splits, combinations and similar events). Both the Original Purchase Price and the Conversion Price are subject to adjustments for stock dividends, splits, combinations and similar events. Each share of Series A Preferred Stock shall automatically be converted into Common Stock at the then applicable Conversion Rate upon the occurrence of the later to occur of both (i) the FDA Approval Date and (ii) the date on which Company consummates an equity financing transaction pursuant to which it sells to one or more third party investors either (A) Common Stock or (B) other equity securities that are convertible into Common Stock and that have rights, preference or privileges, senior to or on a parity with, the Series A Preferred Stock, in each case having an as-converted per share of Common Stock price of not less than $10.00 (adjusted for stock splits, combinations, stock dividends, recapitalizations and the like) and that results in total gross proceeds to the Company of at least $30,000,000. The Series A Preferred Stock is not redeemable and shall not be convertible at the option of the Company, other than as set forth above.
The holders of Series A Preferred Stock will be entitled to receive dividends and other distributions on a pari passu basis with the holders of Common Stock on an as-converted basis. Except as otherwise set forth in the Certificate of Designation, the Series A Preferred Stock will vote together with the Common Stock on a converted basis as described therein.
In the event of a Liquidation Transaction, as defined below, holderssale of the Series A Preferred Stock, will receive a payment equal to the greater of (a) one (1) times the Original Purchase Price (as adjusted for stock dividends, splits, combinations and similar events), plus any declared and unpaid dividends, per share of Series A Preferred Stock before any proceeds are distributed to the holders of Common Stock and (ii) the amount each holder of a share of Series A Preferred Stock would be entitled to receive had all shares of Series A Preferred Stock been converted into shares of Common Stock at the then applicable Conversion Price immediately prior to such Liquidation Transaction. Unless waived by the holders of at least 70% of the Series A Preferred Stock, voting together as a separate class, the following shall be deemed to constitute a Liquidation Transaction: (A) any acquisition of the Company by means of merger, consolidation, stock sale, tender offer, exchange offer or other form of corporate reorganization in which outstanding shares of the Company are exchanged or sold, in one transaction or a series of related transactions, for cash, securities, property or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, or any other person or group of affiliated persons and in which the holders of capital stock of the Company hold less than a majority of the voting power of the surviving entity and (B) any sale, transfer, exclusive license or lease of all or substantially all of the properties or assets of the Company and its subsidiaries (each of such transactions in clause (A) and (B), together with an actual liquidation, dissolution or winding up of the Company, a “Liquidation Transaction”), provided that none of the following shall be deemed to constitute a Liquidation Transaction: (x) a transaction for which the sole purpose is to change the state of the Company’s incorporation, (y) a transaction for which the sole purpose is to create a holding company that will hold no assets other than shares of the Company and that will have securities with rights, preferences, privileges and restrictions substantially similar to those of the Company and that are owned in substantially the same proportions by the persons who held such securities of the Company, in each case immediately prior to such transaction or (z) a license transaction entered into by the Company for the purpose of developing and/or commercializing one or more of the Company’s products, so long as such license transaction would not be reasonably considered to be a sale or license of all or substantially all of the assets of the Company.
In addition, for so long as at least 37.5% of the shares of Series A Preferred Stock originally issued to the Investors at the closing of the Transactioncertain conditions are held by the initial Investors or their affiliates, the Company shall not, without first obtaining the Investor Approval: (i) increase or decrease the authorized number of shares of Series A Preferred Stock; (ii) authorize, create, issue or obligate itself to issue (by reclassification, merger or otherwise) any security (or any class or series thereof) or any indebtedness, in each case that has any rights, preferences or privileges senior to, or on a parity with, the Series A Preferred Stock, or any security convertible into or exercisable for any such security or indebtedness (other than the issuance of (A) up to an aggregate of $35,000,000 of indebtedness pursuant to the Company’s credit facility with Silicon Valley Bank and/or MidCap Financial, as the same may be amended, refinanced or resyndicated from time to time or (B) up to an aggregate of $500,000 of indebtedness pursuant to operating, capital or equipment leases entered into in the ordinary course of business (such indebtedness being the “Permitted Indebtedness”),; (iii) amend the Company’s certificate of incorporation (including by filing any new certificate of designation or elimination) or the Certificate of Designation, in each case in a manner that adversely affects the rights, preference or privileges of the Series A Preferred Stock; (iv) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of Common Stock or Preferred Stock; provided, however, that this restriction shall not apply to (A) the redemption of rights issued pursuant to any “poison pill” rights plan or similar plan adopted by the Company after the closing of the Transaction or (B) the repurchases of stock from former employees, officers, directors or consultants who performed services for the Company in connection with the cessation of such employment or service pursuant to the terms of existing agreements with such individuals; (v) declare or pay any dividend or distribution on any shares of capital stock; provided, however, that this restriction shall not apply to (A) dividends payable to holders of Common Stock that consist solely of shares of Common Stock for which adjustment to the Conversion Price of the Series A Preferred Stock is made pursuant to the Certificate of Designation or (B) dividends or distributions issued pro rata to all holders of capital stock (on an as-converted basis) in connection with the implementation of a “poison pill” rights plan or similar plan by the Company; (vi) authorize or approve any increase to the number of aggregate shares of capital stock reserved for issuance pursuant to stock option, stock purchase plans or other equity incentive plans of the Company such that the total aggregate number of shares issued under such plans and reserved for issuance under such plans (on an as-converted basis) exceeds the number of shares issued and reserved for issuance under such plans (on an as-converted basis) on the date of the closing of the Transaction by more than 20% (adjusted for stock splits, combinations, stock dividends, recapitalizations and the like), provided that any increases resulting solely from the annual increases resulting from the “evergreen” provisions of the Company’s equity incentive plans in effect on the date of the closing of the Transaction shall not be subject to this restriction and shall not be included for purposes of determining whether such 20% increase has occurred; (vii) issue stock or other equity securities of any subsidiary of the Company (other than to the Company or another wholly-owned subsidiary of the Company) or declare or pay any dividend or other distribution of cash, shares or other assets or redemption or repurchase of shares of any subsidiary of the Company; or (viii) incur any secured indebtedness other than any Permitted Indebtedness.
A copy of the complete Certificate of Designation of the Series A Preferred Stock is attached as Exhibit B to this proxy statement.
Terms of the Warrants
The per share exercise price of the Warrants is $44.00. The Warrants will be exercisable beginning on the original date of issuance and will expire on the earlier of (i) immediately following the consummation of a Sale Event (for cash or freely tradable securities), if the Warrants are not exercised at or prior to consummation of the Sale Event or (ii) the date that is five (5) years after the closing of the Transaction. At the election of the holders of the Warrants, the Warrants may be exercised for the number of shares of Common Stock then issuable upon conversion of the Series A Preferred Stock that would otherwise be issued upon such exercise.
A copy of the complete form of Warrant is attached as Exhibit C to this proxy statement.
Registration of the Underlying Common Stock
Pursuant to the Purchase Agreement, the Company and the Investors, Palo Alto Investors, LLC (“PAI”), Sofinnova Venture Partners VIII, L.P. (“Sofinnova”) and Growth Equity Opportunities Fund III, LLC (“Growth Equity”), will enter into a Registration Rights Agreement (the “Registration Rights Agreement”), whereby the Company will be required to file on or before the date that is 45 days from the closing of the Transaction an “evergreen” shelf registration statement pursuant to the Securities Act to register the shares of Common Stock issuable upon conversion of the Series A Preferred Stock issued and sold in the Transaction to PAI, Sofinnova and Growth Equity (the “Conversion Shares”), and the shares of Common Stock issuable upon exercise of the Warrants or issuable upon conversion of the Series A Preferred Stock issuable upon exercise of the Warrants issued to PAI, Sofinnova and Growth Equity (the “Warrant Shares,” and together with the Conversion Shares, the “Registrable Securities”) for resale. The Registration Rights Agreement also contains provisions for “demand registration rights,” pursuant to which the Investors may require the Company to register or all or a portion of their Registrable Securities and offer them for resale in an underwritten offering, and “piggyback registration rights” pursuant to which the Investors may include their Registrable Securities in any future registration statement filed by the Company, with certain exceptions as set forth in the Registration Rights Agreement. In addition, the Company agreed to use reasonable best efforts to keep the registration, and any qualification, exemption or compliance under state securities laws which the Company determines to obtain, continuously effective, and to keep the registration statement and any related prospectuses or prospectus supplement free of any material misstatements or omissions, until the date on which the Company shall have obtained a written opinion of legal counsel reasonably satisfactory to the Investors and addressed to the Company and the Investors to the effect that the Registrable Securities may be publicly offered for sale in the United States by the Investors or any subsidiary of such Investor without restriction as to manner of sale and amount of securities sold and without registration or other restriction under the Securities Act. The following discussion of the Registration Rights Agreement provides only a summary of the material terms and conditions of the Registration Rights Agreement, and is qualified by reference to the Registration Rights Agreement attached as Exhibit D hereto.
Demand Registration Rights
Under the Registration Rights Agreement, after March 1, 2013 and prior to the date on which the Company shall have a obtained a written opinion of legal counsel reasonably satisfactory to the Investors and addressed to the Company and the Investors to the effect that the Registrable Securities may be publicly offered for sale in the United States by the Investors or any subsidiary of such Investor without restriction as to manner of sale and amount of securities sold and without registration or other restriction under the Securities Act, each of PAI and Sofinnova have the right to require that we register all or a portion of their Registrable Securities. We are only obligated to effect one registration for each of PAI and Sofinnova in response to these demand registration rights. We may postpone the filing of a registration statement for up to 90 days once in any 12-month period if our Board of Directors determined in good faith that the filing would be seriously detrimental to our stockholders or to us. The underwriters of any underwritten offering have the right to limit the number of shares to be included in a registration statement filed in response to the exercise of these demand registration rights. We must pay all expenses, except for underwriters’ discounts and commissions, incurred in connection with these demand registration rights.
Piggyback Registration Rights
If we register any securities for public sale, under the Registration Rights Agreement, the Investors have the right to include their shares in the registration, subject to specified exceptions. The underwriters of any underwritten offering have the right to limit the number of shares registered by the Investors due to marketing reasons. We must pay all expenses, except for underwriters’ discounts and commissions incurred in connection with these piggyback registration rights.
Stockholder Support Letters
In connection with the Transaction, stockholders holding approximately 56% of the Company’s Common Stock as of July 17, 2012, have entered into separate agreements with us whereby they have agreed to vote all of the shares of our Common Stock beneficially owned by them as of the record date of the Special Meeting in favor of the Transaction, and have granted an irrevocable proxy to us to vote such shares of Common Stock in favor of the Transaction. As a result, we expect that the proposal will be approved at the Special Meeting.
Investor Representation on the Company’s Board of Directors
Pursuant to the Purchase Agreement, conditioned on the closing of the Transaction, the Company agreed to increase the number of directors on the Company’s Board of Directors from eight (8) directors to nine (9) directors. Pursuant to the Certificate of Designation, for as long as Sofinnova, together with its affiliates, continues to hold at least 50% of the shares of Series A Preferred Stock originally issued to Sofinnova at the closing under the Purchase Agreement (or shares of Common Stock issued upon conversion thereof),met, the holders of Series A Preferred Stock, voting as singlea separate class, shall beare entitled to elect, at any election of the Company’sour Class II Directors, one individualdirector to serve as a Class II Directoron the board of directors (the “Series A“Preferred Director”), who shall be designated by Sofinnova. The initial Series A Director will be appointed. For so long as of the closing of the Transaction and is currently expected to be Garheng Kong. At the closing of the Transaction, the Series A Director will also enter into an indemnification agreement requiring the Company to indemnify him to the fullest extent permitted under Delaware law with respect to his or her service as a director. The indemnification agreement will be in the form entered into with the Company’s other directors and executive officers. This form is filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1, as amended (File No. 333-162782), which was declared effective by the Securities and Exchange Commission (the “SEC”) on April 21, 2010.
Amendment to Our Bylaws
In connection with the Transaction, on July 16, 2012, the Board of Directors approved an amendment to the Amended and Restated Bylaws of the Company, which amendment shall be effective upon and subject to the closing of the Transaction, to provide that the holders of Series A Preferred Stock may take any exclusive action required or permitted to be taken by the stockholders holding Series A Preferred Stock pursuant to the Certificate of Designation by written consent at any time.
NASDAQ Listing Rules
Under NASDAQ Listing Rule 5635(b), prior stockholder approval is required for issuances of securities that will result in a “change of control” of the issuer (the “NASDAQ Change of Control Rule”). NASDAQ may deem a change of control to occur when, as a result of an issuance, an investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of common stock or voting power and such ownership or voting power would be the largest ownership position of the issuer. Following the closing of the Transaction, PAI, one of the Investors, assuming the exercise and subsequent conversion of its Warrant (but no other Warrants) and the conversion of its Series A Preferred Stock and including the number of shares of Common Stock currently owned by PAI, will own approximately 14,356,633 shares of the Common Stock, which is expected to represent approximately 29.12% of the total voting power of the Company’s voting securities following the closing of the Transaction. We seek your approval of the proposal in order to satisfy the requirements of the NASDAQ Change of Control Rule with respect to the issuance of the Series A Preferred Stock.
In addition, under NASDAQ Listing Rule 5635(d), prior stockholder approval is required for the issuance, other than in a public offering, of securities convertible into common stock at a price less than the greater of book or market value of the common stock if the securities are convertible into 20% or more of a company’s common stock (the “NASDAQ Private Placement Rule”). The initial Conversion Price of $2.91 may be less than the greater of the book or market value of our Common Stock immediately before the closing of the Transaction. In addition, the terms of the Series A Preferred Stock contain weighted average anti-dilution adjustmentsretain this right, the Preferred Director is to be nominated by Sofinnova Venture Partners VIII, L.P. The current Preferred Director is Dr. Kong.
Independent Directors
Each of our directors, other than C. Daniel Myers, qualifies as an independent director in accordance with the published listing requirements of the Nasdaq Global Market, or Nasdaq. The Nasdaq independence definition includes a series of objective tests, such as that could resultthe director is not also one of our employees and has not engaged in various types of business dealings with us. In addition, as further required by the Nasdaq rules, our board of directors has made a subjective determination as to each independent director that no relationships exist which, in the Conversion Price being reducedopinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities as they may relate to us and our management.
Board Committees
Our board of directors has established an audit committee, a compensation committee and a nominating/corporate governance committee. Our board of directors and its committees set schedules to meet throughout the year and also can hold special meetings and act by written consent from time to time as appropriate. The independent directors of our board of directors also will hold separate regularly scheduled executive session meetings at least twice a year at which only independent directors are present. Our board of directors has delegated various responsibilities and authority to its committees as generally described below. The committees will regularly report on their activities and actions to the full board of directors. Each current member of each committee of our board of directors qualifies as an independent director in accordance with the Nasdaq standards described above and SEC rules and regulations. Each committee of our board of directors has a written charter approved by our board of directors. Copies of each charter are posted on our website at www.alimerasciences.com under the Investor Relations section. The inclusion of our website address in this proxy statement does not include or incorporate by reference the information on our website into this proxy statement.
The following table provides membership and meeting information for each of the committees of the board of directors during the year ended December 31, 2012:
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| | | | | | Number of Meetings | |
| Committee | | Chairman | | Members | | in 2012 | |
| Audit Committee | | Peter J. Pizzo, III | | Calvin W. Roberts, M.D. (1) Glen Bradley, Ph.D. Mark J. Brooks (2) | | 8 | |
| Compensation Committee | | Brian K. Halak, Ph.D. | | Mark J. Brooks James R. Largent | | 11 | |
| Nominating/Corporate Governance Committee | | Philip R. Tracy | | Brian K. Halak, Ph.D. James R. Largent | | 1 | |
(1) Resigned from the audit committee in June 2012.
(2) Replaced Dr. Roberts as a member of the audit committee in June 2012.
The primary responsibilities of each committee are described below.
Audit Committee
Our audit committee currently consists of Peter J. Pizzo, III, Glen Bradley, Ph.D. and Mark J. Brooks. Mr. Pizzo serves as the chairman of the audit committee. Our board of directors annually reviews the Nasdaq listing standards definition of independence for audit committee members and has determined that all current members of our audit committee are independent (as independence is currently defined in applicable Nasdaq listing standards and Rule 10A-3 promulgated under the Exchange Act).
Mr. Pizzo qualifies as an “audit committee financial expert” as that term is defined in the rules and regulations of the SEC. The designation of Mr. Pizzo as an “audit committee financial expert” does not impose on him any duties, obligations or liability that are greater than those that are generally imposed on him as a member of our audit committee and our board of directors, and his designation as an “audit committee financial expert” pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of our audit committee or board of directors.
The audit committee monitors our corporate financial statements and reporting and our external audits, including, among other things, our internal controls and audit functions, the results and scope of the annual audit and other services provided by our independent registered public accounting firm and our compliance with legal matters that have a significant impact on our financial statements. Our audit committee also consults with our management and our independent registered public accounting firm prior to the presentation of financial statements to stockholders and, as appropriate, initiates inquiries into aspects of our financial affairs. Our audit committee is responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. Our audit committee monitors compliance with our Code of Business Conduct policy. In addition, our audit committee is directly responsible for the appointment, retention, compensation and oversight of the work of our independent auditors, including approving services and fee arrangements. Related party transactions will be approved by our audit committee before we enter into them, in accordance with the applicable rules of Nasdaq.
Both our independent registered public accounting firm and internal financial personnel regularly meet with, and have unrestricted access to, the audit committee.
Compensation Committee
Our compensation committee currently consists of Mark J. Brooks, Brian K. Halak, Ph.D., James R. Largent and Garheng Kong, M.D., Ph.D., who was appointed to the compensation committee in March 2013. Dr. Halak serves as chairman of the compensation committee. Our
board of directors has determined that Mr. Brooks, Dr. Halak, Mr. Largent and Dr. Kong satisfy the general independence requirements of the Nasdaq and the SEC rules and regulations for directors. Although as a smaller reporting company we are not expected to be subject to the enhanced compensation committee independence standards recently approved by Nasdaq, we currently believe each of the members of our compensation committee would satisfy these more stringent standards. Each member of our compensation committee is a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended.
The compensation committee makes recommendations to the board of directors and reviews and approves our compensation policies and all forms of compensation to be provided to our directors and executive officers, including, among other things, annual salaries, bonuses, and equity incentive awards and other incentive compensation arrangements. In addition, our compensation committee will administer our equity incentive and employee stock purchase plans, including granting stock options or awarding restricted stock units to our directors and executive officers. Our compensation committee also reviews and approves employment agreements with executive officers and other compensation policies and matters.
Prior to the third quarter of 2010, the compensation committee had not engaged a compensation consultant for advice on matters related to compensation for executive officers, other key employees and non-employee directors. In July 2010, the compensation committee determined that, in light of Company’s initial public offering, it would engage an executive compensation consultant to review the compensation of the Company’s executives and advise the compensation committee with respect to any recommended changes to such compensation. The compensation committee engaged Hewitt Associates LLC in 2010 to provide advice in connection with our 2011 executive compensation program and used Hewitt Associates’ recommendations as part of its decision-making process for setting the named executive officers’ 2011 base salary and target bonus. The compensation committee assessed the independence of Hewitt Associates pursuant to the Nasdaq listing standards and concluded that the work of Hewitt Associates has not raised any conflict of interest. The compensation committee engaged Frederick W. Cook & Co. (“FW Cook”) in 2011 and 2012 to provide advice in connection with our 2012 and 2013 executive compensation programs and used FW Cook’s recommendations as part of its decision-making process for setting the named executive officers’ 2012 compensation. The compensation committee assessed the independence of FW Cook pursuant to the Nasdaq listing standards and concluded that the work of FW Cook has not raised any conflict of interest.
Nominating/Corporate Governance Committee
Our nominating/corporate governance committee currently consists of Brian K. Halak, Ph.D., Philip R. Tracy and James R. Largent. Mr. Tracy serves as chairman of the nominating/corporate governance committee.
Our nominating/corporate governance committee identifies, evaluates and recommends nominees to our board of directors and committees of our board of directors, conducts searches for appropriate directors and evaluates the performance of our board of directors and of individual directors. In evaluating potential nominees to the board of directors, the nominating/corporate governance committee considers a wide variety of qualifications, attributes and other factors and recognizes that a diversity of viewpoints and practical experience can enhance the effectiveness of our board of directors. Accordingly, as part of its evaluation of each candidate, the nominating/corporate governance committee takes into account that candidate’s background, experience, qualifications, attributes and skills that may complement, supplement or duplicate those of other prospective candidates and current directors. Our nominating/corporate governance committee also considers candidates proposed in writing by stockholders, provided such proposal meets the eligibility requirements for submitting stockholder proposals under our amended and restated bylaws and is accompanied by certain required information about the candidate and the stockholder submitting the proposal. Candidates proposed by stockholders will be evaluated by our nominating/corporate governance committee using the same criteria as for all other candidates. Our nominating/corporate governance committee is also responsible for reviewing developments in corporate governance practices, evaluating the adequacy of our corporate governance practices and reporting and making recommendations to the board of directors concerning corporate governance matters. Our nominating/corporate governance committee has not adopted a policy regarding the consideration of diversity in identifying director nominees.
Board Meetings and Attendance
Our board of directors held twenty (20) meetings in 2012. In 2012, each member of the board of directors attended 75% or more of the aggregate of (i) the total number of board meetings held during the period of such member’s service, with the exception of Mark Brooks, who attended 70% of the total number of board meetings, and (ii) the total number of meetings of committees on which such member served, during the period of such member’s service.
Director Attendance at Annual Meetings of Stockholders
Directors are encouraged, but not required, to attend our annual stockholder meetings. All of our then-serving directors attended our last annual meeting.
Separation of CEO and Chairman Roles
Our board of directors separates the positions of chairman of the board and Chief Executive Officer. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business activities, while allowing the chairman of the board to lead our board of directors in its fundamental role of providing advice to and independent oversight of our management. Our board of directors recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment
required to serve as our chairman of the board, particularly as the board of directors’ oversight responsibilities continue to grow. Our board of directors is led by our chairman of the board. The chairman of the board chairs all board meetings (including executive sessions), acts as liaison between the independent directors and management, approves board meeting schedules and oversees the information distributed in advance of board meetings, is available to our outside corporate counsel to discuss and, as necessary, respond to stockholder communications to our board of directors and calls meetings of the independent directors. We believe that having different people serving in the roles of chairman of the board and chief executive officer is an appropriate and effective organizational structure for our Company.
Risk Oversight
Our board of directors oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. Our board of directors performs this oversight role by using several different levels of review. In connection with its reviews of the operations and corporate functions of our Company, our board of directors addresses the primary risks associated with those operations and corporate functions. In addition, our board of directors reviews the risks associated with our Company’s business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies.
Each of our board committees also oversees the management of our Company’s risk that falls within the committee’s areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors. Our Chief Financial Officer reports to the audit committee with respect to risk management and is responsible for identifying, evaluating and implementing risk management controls and methodologies to address any identified risks. In connection with its risk management role, our audit committee meets privately with representatives from our independent registered public accounting firm and our Chief Financial Officer. The audit committee oversees the operation of our risk management program, including the identification of the primary risks associated with our business and periodic updates to such risks and reports to our board of directors regarding these activities.
Code of Business Conduct
Our board of directors has adopted a code of ethics and business conduct that applies to all of our employees, executive officers (including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions) and directors. The full text of our code of ethics and business conduct is posted on our website at www.alimerasciences.com under the Investor Relations section. We intend to disclose future amendments to certain provisions of our code of ethics and business conduct, or waivers of such provisions, applicable to our directors and executive officers at the same location on our website identified above and also in a Current Report on Form 8-K, as required, within four business days following the date of such amendment or waiver. The inclusion of our website address in this proxy statement does not include or incorporate by reference the information on our website into this proxy statement.
Limitation of Liability and Indemnification
We have entered into indemnification agreements with each of our directors and executive officers. The agreements provide that we will indemnify each of our directors and executive officers against any and all expenses incurred by that director or executive officer because of his or her status as one of our directors or executive officers, to the fullest extent permitted by Delaware law, our restated certificate of incorporation and amended and restated bylaws. In addition, the agreements provide that, to the fullest extent permitted by Delaware law, but subject to various exceptions, we will advance all expenses incurred by our directors in connection with a legal proceeding.
Our restated certificate of incorporation and amended and restated bylaws contain provisions relating to the limitation of liability and indemnification of directors. The restated certificate of incorporation provides that our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability:
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| • | for any breach of the director’s duty of loyalty to us or our stockholders; |
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| • | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; |
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| • | in respect of unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or |
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| • | for any transaction from which the director derives any improper personal benefit. |
Our restated certificate of incorporation also provides that if Delaware law is amended in the future to an amount that is less thanauthorize corporate action further eliminating or limiting the greaterpersonal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law. The foregoing provisions of the bookrestated certificate of incorporation are not intended to limit the liability of directors or officers for any violation of applicable federal securities laws. As permitted by Section 145 of the Delaware General Corporation Law, our restated certificate of incorporation provides that we may indemnify our directors to the fullest extent permitted by Delaware law and the restated certificate of incorporation provisions relating to indemnity may not be retroactively repealed or modified so as to adversely affect the protection of our directors.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws provide that we are authorized to enter into indemnification agreements with our directors and executive officers and we are authorized to purchase directors’ and officers’ liability insurance, which we currently maintain to cover our directors and executive officers.
Communications to the Board of Directors
Stockholders interested in communicating with the independent directors regarding their concerns or issues may address correspondence to a particular director, or to the independent directors generally, in care of Alimera Sciences, Inc., 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005, Attn: Secretary. The Secretary of the Company has the authority to disregard any inappropriate communications or to take other appropriate actions with respect to any inappropriate communications. If deemed an appropriate communication, the Secretary of the Company will forward it, depending on the subject matter, to the chairman of the board of directors, chairman of a committee of the board of directors, the full board of directors or a particular director, as appropriate.
Director Compensation
In October 2009, our board of directors adopted a compensation program for outside directors, which became effective upon the consummation of our initial public offering in April 2010. Our board of directors, based in part on the recommendations of FW Cook, amended the non-employee director compensation program effective as of January 1, 2013. The table below sets forth the provisions of the non-employee director compensation program prior to and after the amendment.
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| Term | | Program in effect during 2012 | | Amended Program effective as of January 1, 2013 |
| Annual Cash Retainer (1) | | $20,000 | | $35,000 |
| Chairman of Board Compensation (1) | | Additional annual retainer of $5,000 | | Additional annual retainer of $25,000 |
| Chair of Audit Committee Compensation (1) | | Additional annual retainer of $7,500 | | Additional annual retainer of $17,000 |
| Chair of Compensation Committee Compensation (1) | | Additional annual retainer of $3,500 | | Additional annual retainer of $10,000 |
| Chair of Nominating/Corporate Governance Committee Compensation (1) | | Additional annual retainer of $3,500 | | Additional annual retainer of $6,000 |
| Non-Chair Member of Audit Committee Compensation (1) | | Additional annual retainer of $2,000 | | Additional annual retainer of $7,000 |
| Non-Chair Member of Compensation Committee Compensation (1) | | Additional annual retainer of $2,000 | | Additional annual retainer of $5,000 |
| Non-Chair Member of Nominating/Corporate Governance Committee Compensation (1) | | Additional annual retainer of $2,000 | | Additional annual retainer of $3,000 |
| Initial Option Grant | | Option to purchase 20,000 shares of our common stock upon election as director (2) | | Option to purchase up to 20,000 shares of our common stock upon election as director prorated based on the number of days remaining in the year of election (2) |
| Annual Option Grant | | Option to purchase 7,500 shares of our common stock following each annual meeting of stockholders provided the applicable director did not receive an initial option grant in the same calendar year (3) | | Option to purchase 20,000 shares of our common stock following each annual meeting of stockholders (4) |
(1) All annual cash retainer fees are paid in four quarterly payments.
(2) Option vests and becomes exercisable with respect to 25% of the option shares after one year of service on the board of directors and an additional 6.25% of the option shares for each subsequent three-month period thereafter.
(3) Option is vested and exercisable in full on the date of grant.
(4) Option vests and becomes exercisable in equal monthly installments over the following 12 months provided the director provides continuous service through the applicable vesting date.
All stock option grants to non-employee directors will have an exercise price per share equal to the fair market value of
our Common Stock immediately before the closing of the Transaction. This would occur in the event of certain issuances of securities or if we elect to enter into certain transactions in the future that would trigger such anti-dilution adjustments. If the proposal is approved, the issuanceone share of our
Common Stock upon conversioncommon stock on the date of
grant and will be subject to the
Series A Preferred Stock and the conversion of the Series A Preferred Stock issued upon exercise of the Warrants will exceed 20%terms of our
Common Stock currently outstanding. Because the Conversion Price in the future (due to anti-dilution adjustments) may be below the greater of the book or market value of2010 Equity Incentive Plan. Each option granted under our
Common Stock immediately prior to the closing of the Transaction, we believe the NASDAQ Private Placement Rule requiresnon-employee director compensation program that
we obtain stockholder approval of the Series A Preferred Stock issued in the Transaction. Therefore, in addition to satisfying the requirements of the NASDAQ Change of Control Rule, we seek your approval of the proposal in order to satisfy the requirements of the NASDAQ Private Placement Rule.Effects of Approval of the Proposal on Current Stockholders
If the proposal is approved, the sale of the Series A Preferred Stock and the issuance of the Series A Preferrednot fully vested will become fully vested upon the exercise of the Warrants will dilute each existing stockholder’s (other than those stockholders that are also Investors) proportionate ownership and voting power. Since the shares sold in the Transaction will not have any voting restrictions, the Transaction could have the effect of delaying or preventing a change in control of our Company and if the non-employee director’s service terminates due to death.
We currently have a policy to reimburse our non-employee directors for travel, lodging and other reasonable expenses incurred in connection with their attendance at board and committee meetings.
Director Compensation Table for Year Ended December 31, 2012
The following table sets forth information regarding compensation earned by each of our non-employee directors during the fiscal year ended December 31, 2012:
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| Name(1) | | Fees Earned or Paid in Cash ($) | | Option Awards ($)(2) | | Total ($) | |
| Glen Bradley, Ph.D. | | $ | 22,000 | | $ | 15,542 | | $ | 37,542 | |
| Mark J. Brooks (3) | | | 22,000 | | | 15,542 | | | 37,542 | |
| Brian K. Halak, Ph.D. (3) | | | 25,500 | | | 15,542 | | | 41,042 | |
| Garheng Kong, M.D., Ph.D. (4) | | | 5,000 | | | 39,444 | | | 44,444 | |
| James R. Largent | | | 24,000 | | | 15,542 | | | 39,542 | |
| Peter J. Pizzo, III | | | 27,500 | | | 15,542 | | | 43,042 | |
| Calvin W. Roberts, M.D. | | | 22,000 | | | 15,542 | | | 37,542 | |
| Philip R. Tracy | | | 28,500 | | | 15,542 | | | 44,042 | |
(1) Mr. Myers was not favored by the Investors. In addition,eligible in 2012 to receive any compensation from us for service as a resultdirector pursuant to our non-employee director compensation plan because Mr. Myers is a Company employee.
(2) The amounts reported in this column represent the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. See Note 11 of the Transaction, PAI would have considerable influenceNotes to the Financial Statements in our day-to-day affairs and/orAnnual Report on Form 10-K for the year ended December 31, 2012 for a discussion of our assumptions in determining the outcomeASC 718 values of any corporate transaction or other matter submittedour option awards.
(3) Fees earned by Mr. Brooks and Dr. Halak were paid to our stockholders for approval, including the electionmanagement companies of the venture capital funds affiliated with these directors.
(4) Dr. Kong was appointed to the board of directors and approval of mergers, consolidations or the sale of all or substantially alleffective October 2, 2012.
The following table sets forth information regarding outstanding option awards held by each of our
assets.MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
PROPOSAL: APPROVAL OF THE ISSUANCE OF PREFERRED STOCK CONVERTIBLE INTO OUR COMMON STOCK OUTSTANDING UNDER CIRCUMSTANCES WHICH REQUIRE STOCKHOLDER APPROVAL PURSUANT TO APPLICABLE NASDAQ LISTING RULES
Our Common Stock is listed onnon-employee directors as of December 31, 2012:
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| | | Option Awards | |
| Name | | Number of
Securities
Underlying
Unexercised
Options (#) Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#) Unexercisable | | Option
Exercise
Price ($) | | Option Expiration
Date | |
| Glen Bradley, Ph.D. | | 7,500 | | 12,500 | | 7.97 | | April 18, 2021(1) | |
| | | 7,500 | | — | | 2.77 | | June 14, 2022(2) | |
| Mark J. Brooks | | 4,687 | | 2,813 | | 11.00 | | April 27, 2020(3) | |
| | | 7,500 | | — | | 7.53 | | June 8, 2021(2) | |
| | | 7,500 | | — | | 2.77 | | June 14, 2022(2) | |
| Brian K. Halak, Ph.D. | | 4,687 | | 2,813 | | 11.00 | | April 27, 2020(3) | |
| | | 7,500 | | — | | 7.53 | | June 8, 2021(2) | |
| | | 7,500 | | — | | 2.77 | | June 14, 2022(2) | |
| James R. Largent | | 6,250 | | 13,750 | | 8.47 | | July 28, 2021(4) | |
| | | 7,500 | | — | | 2.77 | | June 14, 2022(2) | |
| Peter J. Pizzo, III | | 12,500 | | 7,500 | | 11.00 | | April 27, 2020(3) | |
| | | 7,500 | | — | | 7.53 | | June 8, 2021(2) | |
| | | 7,500 | | — | | 2.77 | | June 14, 2022(2) | |
| Calvin W. Roberts, M.D. | | 8,824 | | — | | 1.33 | | December 14, 2013(2) | |
| | | 4,412 | | — | | 3.88 | | June 25, 2015(2) | |
| | | 4,412 | | — | | 4.02 | | June 16, 2016(2) | |
| | | 4,687 | | 2,813 | | 11.00 | | April 27, 2020(3) | |
| | | 7,500 | | — | | 7.53 | | June 8, 2021(2) | |
| | | 7,500 | | — | | 2.77 | | June 14, 2022(2) | |
| Philip R. Tracy | | 4,687 | | 2,813 | | 11.00 | | April 27, 2020(3) | |
| | | 7,500 | | — | | 7.53 | | June 8, 2021(2) | |
| | | 7,500 | | — | | 2.77 | | June 14, 2022(2) | |
| Garheng Kong, M.D., Ph.D. | | — | | 20,000 | | 2.49 | | October 2, 2022(5) | |
(1) Exercisable with respect to 25% of the NASDAQ Global Market, and therefore weshares of stock which are subject to this option on April 18, 2012 (the “Initial Vesting Date”), provided the NASDAQ Listing Rules. Underoptionee provides continuous service to Alimera through the NASDAQ Change of Control Rule, prior stockholder approval is required for issuances of securities that will result in a “change of control”Initial Vesting Date; and the remainder of the issuer. NASDAQ may deem a change of control to occur when, as a result of an issuance, an investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of common stock or voting power andwhich are subject to this option shall vest in equal increments quarterly over three years beginning on the date three months from such ownership or voting power would beInitial Vesting Date, provided optionee provides continuous service to Alimera through the largest ownership positionlast day of the issuer. Following the closing of the Transaction, PAI, one of the Investors, assuming the exercise and subsequent conversion of its Warrant (but no other Warrants) and the conversion of its Series A Preferred Stock and including the number of shares of Common Stock currently owned by PAI, will own approximately 14,356,633 shares of the Common Stock, which is expected to represent approximately 29.12% of the total voting power of the Company’s voting securities following the closing of the Transaction. Therefore, stockholder approval is required for purposes of the NASDAQ Change of Control Rule and we seek your approval of the proposal in order to satisfy the requirements of the NASDAQ Change of Control Ruleeach quarterly period.
(2) Exercisable with respect to
the issuance100% of the
Series A Preferred Stockshares of stock which are subject to
PAI.In addition, underthis option as of the NASDAQ Private Placement Rule, prior stockholder approval is requireddate of grant.
(3) Exercisable with respect to 25% of the shares of stock which are subject to this option on April 27, 2011 (the “Initial Vesting Date”), provided the optionee provides continuous service to Alimera through the Initial Vesting Date; and the remainder of the shares of stock which are subject to this option shall vest in equal increments quarterly over three years beginning on the date three months from such Initial Vesting Date, provided optionee provides continuous service to Alimera through the last day of each quarterly period.
(4) Exercisable with respect to 25% of the shares of stock which are subject to this option on July 28, 2012 (the “Initial Vesting Date”), provided the optionee provides continuous service to Alimera through the Initial Vesting Date; and the remainder of the shares of stock which are subject to this option shall vest in equal increments quarterly over three years beginning on the date three months from such Initial Vesting Date, provided optionee provides continuous service to Alimera through the last day of each quarterly period.
(5) Exercisable with respect to 25% of the shares of stock which are subject to this option on October 2, 2013 (the “Initial Vesting Date”), provided the optionee provides continuous service to Alimera through the Initial Vesting Date; and the remainder of the shares of stock which are subject to this option shall vest in equal increments quarterly over three years beginning on the date three months from such Initial Vesting Date, provided optionee provides continuous service to Alimera through the last day of each quarterly period.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of our board of directors has selected Grant Thornton LLP, an independent registered public accounting firm, as our independent auditors for the issuance,year ending December 31, 2013, and has further directed that management submit the selection of independent auditors for ratification by the stockholders at the Annual Meeting. Grant Thornton LLP has served as our independent registered public accounting firm since August 23, 2012. Prior to such time, Deloitte & Touche LLP served as our independent registered accounting firm. See “Changes in Independent Registered Public Accounting Firm” below. Representatives of Grant Thornton 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 available to respond to appropriate questions.
Neither our amended and restated bylaws nor other than in a public offering, of securities convertible into common stock at a price less than the greater of bookgoverning documents or market valuelaws require stockholder ratification of the common stockappointment of Grant Thornton LLP as our independent registered public accounting firm. However, the audit committee of the board of directors is submitting the appointment of Grant Thornton LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee of the board of directors will reconsider whether or not to retain Grant Thornton LLP. Even if the securities are convertible into 20% or moreselection is ratified, the audit committee of our board of directors in its discretion may direct the appointment of different independent auditors at any time during the year if it determines that such a company’s common stock. The initial Conversion Price of $2.91 maychange would be less thanin the greaterbest interests of the book or market value ofCompany and our Common Stock immediately before the closing of the Transaction. stockholders.
In addition, the terms of the Series A Preferred Stock contain weighted average anti-dilution adjustments that could result in the Conversion Price being reduced in the futureorder for Proposal 2 to an amount that is less than the greater of the book or market value of our Common Stock immediately before the closing of the Transaction. This would occur in the event of certain issuances of securities or if we elect to enter into certain transactions in the future that would trigger such anti-dilution adjustments. If the proposal is approved, the issuance of our Common Stock upon conversion of the Series A Preferred Stock and the conversion of the Series A Preferred Stock issued upon the exercise of the Warrants will exceed 20% of our Common Stock currently outstanding. Because the Conversion Price in the future (due to anti-dilution adjustments) may be below the greater of the book or market value of our Common Stock immediately before the closing of the Transaction, we believe the NASDAQ Private Placement Rule requires that we obtain stockholder approval of the issuance of the Series A Preferred Stock and Warrants in the Transaction. We seek your approval of the proposal in order to satisfy the requirements of the NASDAQ Private Placement Rule.In the event that the proposal is not approved by stockholders as submitted hereby, the Transaction will not be consummated.
The approval of the change of control under NASDAQ Listing Rules resulting from the Transaction and the transactions contemplated thereby, including the issuance of our Common Stock upon conversion of the Series A Preferred Stock, and the approval of the issuance of securities convertible into more than 20% of our Common Stock currently outstanding at a price that may be less than the greater of book or market value of our Common Stock each requires the affirmative votepass, holders of a majority of the total votes cast on the proposal at the Special Meeting, eitherall those outstanding shares present in person, or represented by proxy.proxy, and cast either affirmatively or negatively at the Annual Meeting must vote
“FOR” Proposal 2. Abstentions and broker “non-votes”non-votes will be counted towards a quorum, however, they will not be counted either “FOR” or “AGAINST” the proposal and will have no effect with respect toon the approvalproposal. Because the ratification of the changeappointment of control under NASDAQ Listing Rules resulting from the Transaction and the issuance of securities convertible into more than 20% of our Common Stock currently outstanding atindependent registered public accounting firm is a price less than the greater of bookmatter on which a broker or market value of our Common Stock.THEother nominee is generally empowered to vote, no broker non-votes are expected to exist in connection with this matter.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS YOU VOTE THE PROXY CARD “FOR” PROPOSAL 2
Changes in Independent Registered Public Accounting Firm
On August 23, 2012, the audit committee of our board of directors dismissed Deloitte & Touche LLP as the independent registered public accounting firm for the Company and its subsidiaries, effective as of August 23, 2012, and approved the Company’s engagement of Grant Thornton LLP as the independent registered public accounting firm for the Company and its subsidiaries, subject to Grant Thornton LLP’s acceptable of such engagement. On August 27, 2012, the Company formally engaged Grant Thornton LLP as its independent registered public accounting firm for the year ending December 31, 2012.
Deloitte & Touche LLP’s report on the Company’s financial statements for the fiscal year ended December 31, 2011 contained an explanatory paragraph regarding the Company’s ability to continue as a going concern. Other than such statement, no report of Deloitte & Touche LLP on the financial statement of the Company for either of the past two years contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company’s fiscal year ended December 31, 2011 and through August 23, 2012, there were no disagreement(s) with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused Deloitte & Touche LLP to make reference to the subject matter of the disagreement(s) in connection with its report on the Company’s consolidated financial statements.
The Company provided Deloitte & Touche LLP a copy of the above disclosures and requested that Deloitte & Touche LLP furnish to the Company a letter addressed to the SEC stating whether it agrees with the statements made above. A copy of that letter, dated August 28, 2012, was filed as Exhibit 16.1 to the Company’s current report on Form 8-K filed with the SEC on August 28, 2012.
Independent Registered Public Accounting Firm’s Fees
The following table sets forth the fees billed by Deloitte & Touche LLP and Grant Thornton LLP, our independent registered public accounting firm, for audit and non-audit services rendered to the Company in 2012 and 2011. These fees are categorized as audit fees, audit-related fees, tax fees and all other fees. The nature of the services provided in each category is described following the table.
|
| | | | | | | | |
| | Year Ended December 31, | |
| | 2012 | | 2011 | |
| Grant Thornton LLP Fees | | | | | | |
| Audit fees(1) | $ | 133,964 |
| | $ | — |
| |
| Audit-related fees | | — |
| | | — |
| |
| Tax fees(2) | | 58,300 |
| | | — |
| |
| All other fees | | — |
| | | — |
| |
| Deloitte & Touche LLP Fees | | | | | | |
| Audit fees(3) | $ | 135,309 |
| | $ | 287,200 |
| |
| Audit-related fees | | — |
| | | — |
| |
| Tax fees | | — |
| | | — |
| |
| All other fees | | — |
| | | — |
| |
| | | | | | | |
| Total aggregate fees | $ | 327,573 |
| | $ | 287,200 |
| |
| | | | | | | |
(1) The fees billed or incurred by Grant Thornton LLPfor professional services include the review of our quarterly financial statements included in our quarterly report on Form 10-Q and for the quarter September 30, 2012 and the audit of our annual financial statements included in our annual report on Form 10-K for the year ended December 31, 2012.
(2) Fees billed or incurred by Grant Thornton LLP for professional services rendered in connection with an Internal Revenue Code Section 382 study and global tax planning.
(3) The fees billed or incurred by Deloitte & Touche LLP for professional services include the review of our quarterly financial statements included in our quarterly reports on Form 10-Q and for the quarters ended March 31, 2012 and June 30, 2012, the review of our quarterly financial statements included in our quarterly reports on Form 10-Q for the year ended December 31, 2011, the audit of our annual financial statements included in our annual report on Form 10-K for the year ended December 31, 2011 and the review and consent issued for our registration statements on Form S-1 and Form S-8.
All fees described above were pre-approved by the audit committee in accordance with applicable SEC requirements.
Pre-Approval Policies and Procedures of the Audit Committee
The audit committee’s policy is to pre-approve all audit and permissible non-audit services rendered by Deloitte & Touche LLP and Grant Thornton LLP, our independent registered public accounting firms. The audit committee can pre-approve specified services in defined categories of audit services, audit-related services and tax services up to specified amounts, as part of the audit committee’s approval of the scope of the engagement of Deloitte & Touche LLP and Grant Thornton LLP or on an individual case-by-case basis before Deloitte & Touche LLP or Grant Thornton LLP is engaged to provide a service. The audit committee has determined that the rendering of tax-related services by Grant Thornton LLP in 2012 is compatible with maintaining the principal accountant’s independence for audit purposes. Neither Deloitte & Touche LLP nor Grant Thornton LLP has been engaged to perform any non-audit services other than tax-related services.
REPORT OF THE PROPOSAL.AUDIT COMMITTEE1
The audit committee of our board of directors operates pursuant to a charter which is reviewed annually by the audit committee. Additionally, a brief description of the primary responsibilities of the audit committee is included in this proxy statement under “Corporate Governance — Board Committees — Audit Committee”. Under the audit committee charter, our management is responsible for the preparation, presentation and integrity of our financial statements, the application of accounting and financial reporting principles and our internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States of America.
In the performance of its oversight function, the audit committee reviewed and discussed the audited financial statements of the Company with management and with the independent registered public accounting firm. In addition, the audit committee discussed with the independent registered public accounting firm those matters required to be discussed by Statement of Accounting Standards 114, as modified, as adopted by the Public Company Accounting Oversight Board, or “PCAOB”, in Rule 3200T and by PCAOB Auditing Standard No. 16, Communications with Audit Committees, as may be further modified or supplemented. Additionally, the independent registered public accounting firm provided to the audit committee the written disclosures and the letter required by PCAOB Rule 3526 “Communication with Audit Committees concerning independence” as adopted by the Public Company Accounting Oversight Board. The Audit Committee also discussed with the independent registered public accounting firm its independence from the Company.
The audit committee has adopted a charter and a process for pre-approving services to be provided by the independent registered public accountant.
Based upon the review and discussions described in the preceding paragraph, our audit committee recommended to the board of directors that the audited financial statements of the Company be included in the Annual Report on Form 10-K, as amended, for the year ended December 31, 2012 filed with the SEC.
Submitted by the Audit Committee of the Company’s Board of Directors:
|
|
|
Peter J. Pizzo, III (Chairman) Glen Bradley, Ph.D. Mark J. Brooks |
|
| |
| 1 | The material in this report shall not be deemed to be “soliciting material” or “filed” with the SEC. This report shall not be deemed incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent the Company specifically incorporates it by reference into such filing. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information concerning beneficial ownership of our
Common Stockcommon stock and preferred stock as of
August 10, 2012,April 26, 2013, by:
each stockholder, or group of affiliated stockholders, known to us to beneficially own more than 5% of our outstanding Common Stock;
each of our named executive officers;
each of our directors; and
|
| | |
| • | each stockholder, or group of affiliated stockholders, known to us to beneficially own more than 5% of our outstanding common stock and preferred stock; |
all of our current executive officers and directors as a group.
|
| | |
| • | each of our named executive officers; |
|
| | |
| • | each of our directors; and |
|
| | |
| • | all of our current executive officers and directors as a group. |
The table below is based upon information supplied by directors, executive officers and principal stockholders and Schedule 13Gs and 13Ds filed with the SEC through
August 10, 2012.April 26, 2013.
The percentage ownership is based upon 31,432,44531,556,075 shares of common stock outstanding as of April 26, 2013.
The column in the table below entitled “Number of Shares of Common Stock
outstanding as of August 10, 2012.For purposes of the table below, we deemBeneficially Owned” includes (a) shares of Common Stock subject to options or warrants to purchase Common Stock that are currently exercisable or exercisable within 60 days of August 10, 2012 andApril 26, 2013, (b) shares of Common Stock subject to restricted stock unit awards that will vest within 60 days of August 10, 2012April 26, 2013 and (c) shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock and directly or indirectly issuable upon exercise of warrants to purchase shares of Series A Preferred Stock assuming a conversion price of $3.16 for the Series A Preferred Stock, which is the conversion price applicable to voluntary conversion of such securities as of April 26, 2013. The column in the table below entitled “Percentage of Shares of Common Stock Beneficially Owned” deems the shares of Common Stock set forth in clauses (a) – (c) of the prior sentence to be outstanding and to be beneficially owned by the person holding the options, Common Stock warrants, or restricted stock unit award, Series A Preferred Stock or Series A Preferred Stock warrants for the purpose of computing the percentage ownership of that person,the holder thereof, but we dosuch securities are not treat themtreated as outstanding for the purpose of computing the percentage ownership of any other person. Except
The column in the table below entitled “Number of Shares of Series A Preferred Stock Beneficially Owned” includes (1) shares of Series A Preferred Stock outstanding as otherwise noted,of April 26, 2013 and (2) shares of Series A Preferred Stock issuable upon exercise of warrants to purchase shares of Series A Preferred Stock exercisable within 60 days of April 26, 2013. The column in the persons or entitiestable below entitled “Percentage of Shares of Series A Preferred Stock Beneficially Owned” deems the shares of Series A Preferred Stock issuable upon warrants held by the holder thereof to be outstanding for the purpose of computing such holder's percentage ownership, but such securities are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Pursuant to the terms of the Series A Preferred Stock, the Series A Preferred Stock votes together at the Annual Meeting with Common Stock on an as converted basis based on a deemed conversion price of $2.95. As such, the columns in
thisthe table
have sole votingbelow entitled “Number of Voting Shares Owned” and
investing power with respect to all“Percentage of
theVoting Shares Owned” include outstanding shares of Common Stock
beneficially owned by them, subject to community property laws, where applicable. | | | | | | | | |
Name and Address of Beneficial Owner(1) | | Number of
Shares
Beneficially
Owned | | | Percentage
of
Shares
Beneficially
Owned | |
5% Stockholders (other than our executive officers and directors) | | | | | | | | |
BAVP, LP | | | 4,863,094 | (2) | | | 15.5 | % |
950 Tower Lane, Suite 700 | | | | | | | | |
Foster City, California 94404 | | | | | | | | |
Domain Associates, L.L.C. | | | 4,189,427 | (3) | | | 13.3 | % |
One Palmer Square | | | | | | | | |
Princeton, New Jersey 08542 | | | | | | | | |
Intersouth Partners | | | 4,877,480 | (4) | | | 15.5 | % |
406 Blackwell Street, Suite 200 | | | | | | | | |
Durham, North Carolina 27701 | | | | | | | | |
Polaris Venture Partners | | | 3,308,355 | (5) | | | 10.5 | % |
1000 Winter Street, Suite 3350 | | | | | | | | |
Waltham, Massachusetts 02451 | | | | | | | | |
Columbia Wanger Asset Management, LLC | | | 2,513,680 | (6) | | | 8.0 | % |
227 West Monroe Street, Suite 3000 | | | | | | | | |
Chicago, IL 60606 | | | | | | | | |
Palo Alto Investors, LLC | | | 3,634,984 | (7) | | | 11.6 | % |
470 University Avenue | | | | | | | | |
Palo Alto, California 94301 | | | | | | | | |
as of April 26, 2013 and shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock assuming a deemed conversion price of $2.95.
|
| | | | | | | | | | | | | | | |
| Name and Address of Beneficial Owner(1) | | Number of Shares Beneficially Owned | | Percentage of Shares Beneficially Owned | | Number of Shares of Series A Preferred Stock | | Percentage of Shares of Series A Preferred Stock Beneficially Owned | | Number of Voting Shares Owned | | Percentage of Voting Shares Owned | |
| 5% Stockholders (other than our executive officers and directors) | | | | | | | | | | | | | | | |
Palo Alto Investors, LLC 470 University Avenue Palo Alto, California 94301 | | 13,508,401 | (2) | | 38.2% | | 780,000 (25) | | 66.1% | | 11,770,577 | | 26.1% | |
Intersouth Partners 406 Blackwell Street, Suite 200 Durham, North Carolina 27701 | | 4,877,480 | (3) | | 15.5% | | — | | — | | 4,877,480 | | 10.8% | |
BAVP, LP 950 Tower Lane, Suite 700 Foster City, California 94404 | | 4,863,094 | (4) | | 15.4% | | — | | — | | 4,863,094 | | 10.8% | |
Domain Associates, L.L.C. One Palmer Square Princeton, New Jersey 08542 | | 4,189,427 | (5) | | 13.3% | | — | | — | | 4,189,427 | | 9.3% | |
Sofinnova Ventures 2800 Sand Hill Road, Suite 150 Menlo Park, California 94025 | | 4,113,924 | (6) | | 11.5% | | 325,000 (26) | | 30.2% | | 3,389,931 | | 7.5% | |
Columbia Wanger Asset Management, LLC 227 West Monroe Street, Suite 3000 Chicago, IL 60606 | | 2,887,380 | (7) | | 9.1% | | — | | — | | 2,517,380 (7) | | 5.6% | |
Polaris Venture Partners 1000 Winter Street, Suite 3350 Waltham, MA 02451 | | 3,308,355 | (8) | | 10.5% | | — | | — | | 3,308,355 | | 7.3% | |
Growth Equity Opportunities Fund III, LLC New Enterprise Associates 1954 Greenspring Drive, Suite 600 Timonium, MD 21093 | | 2,468,354 | (9) | | 7.3% | | 195,000 (27) | | 18.7% | | 2,033,898 | | 4.5% | |
North Run Capital, LP One International Place, Suite 2401 Boston, MA 02110 | | 2,000,000 | (10) | | 6.3% | | — | | — | | 2,000,000 | | 4.4% | |
|
| | | | | | | | | | | | | | | |
| Directors and Named Executive Officers | | | | | | | | | | | | | | | |
| Glen Bradley, Ph.D. | | 40,047 | (11) | | * | | — | | — | | 10,047 | | * | |
| Mark J. Brooks | | 33,125 | (12) | | * | | — | | — | | — | | * | |
| Susan Caballa | | 334,585 | (13) | | 1.1% | | — | | — | | 70,987 | | * | |
| Richard S. Eiswirth | | 445,689 | (14) | | 1.4% | | — | | — | | 15,299 | | * | |
| Kenneth Green, Ph.D. | | 456,645 | (15) | | 1.4% | | — | | — | | 7,520 | | * | |
| Brian K. Halak, Ph.D. | | 4,222,552 | (16) | | 13.4% | | — | | — | | 4,189,427 | | 9.3% | |
| David Holland | | 366,528 | (17) | | 1.2% | | — | | — | | 126,366 | | * | |
| Garheng Kong, Ph.D. | | 4,113,924 | (18) | | 11.5% | | — | | — | | 3,389,831 | | 7.5% | |
| James R. Largent | | 28,750 | (19) | | * | | — | | — | | — | | * | |
| C. Daniel Myers | | 848,358 | (20) | | 2.6% | | — | | — | | 117,900 | | * | |
| Peter J. Pizzo, III | | 50,000 | (21) | | * | | — | | — | | 7,500 | | * | |
| Calvin W. Roberts, M.D. | | 418,127 | (22) | | 1.3% | | — | | — | | 327,648 | | * | |
| Philip R. Tracy | | 4,910,605 | (23) | | 15.5% | | — | | — | | 4,877,480 | | 10.8% | |
All current directors and executive officers as a group (14 persons) | | 16,268,935 | (24) | | 42.7% | | — | | — | | 13,140,005 | | 29.1% | |
| | | |
| | | | |
Name and
Address of
Beneficial
Owner(1)
| | Number of Share
Beneficially Owned | | | Percentage of
Shares Beneficially
Owned | |
Directors and Named Executive Officers
| | | | | | | | |
Glen Bradley, Ph.D.
| | | 13,750 (8) | | | | * | Represents beneficial ownership of less than one percent of our outstanding common stock. |
Mark J. Brooks
| | | 4,882,312 (9) | | | | 15.5 | % |
Susan Caballa
| | | 292,044 (10) | | | | * | |
Richard S. Eiswirth
| | | 362,779 (11) | | | | 1.1 | % |
Kenneth Green, Ph.D.
| | | 405,631 (12) | | | | 1.3 | % |
Brian K. Halak, Ph.D.
| | | 4,208,645 (13) | | | | 13.4 | % |
David Holland
| | | 325,674 (14) | | | | 1.0 | % |
James R. Largent
| | | 12,500 (15) | | | | * | |
C. Daniel Myers
| | | 745,304 (16) | | | | 2.3 | % |
Peter J. Pizzo, III
| | | 28,750 (17) | | | | * | |
Calvin W. Roberts, M.D.
| | | 404,220 (18) | | | | 1.3 | % |
Philip R. Tracy
| | | 4,896,698 (19) | | | | 15.6 | % |
All current directors and executive officers as a group (12 persons)
| | | 16,578,307 (20) | | | | 49.7 | % |
* Represents beneficial ownership of less than one percent of our outstanding common stock.
| (1) | Unless otherwise indicated, the address for each beneficial owner is c/o Alimera Sciences, Inc., 6120 Windward Parkway, Suite 290, Alpharetta, Georgia 30005. |
|
| | | | |
| (2) | TheRepresents 750,191 shares of Common Stock and an aggregate of 353,797 shares of Common Stock issuable upon voluntary conversion and exercise, as applicable, of Series A Preferred Stock and a warrant to purchase Series A Preferred Stock held by Palo Alto Investors, LLC (“PAI LLC”), as an investment advisor and general partner of BAVP,other funds; 1,216,563 shares of Common Stock and an aggregate of 3,804,557 shares of Common Stock issuable upon voluntary conversion and exercise, as applicable, of Series A Preferred Stock and a warrant to purchase Series A Preferred Stock held by Palo Alto Healthcare Master Fund, L.P. is Scale Venture Management I,(“Healthcare Master”); 1,668,230 shares of Common Stock and an aggregate of 5,715,063 shares of Common Stock issuable upon voluntary conversion and exercise, as applicable, of Series A Preferred Stock and a warrant to purchase Series A Preferred Stock held by Palo Alto Healthcare Master Fund II, L.P. (“Healthcare Master II”). Palo Alto Healthcare Fund, L.P. (“Healthcare”) and Palo Alto Healthcare II, L.P. (“Healthcare II”) hold shares of Common Stock indirectly through Healthcare Master and Healthcare Master II. Dr. Patrick Lee and Dr. Anthony Joonkyoo Yun co-manage PAI LLC. The managingPAI LLC, Healthcare Master, Healthcare Master II, Healthcare, Healthcare II, Dr. Lee and Dr. Jookyoo (collectively the “PAI Investors”) filed a Schedule 13G jointly, but not as members of Scale Venture Management I, LLC share votinga group, and investment power with respect to these shares. Mark J. Brooks,each of them expressly disclaims membership in a member of our board of directors, is a managing member of Scale Venture Management I, LLC, and shares voting and investment power with the three other managing members of Scale Venture Management I, LLC. Mr. Brooksgroup. Each PAI Investor disclaims beneficial ownership, of these shares, except to the extent of histhat PAI Investors' pecuniary interest therein. |
(3) | Represents 4,129,773 shares held by Domain Partners VI, L.P. In addition, Healthcare Master, Healthcare Master II, Healthcare and 40,790 shares held by DP VI Associates, L.PHealthcare II should not be construed as an admission that any of them is, and 18,864 shares held by One Palmer Square Associates VI, L.L.C. The managing members of One Palmer Square Associates VI, L.L.C., the general partner of Domain Partners VI, L.P. and DP VI Associates, L.P., share voting and investment power with respect to these shares. Brian Halak, Ph.D., a member of our board of directors,each disclaims that it is, a memberbeneficial owner of One Palmer Square Associates VI, LLC, but has no votingany of Common Stock, Series A Preferred Stock or investment power and disclaims beneficial ownership of these shares, excepta warrant to the extent of his pecuniary interest therein.purchase Series A Preferred Stock. |
(4)(3) | Represents 73,590 shares held by Intersouth Affiliates V, L.P.; 1,605,743 shares held by Intersouth Partners V, L.P.; 2,053,381 shares held by Intersouth Partners VI, L.P.; and 1,144,766 shares held by Intersouth Partners VII, L.P. Philip R. Tracy, a member of and the chairman of our board of directors, is a member of each of Intersouth Associates V, LLC, Intersouth Associates VI, LLC and Intersouth Associates VII, LLC. Pursuant to powers of attorney granted by each of Intersouth Associates V, LLC, Intersouth Associates VI, LLC and Intersouth Associates VII, LLC, Mr. Tracy shares voting power with respect to the securities owned by the entities for which these entities serve as general partners. Mr. Tracy disclaims beneficial ownership of these shares held by Intersouth Affiliates V, L.P., Intersouth Partners V, L.P., Intersouth Partners VI, L.P., and Intersouth Partners VII, L.P., except to the extent of his pecuniary interest therein. |
| (4) | The general partner of BAVP, LP is Scale Venture Management 1, LLC (“SVM I”). Mark J. Brooks, a member of our Board of Directors, is a member of SVM I; however, voting and investment power with respect to these shares is shared only by the managing members of SVM 1, Kate Mitchell and Rory O'Driscoll. Ms. Mitchell and Mr. O'Driscoll disclaim beneficial ownership with respect to the shares held by BAVP, LP, except to the extent of their respective pecuniary interest therein, if any. Mr. Brooks is also a member of Scale Venture Management I¬A, LLC, which serves as the management company for BAVP, LP and SVM I; however, SVM I maintains the ultimate responsibility for the voting and investment power with respect to these shares. |
| (5) | Represents 4,129,773 shares held by Domain Partners VI, L.P. and 40,790 shares held by DP VI Associates, L.P. and 18,864 shares held by One Palmer Square Associates VI, L.L.C. The managing members of One Palmer Square Associates VI, L.L.C., the general partner of Domain Partners VI, L.P. and DP VI Associates, L.P., share voting and investment power with respect to these shares. Brian Halak, Ph.D., a member of our board of directors, is a member of One Palmer Square Associates VI, LLC, but has no voting or investment power and disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. |
| (6) | Represents an aggregate of 4,113,924 shares of Common Stock issuable upon voluntary conversion and exercise, as applicable, of Series A Preferred Stock and a warrant to purchase Series A Preferred Stock held by Sofinnova Venture Partners VIII, L.P. (“SVP VIII”). Sofinnova Management VIII, L.L.C. (“SM VIII”) is the general partner of SVP VIII and Garheng Kong, M.D., Ph.D., Michael Powell, and James I. Healy, are the managing members of SM VIII (the “Managing Members”). SVP VIII, SM VIII and the Managing Members may be deemed to have shared voting and dispositive power over the shares owned by SVP VIII. Such persons and entities disclaim beneficial ownership over the shares owned by SVP VIII except to the extent of any pecuniary interest therein. |
| (7) | The indicated ownership is based solely on a Schedule 13G/A filed with the SEC by the reporting person on February 14, 2013. According to the Schedule 13G/A, Columbia Wanger Asset Management, LLC (“CWAM”) has sole power to vote or to direct the vote of 2,517,380 shares of Common Stock and sole power to dispose or direct the disposition of 2,887,380 shares of Common Stock. According to the Schedule 13G/A, Columbia Acorn Fund has sole voting and dispositive power over 2,040,000 shares of Common Stock. CWAM is the investment adviser of Columbia Acorn Fund and various other investment companies and managed accounts, and may be deemed to beneficially own the shares reported by Columbia Acorn Fund. Accordingly, the shares reported in the Schedule 13G/A by CWAM include those shares separately reported in the Schedule 13G/A by Columbia Acorn Fund. The Schedule 13G/A filed by the reporting person provides information as of December 31, 2012 and, consequently, the beneficial ownership of the reporting person may have changed between December 31, 2012 and April 26, 2013. |
| (8) | Represents 3,247,811 shares held by Polaris Venture Partners IV, L.P. and 60,544 shares held by Polaris Venture Entrepreneurs’Entrepreneurs' Fund IV, L.P. Polaris Venture Management Co., IV, L.L.C., is the sole general partner of Polaris Venture Partners IV, L.P. and Polaris Venture Partners Entrepreneurs’Entrepreneurs' Fund IV, L.P. |
(6)(9) | The shares reported herein include shares held by Columbia Acorn Trust (CAT), a Massachusetts business trust that is advised by the reporting person. CAT holds 6.9%Represents an aggregate of the outstanding2,468,354 shares of Common Stock. |
(7) | Represents 750,191 sharesStock issuable upon voluntary conversion and exercise, as applicable, of Series A Preferred Stock and a warrant to purchase Series A Preferred Stock held by Micro Cap Partners,Growth Equity Opportunities Fund III, LLC (“GEO”). New Enterprise Associates 14, L.P. (“Micro Cap”NEA 14”), 1,216,563 shares held by Palo Alto Healthcare Master Fund, L.P. (“Healthcare Master”) and 1,668,230 shares held by Palo Alto Healthcare Master Fund II, L.P. (“Healthcare Master II”). Palo Alto Investors, Inc. (“PAI Corp”)which is the managersole member of Palo Alto Investors, LLCGEO; NEA Partners 14, L.P. (“PAI LLC”NEA Partners 14”). William Leland Edwards, which is the controlling shareholdersole general partner of PAI Corp. Dr. Anthony Joonkyoo YunNEA 14; NEA 14 GP, LTD (“NEA 14 GP”), which is the Presidentsole general partner of PAI LLCNEA Partners 14; and PAI Corp. PAI LLC, PAI Corp, Mr. EdwardsMichael James Barrett, Peter J. Barris, Forest Baskett, Ryan D. Drant, Anthony A. Florence, Jr., Patrick J. Kerins, Krishna S. Kolluri, David M. Mott, Scott D. Sandell, Peter W. Sonsini, Ravi Viswanathan and Dr. Yun filed Schedule 13G jointly, but notHarry R. Weller (collectively, the “Directors”). The Directors are the individual directors of NEA 14 GP. GEO, NEA 14, NEA Partners 14, NEA 14 GP and the Directors are sometimes referred to collectively herein as members of a group, and each of them expressly disclaims membership in a group.the “Reporting Persons.” Each of PAI Corp. PAI LLC, PAI Corp, Mr. Edwards and Dr. YunReporting Person disclaims beneficial ownership of such shares of common stock except for the shares, exceptif any, such Reporting Person holds of record. |
| (10) | The indicated ownership is based solely on a Schedule 13G filed with the SEC by the reporting person on February 14, 2013. According to the extent of their respective pecuniary interest therein. In addition, Healthcare Master II should not be construed as a member of a group, and it disclaims that it is a beneficial owner. PAISchedule 13G, North Run Advisors, LLC is a registered investment adviser and(“North Run”) is the general partner of North Run Capital, LP (the “Investment Manager”). According to the Schedule 13G, Todd B. Hammer and investment adviserThomas B. Ellis are the principals and sole members of Healthcare Master IINorth Run. According to the Schedule 13G, North Run, the Investment Manager, Todd B. Hammer and other investment limited partnerships, and is the investment adviser to other investment funds. PAI LLC’s clientsThomas B. Ellis have the right to receive or theshared power to direct the receipt of dividends from, or the proceeds from the salevote and dispose of the share No individual client, other than Healthcare Master II, separately holds more than five percent of the outstanding2,000,000 shares of the Company.Common Stock beneficially owned. |
(8)(11) | Includes 13,75030,000 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 13,75010,000 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(9) |
| Mr. Brooks is a managing member of Scale Venture Management I, LLC, the general partner of BAVP, LP. Mr. Brooks is one of four managing members of Scale Venture Management I, LLC who share voting and investment power with respect to these shares. Mr. Brooks disclaims beneficial ownership of the shares held by BAVP, LP referenced in footnote (2) above, except to the extent of his pecuniary interest therein. | | | |
| (12) | Includes 19,21833,125 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 3,2821,875 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. Mr. Brooks is a member of Scale Venture Management 1, LLC, the general partner of BAVP, LP. Mr. Brooks is deemed to hold the options for the benefit of Scale Management, LLC and disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein, if any. |
(10)(13) | Includes 227,247263,598 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 104,053192,702 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(11)(14) | Includes 348,017430,390 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 259,136516,763 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(12)(15) | Includes 394,499449,125 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 160,231305,604 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(13)(16) | Dr. Halak is affiliated with Domain Associates L.L.C. Dr. Halak disclaims beneficial ownership of the shares held by the entities affiliated with Domain Associates referenced in footnote (3)(5) above, except to the extent of his pecuniary interest therein. Includes 19,21833,125 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 3,2821,875 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(14)(17) | Includes 196,840240,162 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 125,107231,785 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(15)(18) | Includes 12,500Dr. Kong is affiliated with SVP VIII. Dr. Kong disclaims beneficial ownership of the shares issuable upon exerciseheld by the entities affiliated with SVP VIII referenced in footnote (6) above, except to the extent of options exercisable within 60 days of August 10, 2012.his pecuniary interest therein. Excludes 15,00020,000 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(16)(19) | Includes 588,85528,750 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 433,39911,250 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012. Includes 144,764 shares held in joint tenancy with Mr. Myers’ spouse and pledged or held in a margin account with a brokerage firm.April 26, 2013. |
(17)(20) | Includes 26,250730,458 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 8,750758,796 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(18)(21) | Includes 36,86642,500 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012, 39,706 shares issuable upon exercise of warrants exercisable within 60 days of August 10, 2012, 40,587 shares held by Calvin W. Roberts MD PC Pension Plan and 60,200 shares held in trust with indirect ownership. Mr. Roberts disclaims beneficial ownership of the share held in trust.April 26, 2013. Excludes 3,2825,000 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(19)(22) | Includes 50,773 shares issuable upon exercise of options exercisable within 60 days of April 26, 2013, 39,706 shares issuable upon exercise of warrants exercisable within 60 days of April 26, 2013, 40,587 shares held by Calvin W. Roberts MD PC Pension Plan and 287,061 shares held in a number of trusts with indirect ownership. Mr. Roberts disclaims beneficial ownership of the shares held in trust. Excludes 1,875 shares of Common Stock subject to options that are not exercisable within 60 days of April 26, 2013. |
| (23) | Mr. Tracy is affiliated with Intersouth Partners. Mr. Tracy disclaims beneficial ownership of the shares held by the entities affiliated with Intersouth Partners referenced in footnote (4)(3) above, except to the extent of his pecuniary interest therein. Includes 19,21833,125 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012.April 26, 2013. Excludes 3,2821,875 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
(20)(24) | Includes 1,894,4782,365,131 shares issuable upon exercise of options exercisable within 60 days of August 10, 2012,April 26, 2013, 39,706 shares issuable upon of a warrant exercisable within 60 days of August 10, 2012,April 26, 2013, 40,587 shares held by Calvin W. Roberts MD PC Pension Plan, 60,200287,061 shares held in trusta number of trusts with indirect ownership, which Mr. Roberts disclaims beneficial ownership thereof and 144,764 shares held in joint tenancy by an executive and his spouse and pledged or held in a margin account with a brokerage firm.spouse. Excludes 1,132,5542,259,400 shares of Common Stock subject to options that are not exercisable within 60 days of August 10, 2012.April 26, 2013. |
| (25) | Includes 21,500 shares of Series A Preferred Stock and a warrant to purchase 6,450 shares of Series A Preferred Stock held by PAI LLC, 231,200 shares of Series A Preferred Stock and a warrant to purchase 69,360 shares of Series A Preferred Stock held by Healthcare Master; and 347,300 shares of Series A Preferred Stock and a warrant to purchase 104,190 shares of Series A Preferred Stock held by Master II. For further information regarding PAI Investors, see footnote (2) above. |
| (26) | Includes 250,000 shares of Series A Preferred Stock and a warrant to purchase 75,000 shares of Series A Preferred Stock held by SVP VIII. For further information regarding SVP III, see footnote (6) above. |
| (27) | Includes 150,000 shares of Series A Preferred Stock and a warrant to purchase 45,000 shares of Series A Preferred Stock held by GEO. For further information regarding GEO, see footnote (9) above. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers, and certain holders of more than 10% of our common stock to file reports regarding their ownership and changes in ownership of our securities with the SEC and to furnish us with copies of all Section 16(a) reports that they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us and written representations provided to us by all of our directors and executive officers and certain of our greater than 10% stockholders, we believe that during the year ended December 31, 2012, our directors, executive officers, and greater than 10% stockholders complied with all applicable Section 16(a) filing requirements.
INCORPORATION BY REFERENCEThe SEC allows us
CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS
In addition to “incorporate by reference” the information we filecompensation arrangements with it, which means that we can disclose information to you by referring you to those documents. The information incorporated by reference is deemed to be part of this proxy statement, except for any information that is superseded or modified by information contained directlydirectors and executive officers described elsewhere in this proxy statement, the following is a description of transactions since January 1, 2011, in which we have been a participant, in which the amount involved exceeded or will exceed $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them, had or will have a direct or indirect material interest.
All of the transactions set forth below were approved by a majority of our board of directors, including a majority of the independent and disinterested members of our board of directors. We believe that we have executed all of the transactions set forth below on terms no less favorable to us than we could have obtained from unaffiliated third-parties. It is our intention to ensure that all future transactions between us and our directors, executive officers and principal stockholders and their affiliates are approved by a majority of the members of our board of directors, including a majority of the independent and disinterested members of our board of directors and are on terms no less favorable to us than those that we could obtain from unaffiliated third-parties.
Private Placement Financings
Series A Preferred Stock Financing. On October 2, 2012, we sold an aggregate of 1,000,000 units comprised of 1,000,000 shares of our Series A Preferred Stock and Warrants exercisable for up to an aggregate of 300,000 shares of our Series A Preferred Stock at an exercise price of $44.00 per share for gross proceeds of $40.0 million prior to the payment of related expenses (the “Series A Preferred Stock Financing”). The units were issued to various investors, including entities affiliated with Palo Alto Investors, LLC (“Palo Alto”), Sofinnova Venture Partners VIII, L.P. (“Sofinnova”) and Growth Equity Opportunities Fund III, LLC (“GEOF”). Additionally, Garheng Kong, M.D., Ph.D., one of our directors, serves as a member of the general partner of Sofinnova. See “Security Ownership of Certain Beneficial Owners and Management” for additional information regarding the shares held by these entities.
Transactions with our Directors, Executive Officers, Key Employees and Significant Stockholders
Indemnification Agreements. We have entered into indemnification agreements with each of our directors and executive officers and certain other subsequently filed documentkey employees. The agreements provide that is also incorporatedwe will indemnify each of our directors, executive officers and such key employees against any and all expenses incurred by reference herein. This proxy statement incorporatesthat director, executive officer or key employee because of his or her status as one of our directors, executive officers or key employees to the fullest extent permitted by referenceDelaware law, our restated certificate of incorporation and our amended and restated bylaws (except in a proceeding initiated by such person without board approval). In addition, the informationagreements provide that, to the fullest extent permitted by Delaware law, we will advance all expenses incurred by our directors, executive officers and key employees in connection with a legal proceeding in which they may be entitled to indemnification.
Registration Rights Agreement. In connection with our Series A Preferred Stock financing, we entered into a registration rights agreement with Palo Alto, Sofinnova, and GEOF dated October 2, 2012. The agreement provides that Palo Alto, Sofinnova and GEOF have certain registration rights relating to the registration of the Company’s common stock under certain circumstances set forth in the Company’sagreement.
Stock Option Awards. See “Corporate Governance — Director Compensation” and “Executive Compensation” for additional information regarding stock options and equity awards granted to our directors and named executive officers.
Changes in Control
As a result of our Series A Preferred Stock Financing, a change of control of the Company may be deemed to have occurred. Prior to the closing of the Series A Preferred Stock Financing, Palo Alto and its affiliates beneficially owned an aggregate of 3,634,984 shares of our common stock, according to a Form 13F filed by Palo Alto with the Securities and Exchange Commission on August 15, 2012, which represented approximately 11.6% of our common stock outstanding prior to the closing of our Series A Preferred Stock Financing. Palo Alto Investors, Inc. is the manager of Palo Alto. William Leland Edwards is the controlling shareholder of Palo Alto Investors, Inc. Anthony Joonkyoo Yun, M.D. is the President of Palo Alto and Palo Alto Investors, Inc. Prior to the closing of our Series A Preferred Stock Financing, no stockholder beneficially owned more than 15.5% of our outstanding shares of our Common Stock. At the closing of our Series A Preferred Stock Financing, Palo Alto and certain of its affiliates purchased 600,000 units, consisting of an aggregate of 600,000 shares of our Series A Preferred Stock and a Warrant to purchase 180,000 shares of our Series A Preferred Stock, for a purchase price of $24,000,000. The purchase price was paid from its cash on hand.
Following the closing of our Series A Preferred Stock Financing, Palo Alto and its affiliates, assuming the exercise and subsequent conversion of warrants held by them (but no other warrants) and the conversion of all shares of Series A Preferred Stock (based on a conversion price of $2.91) and including the number of shares of common stock then owned by Palo Alto and its affiliates, beneficially owns approximately 14,356,633 shares of our common stock, represented approximately 30.13% of the total voting power of our voting securities following the closing of our Series A Preferred Stock financing. If the United Kingdom’s National Institute for Health and Clinical Excellence (“NICE”) issues final guidance (following the review of a Patient Access Scheme (as commonly used by NICE), if required) recommending ILUVIEN (a “Positive Guidance”) on or before June 30, 2013, Palo Alto and its affiliates, assuming the exercise and subsequent conversion of warrants held by them (but no other warrants) and the conversion of all shares of our Series A Preferred Stock (based on a conversion price of $3.16) and including the number of shares of our common stock currently owned by Palo Alto and its affiliates, will own approximately 13,508,402 shares of our common stock, which represented 29.13% of the total voting power of our voting securities immediately following the closing of our Series A Preferred Stock Financing. If Positive Guidance is not received on or before June 30, 2013 or if NICE issues final unappealable guidance (following the review of a Patient Access Scheme) failing to recommend ILUVIEN, Palo Alto and its affiliates, assuming the exercise and subsequent conversion of the warrants held by them (but no other warrants) and the conversion of all shares of Series A Preferred Stock (based on a conversion price of $2.66) and including the number of shares of our common stock currently owned by Palo Alto and its affiliates, will own approximately 15,364,307 shares of our common stock, which represented approximately 31.24% of the total voting power of our voting securities immediately following the closing of our Series A Preferred Stock Financing. The foregoing is based on our capitalization as of October 2, 2012, as adjusted for the sale of the units in the Series A Preferred Stock Financing.
EXECUTIVE OFFICERS
Set forth below is the name, age, and position of each of our executive officers as of April 26, 2013 and certain biographical information for each executive officer.
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| | | | |
| Name | | Age | | Position |
| C. Daniel Myers | | 59 | | President, Chief Executive Officer and Director |
| Richard S. Eiswirth | | 44 | | Chief Financial Officer and Chief Operating Officer |
| Kenneth Green, Ph.D. | | 54 | | Senior Vice President and Chief Scientific Officer |
| Susan Caballa | | 68 | | Senior Vice President, Regulatory and Medical Affairs |
| David Holland | | 49 | | Senior Vice President of Sales and Marketing |
| Philip Ashman, Ph. D. | | 48 | | Senior Vice President, EU Managing Director |
C. Daniel Myers — For biographical information, see “Proposal 1: Election of Directors – Continuing Directors Not Standing for Election”.
Richard S. Eiswirth has served as Chief Financial Officer of our Company since October 2005 and as Chief Operating Officer since August 2010. From 2003 to 2005, Mr. Eiswirth served as founding partner of Brand Ignition Group, engaged in consumer products acquisition activities. From 2002 to 2005, Mr. Eiswirth served as President of Black River Holdings, Inc., a financial consultancy he founded in 2002. Mr. Eiswirth served as Chief Financial Officer and Senior Executive Vice President of Netzee, Inc., a provider of Internet banking solutions to community banks from 1999 to 2002. Mr. Eiswirth held various positions with Arthur Andersen, where he began his career, from 1991 to 1999. Mr. Eiswirth previously served as chairman, audit committee chairman and member of the compensation committee of Jones Soda Co., a Seattle, Washington based beverage company, and as director and audit committee chairman of Color Imaging, Inc., a Norcross, Georgia based manufacturer of printer and copier supplies. Mr. Eiswirth was previously a Certified Public Accountant in Georgia. Mr. Eiswirth holds a Bachelor’s in accounting from Wake Forest University.
Kenneth Green, Ph.D. joined us in 2004 as Vice President of Scientific Affairs, and has served as the Senior Vice President and Chief Scientific Officer of our Company since January 2007. Prior to joining us, Dr. Green served as the V.P. Global Head of Clinical Sciences at Novartis Ophthalmics. He has managed ophthalmic clinical development organizations at Storz Ophthalmics, Bausch & Lomb and CIBA Vision. He started his career in the pharmaceutical industry in 1984, as a basic research scientist in drug discovery at Lederle Laboratories, and has since held positions in many areas of drug development. Dr. Green holds a B.A. in Chemistry from Southern Illinois University and a Ph.D. in Organic Chemistry from Ohio State University.
Susan Caballa has served as the Senior Vice President of Regulatory and Medical Affairs of our Company since 2004. Prior to joining us, Ms. Caballa served as the Vice President of Regulatory and Medical Affairs at Novartis Ophthalmics from 1999 to 2004. Ms. Caballa also held various regulatory management positions with the following companies engaged in the development and marketing of ophthalmic products: Allergan, Inc. (1983-1987), Iolab Corporation, a J&J Company (1987-1994) and Alcon Laboratories, Inc. (1994-1999). Ms. Caballa holds a B.S. in Chemistry and a Masters in Chemistry from the University of Santo Tomas and University of the Philippines.
David Holland is one of our co-founders and served as the Vice President of Marketing since the founding of our Company in 2003 through August 2010 when he was appointed the Senior Vice President of Sales and Marketing. Prior to founding our Company, Mr. Holland served as the Vice President of Marketing of Novartis Ophthalmics from 1998 to 2003. In 1997, Mr. Holland served as Global Head of the Lens Business at CIBA Vision and in 1996, Global Head of the Lens Care Business of CIBA Vision. From 1992 to 1995, Mr. Holland served as the Director of Marketing for CIBA Vision Ophthalmics. From 1989 to 1991, Mr. Holland served as New Products Manager for CIBA Vision. From 1985 to 1989, Mr. Holland served as a Brand Assistant and Assistant Brand Manager of Procter and Gamble. Mr. Holland holds an A.B. in Politics from Princeton University.
Philip Ashman, Ph.D. has served as the Senior Vice President, Managing Director Europe since January 1, 2013. Prior to joining us, Dr. Ashman held a number of leadership roles at Bayer from 2006 to 2012, most recently responsible for leadership of the market access strategy in the U.K. for Bayer, covering all therapy areas including Ophthalmology. Prior to this, Dr. Ashman served as Vice President Global Marketing Oncology at Bayer and also as Vice President Regional Business Unit Head (Europe) Oncology, responsible for the delivery of oncology sales and profitability targets in Europe, Canada, the Middle East and Africa. Before 2006, Dr. Ashman held UK-based business leadership positions in AstraZeneca and Sanofi. Dr. Ashman holds a doctorate in biochemistry from the University of London: Royal Holloway and Bedford, U.K., and a Bachelor of Science degree in biochemistry from the University College London, U.K.
Election of Officers
Our executive officers are currently elected by our board of directors on an annual basis and serve until their successors are duly elected and qualified, or until their earlier resignation or removal. There are no family relationships among any of our directors or executive officers.
EXECUTIVE COMPENSATION
2012 Summary Compensation Table
The following table summarizes the compensation that we paid to our Chief Executive Officer and each of our two other most highly compensated executive officers during the year ended December 31, 2012. We refer to these executive officers in this proxy statement as our named executive officers.
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| | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary ($) | | Bonus ($)(1) | | Stock Awards
($)(2) | | Option Awards
($)(3) | | Non-Equity Incentive Plan Compensation ($)(4) | | All other Compensation ($)(5) | | Total ($) | |
C. Daniel Myers
Chief Executive Officer | | 2012 | | $431,650 | | $118,704 | | $33,465 | | $1,122,702 | | $118,703 | | $1,904 | | $1,827,128 | |
| | 2011 | | $431,650 | | $5,935 | | — | | — | | $53,120 | | $1,852 | | $492,557 | |
Richard S. Eiswirth
Chief Operating Officer and Chief Financial Officer | | 2012 | | $311,383 | | $62,277 | | $23,363 | | $748,040 | | $62,276 | | $6,404 | | $1,213,743 | |
| | 2011 | | $311,383 | | $3,114 | | — | | — | | $38,144 | | $6,352 | | $358,993 | |
Kenneth Green, Ph.D. Senior Vice President, Scientific Affairs and Chief Scientific Officer | | 2012 | | $294,228 | | $58,846 | | $18,924 | | $431,785 | | $58,845 | | $6,404 | | $869,032 | |
| | 2011 | | $294,228 | | $2,942 | | — | | — | | $30,453 | | $6,352 | | $333,975 | |
(1) The amounts set forth in this column represent the subjective portion of our annual bonus awards paid to the named executive officers based on the board of directors’ approval.
(2) The amounts reported in this column represent the aggregate grant date fair value of restricted stock unit awards computed in accordance with FASB ASC Topic 718. See Note 11 of the Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2011, which2012 for a discussion of our assumptions in determining the ASC 718 values of our stock awards.
(3) The amounts reported in this column represent the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. See Note 11 of the Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of our assumptions in determining the ASC 718 values of our option awards.
(4) The Non-Equity Incentive Plan Compensation represents the bonus paid to executives based on objective corporate targets as defined in our Incentive Compensation Bonus Plan and approved by the board of directors.
(5) All Other Compensation represents 401(k) matching contributions and short-term and long-term disability gross-ups paid on an executive’s behalf.
Overview of Compensation Philosophy and Objectives
Our executive compensation programs are designed to fairly compensate our executive officers, attract and retain highly qualified executive officers, motivate the performance of our executive officers towards, and reward the achievement of, clearly defined corporate goals, and align our executive officers’ long-term interests with those of our stockholders. Under these programs, our named executive officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals and individual goals. Our compensation programs are designed to motivate our executives to create a successful company. We believe that our compensation program, with its balance of short-term incentives (including cash bonus awards) and long-term incentives (including equity awards that vest over up to four years) reward sustained performance that is aligned with long-term stockholder interests.
To that end, the compensation committee applies the following principles when structuring compensation arrangements for our named executive officers:
In order to determine competitiveness in the marketplace, our compensation committee relies on an analysis of peer group companies, comparable in asset size and corporate structure, prepared by the compensation committee’s compensation consultant. The compensation committee believes that total direct compensation should be established at a level that is competitive with the Company’s defined peer group.
Total compensation should include “at risk” components that are linked to annual company and individual performance.
Stock−based compensation should form a key component of total compensation as a means of linking senior management to the long−term performance of the Company, motivating our executive officers and aligning their interests with those of stockholders.
While base salary and the potential for cash bonuses must be at competitive levels, performance is most significantly impacted by appropriately relating the potential for creating stockholder value to an individual’s compensation potential through the use of equity awards.
Highlights of our named executive officer 2012 compensation program include:
Base Salary – Base salaries are intended to reflect compensation commensurate with the individual’s current position and work experience. Our goal in this regard is to attract and retain high-caliber talent for the position and to provide a base wage that is not subject to performance risk. Our compensation committee did not to make any adjustments to the 2012 base salaries of our named executive officers from the amounts paid in 2011. See the column titled “Salary” in the 2012 Summary Compensation Table for additional information related to the base salaries of our named executive officers.
Annual Cash Incentive Compensation – Annual cash incentives for our named executive officers are designed to reward the achievement of overall performance by our executive officers each year, which we believe should increase stockholder value. In December 2012, our compensation committee approved the annual cash incentive awards set forth in the table below. See the columns titled “Bonus” and “Non-Equity Incentive Compensation” in the 2012 Summary Compensation Table for additional information.
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| | | | | | | | |
| Named Executive Officer | | % of Objective Corporate Goals Achieved (1) | | % of Subjective Discretionary Bonus Awarded (2) | | Total % of Aggregate Target Cash Incentive Amount Awarded | | Actual Cash Incentive Award |
| C. Daniel Myers | | 100% | | 100% | | 100% | | $237,407 |
| Richard S. Eiswirth | | 100% | | 100% | | 100% | | $124,553 |
| Kenneth Green, Ph.D. | | 100% | | 100% | | 100% | | $117,691 |
| |
| (1) | 50% of each named executive officer's aggregate target cash incentive award was allocated to the achievement of objective corporate performance goals approved by the compensation committee, which included (i) obtaining marketing authorization for ILUVIEN in at least 4 countries in the European Union; (ii) creating a commercial infrastructure for the launch of ILUVIEN in Europe; (iii) developing a regulatory path to seek marketing authorization for ILUVIEN in the U.S. and (iv) securing sufficient financing to fund the initial commercial launch of ILUVIEN in Europe. |
| |
(2) | 50% of each named executive officer's aggregate target cash incentive award was discretionary based upon the subjective assessment by the compensation committee of the progress of the executive team towards our strategic objectives. |
Equity Compensation – We utilize equity awards for our long-term equity compensation to ensure that our executive officers have a continuing stake in our long-term success. In 2012, we granted our named executive officers options to purchase shares of our common stock and awarded our named executive officers with restricted stock unit awards. See the columns titled “Stock Awards” and “Option Awards” in the 2012 Summary Compensation Table for additional information related to the performance bonuses earned by our named executive officers. The table below sets forth the equity incentive grants and awards made to our named executive officers in 2012:
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| | | | | | | | | | |
| Named Executive Officer | | Grant Date | | Options to Purchase Common Stock | | Option Exercise Price Per Share (1) | | Shares of Common Stock underlying RSU awards | | Vesting Schedule |
| C. Daniel Myers | | February 2, 2012 | | | | | | 19,685 | | (2) |
| | | February 10, 2012 | | 300,000 | | $1.65 | | | | (3) |
| | | February 10, 2012 | | 95,000 | | $1.65 | | | | (4) |
| | | December 19, 2012 | | 365,000 | | $1.66 | | | | (3) |
| | | December 19, 2012 | | 110,000 | | $1.66 | | | | (5) |
| Richard S. Eiswirth | | February 2, 2012 | | | | | | 13,753 | | (2) |
| | | February 10, 2012 | | 170,000 | | $1.65 | | | | (3) |
| | | February 10, 2012 | | 70,000 | | $1.65 | | | | (4) |
| | | December 19, 2012 | | 235,000 | | $1.66 | | | | (3) |
| | | December 19, 2012 | | 105,000 | | $1.66 | | | | (5) |
| Kenneth Green, Ph.D. | | February 2, 2012 | | | | | | 11,132 | | (2) |
| | | February 10, 2012 | | 95,000 | | $1.65 | | | | (3) |
| | | February 10, 2012 | | 40,000 | | $1.65 | | | | (4) |
| | | December 19, 2012 | | 135,000 | | $1.66 | | | | (3) |
| | | December 19, 2012 | | 65,000 | | $1.66 | | | | (5) |
| |
| (1) | Option exercise price was the closing price of per share of our common stock on The Nasdaq Global Market, as such price is reported by Nasdaq the date of grant. |
| |
| (2) | Vested in full on the first day on which the Company received formal approval of its marketing authorization application for ILUVIEN from regulatory authorities in the fourth of the following European countries: United Kingdom, Austria, France, Germany, Italy, Portugal and Spain. |
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| (3) | Vests with respect to 1/48th of the shares subject to the option when the named executive officer completes each continuous month of service following the date of grant. |
| |
| (4) | Vests with respect to 100% of the shares subject to the option upon receipt by our Company, on or prior to August 9, 2013, of approval from the U.S. Food and Drug Administration of our new drug application for ILUVIEN provided the named executive officer remains continuously employed by us through such date. |
| |
| (5) | Vests with respect to 1/48th of the shares subject to the option when the named executive officer completes each month of continuous service following the date of grant; provided, however, that the option shall not become exercisable unless and until NICE issues Positive Guidance on or before June 30, 2013. |
Other Benefits – Our executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability and accidental death and dismemberment insurance, our employee stock purchase plan and our 401(k) plan, in each case on the same basis as other employees, subject to applicable law. We also provide vacation and other paid holidays to all employees, including our executive officers, which are comparable to those provided at peer companies. At this time, we do not provide special benefits or other perquisites to our executive officers.
Tax and Accounting Treatment of Compensation
Section 162(m) of the Internal Revenue Code places a limit of $1.0 million per person on the amount of compensation that we may deduct in any one year with respect to each of our named executive officers other than the Chief Financial Officer. There is an exemption from the $1.0 million limitation for performance-based compensation that meets certain requirements. All grants of options under our 2010 Equity Incentive Plan are intended to qualify for the exemption. Grants of restricted shares or stock units under our 2010 Equity Incentive Plan may qualify for the exemption if vesting is contingent on the attainment of objectives based on the performance criteria set forth in the plan and if certain other requirements are satisfied. Grants of restricted shares or stock units that vest solely on the basis of service cannot qualify for the exemption. Our current cash incentive plan is not designed to qualify for the exemption. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, our compensation committee has not adopted a policy requiring all compensation to be deductible. Although tax deductions for some amounts that we pay to our named executive officers as compensation may be limited by section 162(m), that limitation does not result in the current payment of increased federal income taxes by us due to our significant net operating loss carry-forwards. Our compensation committee may approve compensation or changes to plans, programs or awards that may cause the compensation or awards to exceed the limitation under section 162(m) if it determines that such action is appropriate and in our best interests.
We account for equity compensation paid to our employees under the rules of FASB ASC Topic 718, which requires us to estimate and record an expense for each award of equity compensation over the service period of the award. Accounting rules also require us to record cash compensation as an expense at the time the obligation is accrued. We have not tailored our executive compensation program to achieve particular accounting results.
Stockholder Advisory Vote on Executive Compensation
At our 2012 annual meeting of stockholders, approximately 99.7% of the shares voted were in favor of the compensation of our named executive officers as disclosed in the proxy statement for the 2012 annual meeting of stockholders, including the Compensation Discussion and Analysis, the 2011 Summary Compensation Table and other related tables and disclosures. The compensation committee considers this vote to be an endorsement of our compensation philosophy and practices, including our balance between cash and equity compensation. Based upon that stockholder vote, the compensation committee believed that significant modifications to our executive compensation program were not necessary for 2012 and, as such, it remained relatively unchanged from our 2011 program. Both our compensation committee and board of directors intend to periodically reevaluate our executive compensation philosophy and practices in light of the Company’s performance, needs and developments, including the outcome of future non−binding advisory votes by the Company’s stockholders.
Outstanding Equity Awards as of December 31, 2012
The following table sets forth information regarding each option held by each of our named executive officers as of December 31, 2012. The vesting applicable to each outstanding option is described in the footnotes to the table below. For a description of the acceleration of vesting provisions applicable to the options held by our named executive officers, please see the section titled “Estimated Benefits and Payments Upon Termination of Employment” below.
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| | | | | | | | | | | | | | |
| | | Option Awards | |
| Name | | Initial Vesting Date (1) | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | |
| C. Daniel Myers | | 7/7/2005 | | | 22,775 | | — | | $ | 2.04 | | 7/7/2014 | | |
| | | 11/22/2006 | | | 55,147 | | — | | | 1.33 | | 10/12/2016 | | |
| | | 12/13/2008 | | | 177,883 | | — | | | 1.40 | | 12/13/2017 | | |
| | | 3/20/2009 | | | 160,107 | | — | | | 2.42 | | 3/20/2018 | | |
| | | 8/25/2010 | | | 26,306 | | — | | | 4.02 | | 8/25/2019 | | |
| | | 12/22/2010 | | | 79,851 | | — | | | 4.02 | | 8/25/2019 | | |
| | | 12/3/2010 | (2) | | 50,616 | | 46,569 | | | 11.15 | | 11/3/2020 | | |
| | | 3/10/2012 | (2) | | 62,500 | | 237,500 | | | 1.65 | | 2/10/2022 | | |
| | | | (3) | | — | | 95,000 | | | 1.65 | | | (4) | |
| | | 1/19/2013 | (2) | | — | | 365,000 | | | 1.66 | | 12/19/2022 | | |
| | | 1/19/2013 | (5) | | — | | 110,000 | | | 1.66 | | 12/19/2022 | | |
| Richard S. Eiswirth | | 10/31/2006 | | | 13,625 | | — | | | 2.04 | | 10/31/2015 | | |
| | | 10/31/2006 | | | 96,669 | | — | | | 1.33 | | 1/1/2016 | | |
| | | 11/22/2007 | | | 51,471 | | — | | | 1.33 | | 10/12/2016 | | |
| | | 12/13/2008 | | | 33,094 | | — | | | 1.40 | | 12/13/2017 | | |
| | | 3/20/2009 | | | 46,347 | | — | | | 2.42 | | 3/20/2018 | | |
| | | 6/25/2009 | | | 29,411 | | — | | | 3.88 | | 6/25/2018 | | |
| | | 8/25/2010 | | | 7,033 | | — | | | 4.02 | | 8/25/2019 | | |
| | | 12/22/2010 | | | 21,350 | | — | | | 4.02 | | 8/25/2019 | | |
| | | 12/3/2010 | (2) | | 35,495 | | 32,658 | | | 11.15 | | 11/3/2020 | | |
| | | 3/10/2012 | (2) | | 35,417 | | 134,583 | | | 1.65 | | 2/10/2022 | | |
| | | | (3) | | — | | 70,000 | | | 1.65 | | | (4) | |
| | | 1/19/2013 | (2) | | — | | 235,000 | | | 1.66 | | 12/19/2022 | | |
| | | 1/19/2013 | (5) | | — | | 105,000 | | | 1.66 | | 12/19/2022 | | |
| Kenneth Green, Ph.D. | | 8/2/2005 | | | 73,529 | | — | | | 2.04 | | 8/2/2014 | | |
| | | 1/3/2006 | | | 14,706 | | — | | | 2.04 | | 1/1/2015 | | |
| | | 11/22/2006 | | | 44,118 | | — | | | 1.33 | | 1/1/2016 | | |
| | | 11/22/2006 | | | 36,177 | | — | | | 1.33 | | 10/12/2016 | | |
| | | 11/22/2007 | | | 8,031 | | — | | | 1.33 | | 10/12/2016 | | |
| | | 3/1/2008 | | | 58,824 | | — | | | 1.40 | | 3/1/2017 | | |
| | | 12/13/2008 | | | 26,077 | | — | | | 1.40 | | 12/13/2017 | | |
| | | 3/20/2009 | | | 67,414 | | — | | | 2.42 | | 3/20/2018 | | |
| | | 8/25/2010 | | | 9,118 | | — | | | 4.02 | | 8/25/2019 | | |
| | | 12/22/2010 | | | 27,678 | | — | | | 4.02 | | 8/25/2019 | | |
| | | 12/3/2010 | (2) | | 28,154 | | 25,903 | | | 11.15 | | 11/3/2020 | | |
| | | 3/10/2012 | (2) | | 19,792 | | 75,208 | | | 1.65 | | 2/10/2022 | | |
| | | | (3) | | — | | 40,000 | | | 1.65 | | | (4) | |
| | | 1/19/2013 | (2) | | — | | 135,000 | | | 1.66 | | 12/19/2022 | | |
| | | 1/19/2013 | (5) | | — | | 65,000 | | | 1.66 | | 12/19/2022 | | |
(1) Unless otherwise set forth below, 25% of each option vests upon continuous service through the Initial Vesting Date shown in the table. Thereafter, the option vests in 12 equal quarterly installments over the next three years of service.
(2) Vests in 48 equal monthly installments over a four year period beginning on the Initial Vesting Date.
(3) This option shall vest in full upon receipt by the Issuer, on or prior to August 9, 2013, of approval from the U.S. Food and Drug Administration of the Issuer’s New Drug Application for ILUVIEN® (the “Vesting Event”).
(4) This option shall expire on February 9, 2022, if the Vesting Event occurs. If the Vesting Event does not occur, then the option will expire on August 10, 2013.
(5) This option shall become exercisable if and only if on or before June 30, 2013 NICE issues Positive Guidance, in which case this option shall vest in forty-eight equal monthly installments beginning on January 19, 2013, provided Reporting Person remains continuously employed by the Issuer through each vesting period.
Employment Agreements with Our Executive Officers
We have entered into employment agreements with each of our named executive officers. The employment agreements provide for a starting base salary and a potential annual bonus, which is subject to adjustment by our board of directors from time to time. In addition, each of the agreements provides that if we terminate the named executive officer’s employment without cause or if he or she resigns for good reason, the named executive officer is entitled to one year of his or her base salary at the rate in effect at the time of his termination paid in 12 equal monthly installments. The named executive officer will also be entitled to the portion of his or her bonus earned up until termination. In addition, the named executive officer is entitled to reimbursement of his or her premiums for medical insurance coverage under COBRA for 12 months after the date of termination or until the named executive officer is eligible to be covered under a medical insurance plan by a subsequent employer. The employment agreements also provide for acceleration of any unvested options held by our named executive officers in the event of a change of control. Under these provisions, in the event of change of control, each executive will receive 12 months of additional vesting for any stock options that are outstanding and unvested as of the date of such transaction. In addition, unvested options vest in full in the event that the stock options are not continued or replaced with an alternate security, the executive is terminated without cause, or the executive terminates his or her employment for good reason within 12 months of a change of control.
The following table sets forth the base salary and potential bonus of each of our named executive officers at January 1, 2013.
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| | | | | |
| Name | | Base
Salary
($) | | Potential
Bonus ($) | |
| C. Daniel Myers | | 444,599 | | 244,529 | |
| Richard S. Eiswirth | | 320,725 | | 128,290 | |
| Kenneth Green, Ph.D. | | 303,055 | | 121,222 | |
For purposes of severance payments, “good reason” is defined in all amended and restated employment agreements as an executive resigning within 12 months after one of the following conditions has come into existence without the executive’s consent:
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| | |
| • | a reduction of the executive’s base salary; |
|
| | |
| • | a material adverse change in the executive’s primary responsibilities or duties; |
|
| | |
| • | a geographical relocation of our corporate headquarters, or the executive’s primary business location, to a location that is more than 35 miles from the present location; or |
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| | |
| • | any material breach by us of the employment agreement. |
The executive must provide us with written notice within 90 days after a good reason condition comes into the existence, and we have 30 days to remedy the condition after receipt of the notice. For purposes of option acceleration, “good reason” is defined in all applicable employment agreements as:
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| | |
| • | a material adverse change in the executive’s responsibilities or duties; |
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| | |
| • | a geographical relocation of our corporate headquarters, or the executive’s primary business location, to a location that is more than 35 miles from the present location; or |
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| | |
| • | any breach by us of the employment agreement that is material and not cured, or capable of being cured, within 30 days after the executive gives us and our board of directors written notice. |
Estimated Benefits and Payments Upon Termination of Employment
The following table describes the potential payments and benefits upon termination of our named executive officers’ employment before or after a change in control of our Company as described above, as if each officer’s employment terminated as of December 31, 2012, the last business day of the 2012 fiscal year.
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| | | | | | | | | | | | | | | | | |
| Name | | Benefit | | Voluntary Resignation or Termination for Cause | | | Termination without Cause or for Good Reason Prior to Change in Control | | | Termination without Cause or for Good Reason after Change in Control | |
| C. Daniel Myers | | | | | | | | | | | | | | |
| | | Salary | | $ | — |
| | | $ | 431,650 |
| | | $ | 431,650 |
| |
| | | Bonus | | | — |
| | | | 237,407 |
| (1) | | | 237,407 |
| (1) |
| | | Benefit Continuation | | | — |
| | | | 16,266 |
| | | | 16,266 |
| |
| | | Accrued Vacation(2) | | | 18,340 |
| | | | 18,340 |
| | | | 18,340 |
| |
| | | Accelerated Vesting | | | — |
| | | | — |
| | | | — |
| (3) |
| Total value | | | | $ | 18,340 |
| | | $ | 703,664 |
| | | $ | 703,664 |
| |
| | | | | | | | | | | | | | | |
| Richard S. Eiswirth | | | | | | | | | | | | | | |
| | | Salary | | $ | — |
| | | $ | 311,383 |
| | | $ | 311,383 |
| |
| | | Bonus | | | — |
| | | | 124,553 |
| (1) | | | 124,553 |
| (1) |
| | | Benefit Continuation | | | — |
| | | | 24,625 |
| | | | 24,625 |
| |
| | | Accrued Vacation(2) | | | 21,238 |
| | | | 21,238 |
| | | | 21,238 |
| |
| | | Accelerated Vesting | | | — |
| | | | — |
| | | | — |
| (3) |
| Total value | | | | $ | 21,328 |
| | | $ | 481,889 |
| | | $ | 481,889 |
| |
| | | | | | | | | | | | | | | |
| Kenneth Green, Ph.D. | | | | | | | | | | | | | | |
| | | Salary | | $ | — |
| | | $ | 294,228 |
| | | $ | 294,228 |
| |
| | | Bonus | | | — |
| | | | 117,691 |
| (2) | | | 117,691 |
| (1) |
| | | Benefit Continuation | | | — |
| | | | 24,625 |
| | | | 24,625 |
| |
| | | Accrued Vacation(2) | | | 21,765 |
| | | | 21,765 |
| | | | 21,765 |
| |
| | | Accelerated Vesting | | | — |
| | | | — |
| | | | — |
| (3) |
| Total value | | | | $ | 21,765 |
| | | $ | 458,309 |
| | | $ | 458,309 |
| |
| | | | | | | | | | | | | | | |
(1) Represents aggregate target bonus, including objective and subjective portion, for 2012. Bonus payments in the year of termination would be based on the actual earned bonus and may be less than the aggregate target bonus.
(2) Based on each executive officer’s base salary in effect at the end of 2012 and the number of accrued but unused vacation days at the end of 2012.
(3) The value of option acceleration was zero because the exercise price per share of the accelerated options was greater than the $1.57 closing market price of per share of the Company’s common stock on December 31, 2012 (the last trading day in fiscal 2012) and the exercise price of the option.
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Our board of directors recognizes the interests our investors have in the compensation of our executives. In recognition of that interest and as required by the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, we are providing our stockholders with the opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules.
As described in detail in our Executive Officers – Overview of Compensation Philosophy and Objectives, our executive compensation programs are designed to attract, motivate and retain our named executive officers, who are critical to our success and will drive the creation of stockholder value. Under these programs, our named executive officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals and the realization of increased stockholder value. Please read “Executive Officers – Overview of Compensation Philosophy and Objectives” for additional details about our executive compensation programs, including information about the fiscal year 2012 compensation of our named executive officers.
The compensation committee of our board of directors continually reviews the compensation programs for our named executive officers to ensure they achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices. As described in detail in our Executive Officers – Overview of Compensation Philosophy and Objectives, our compensation programs are designed to motivate our executives to create a successful company. We believe that our compensation program, with its balance of short-term incentives (including cash bonus awards) and long-term incentives (including equity awards that vest over up to four years) reward sustained performance that is aligned with long-term stockholder interests.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Stockholders are encouraged to read “Executive Officers – Overview of Compensation Philosophy and Objectives,” the accompanying compensation tables, and the narrative disclosure. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED.”
In order for Proposal 3 to be approved, holders of a majority of all those outstanding shares present in person, or represented by proxy, and cast either affirmatively or negatively at the Annual Meeting must vote “FOR” Proposal 3. Abstentions and broker non-votes will not be counted either “FOR” or “AGAINST” the proposal and will have no effect on the proposal. Because Proposal 3 is a non-routine matter, broker non-votes are expected to exist in connection with this matter.
As an advisory vote, the result will not be binding on our board of directors or compensation committee. Our board of directors and our compensation committee value the opinions of our stockholders and expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION
NO INCORPORATION BY REFERENCE
In the Company’s filings with the SEC, information is sometimes “incorporated by reference.” This means that we are referring you to information that has previously been filed with the SEC on March 30, 2012, and the Company’s Quarterly Reports filed forinformation should be considered as part of the quarterly periods ended March 31, 2012 and June 30, 2012 filedparticular filing. As provided under SEC regulations, the “Report of the Audit Committee” contained in this proxy statement specifically is not incorporated by reference into any other filings with the SEC respectively,and shall not be deemed to be “soliciting material.” In addition, this proxy statement includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on May 11, 2012 and August 14, 2012.these websites is not part of this proxy statement.
As of the time of preparation of this proxy statement, neither the board nor management intends to
beingbring before the meeting any business other than the matters referred to in the Notice of
SpecialAnnual Meeting and this proxy statement. If any other business should properly come before the meeting, or any adjournment thereof, the persons named in the proxy will vote on such matters according to their best judgment.
Accompanying this proxy statement and posted on our website with this proxy statement, is our Annual Report for the fiscal year ended December 31, 2012. Copies of our Annual Report for the fiscal year ended December 31, 2012, as filed with the SEC, is available free of charge on the investor relations portion of our website at www.alimerasciences.com.
CONTACT FOR QUESTIONS AND ASSISTANCE WITH VOTING
If you have any questions or require any assistance with voting your shares or need additional copies of this proxy statement or voting materials, please contact:
Alpharetta, Georgia 30005
It is important that your shares are represented at the
SpecialAnnual Meeting. Whether or not you plan to attend the
SpecialAnnual Meeting, please vote by using the Internet
or by telephone or,
if you received a paper copy of the proxy card by mail, by signing and returning the enclosed proxy card, so your shares will be represented at the
SpecialAnnual Meeting.
The form of proxy and this proxy statement have been approved by the board of directors and are being mailed
or delivered to stockholders by its authority.
The Board of Directors of Alimera Sciences, Inc.
Alpharetta, Georgia
August 24, 2012
Exhibit A
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (as may be amended or restated, this “Agreement”) is dated as of July 17, 2012, between Alimera Sciences, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser”, and collectively, the “Purchasers”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement; and
WHEREAS, certain of the Company’s stockholders have entered into separate support letters (the “Support Letters”) whereby such stockholders have agreed to vote their shares in favor of the transactions contemplated by this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Agreement” shall have the meaning ascribed to such term in the preamble to this Agreement.
“Beneficial Ownership” shall have the meaning ascribed to such term in Section 4.10(d).
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“CDA” shall have the meaning ascribed to such term in Section 3.2(d).
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing 8-K” shall have the meaning ascribed to such term in Section 4.2.
April 29, 2013
“Closing Date” means the Trading Day mutually agreed upon by the Company and the Purchasers purchasing at least 70% of the Units at such Closing not later than three (3) Business Days following the date of the Stockholder Approval, provided, that, the conditions set forth in Sections 2.3(a) and 2.3(b) have been satisfied or waived but, pursuant to Section 5.1, in no event later than November 30, 2012.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Company” shall have the meaning ascribed to such term in the preamble to this Agreement.
“Company Counsel” means Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP with offices located at 850 Winter Street, Waltham, MA 02451.
“Company Stockholders Meeting” shall have the meaning ascribed to such term in Section 4.10(a).
“Conversion Shares” means the shares of Common Stock issuable upon conversion of each of the Shares.
“Enforceability Exceptions” shall have the meaning ascribed to such term in Section 3.1(b).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“FDA” means the U.S. Food and Drug Administration.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(f).
“Intellectual Property Licenses” shall have the meaning ascribed to such term in Section 3.1(i).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(i).
“Knowledge of the Company” or “Knowledge” means the actual knowledge, after reasonable due inquiry, of each of C. Daniel Myers and Richard S. Eiswirth, Jr., and, solely with respect to Section 3.1(o), the actual knowledge, after due inquiry, of Susan Caballa.
“Lead Purchaser” means Palo Alto Investors, LLC a California limited liability company.
“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction that has the practical effect of creating any of the foregoing.
“Management Rights Letter” means a management rights letter substantially in the form ofExhibit B attached hereto.
“Material Adverse Effect” means: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the Company’s authority or ability to perform on a timely basis in any material respect its obligations under any Transaction Document or (iii) a material adverse change in the results of operations, assets, business or condition (financial or otherwise) of the Company.
“Money Laundering Laws” shall have the meaning ascribed to such term in Section 3.1(q).
“Per Share Purchase Price” means $40.00 per share.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Preferred Stock” means the Series A Preferred Stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Press Release” shall have the meaning ascribed to such term in Section 4.2.
“Press Release 8-K” shall have the meaning ascribed to such term in Section 4.2.
“Prospectus” means the final prospectus filed for the Registration Statement, including the documents incorporated by reference in the Registration Statement, and the documents incorporated by reference in such final prospectus.
“Prospectus Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that shall be filed with the Commission and delivered by the Company to each Purchaser at the Closing, including the documents incorporated by reference therein.
“Proxy Statement” shall have the meaning ascribed to such term in Section 4.10(a)
“Purchaser” and “Purchasers” shall have the meaning ascribed to such terms in the preamble to this Agreement.
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.4.
“Registration Statement” means the effective registration statement filed with the Commission on May 27, 2011 (File No. 333-174586), which registers the sale of the Shares, the Common Stock issuable upon conversion of the Shares, the Warrants, the Warrant Shares and the shares of Common Stock issuable upon conversion of the Warrant Shares to the Purchasers.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(e).
“Second Lead Purchaser” means Sofinnova Venture Partners VIII, L.P., a Delaware limited partnership.
“Securities” means the Shares, the Conversion Shares, the Warrants, and the Warrant Shares.
“Securities Act” shall have the meaning ascribed to such term in the recitals to this Agreement.
“Shares” means the shares of Preferred Stock issued or issuable to each Purchaser pursuant to this Agreement.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Preferred Stock or Common Stock).
“Stockholder Approval” shall the meaning ascribed to such term in Section 2.3(c).
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for the Units purchased hereunder, in United States dollars and in immediately available funds, the amount as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount;”
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successor exchanges of any of the foregoing).
“Transaction Documents” means this Agreement, the Warrants, the Support Letters, the Management Rights Letter and the Registration Rights Agreement.
“Transfer Agent” means American Stock Transfer & Trust Company, with a mailing address of 59 Maiden Lane, New York, NY 10038-4667, and a telephone number of (212) 936-5100, and any successor transfer agent of the Company.
“Unit” means one share of Preferred Stock and a Warrant to purchase 0.30 shares of Preferred Stock.
“Warrant” means a warrant to purchase shares of Preferred Stock delivered to the Purchasers at the Closing in accordance with Section 2.2(a)(iii), in the form ofExhibit A attached hereto.
“Warrant Shares” means the shares of Preferred Stock or Common Stock, as the case may be, issuable upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally and not jointly, purchase from the Company, such number of Units equal to the quotient resulting from dividing (a) the applicable Subscription Amount for such Purchaser by (b) the Per Share Purchase Price,provided that any Purchaser may cause one or more investment funds that are Affiliates of such Purchaser to purchase the number of Units allocated to such Purchaser. On the Closing Date, each Purchaser purchasing Units at a Closing (or such investment fund) shall deliver to the Company, via wire transfer, immediately available funds equal to such Purchaser’s Subscription Amount, and the Company shall deliver to such Purchaser its respective Shares and Warrants as determined pursuant to Section 2.2(a), and the Company and such Purchaser shall deliver the other items set forth in Section 2.2. The Closing shall occur at the offices of Company Counsel or such other location as the Company and the Purchasers purchasing at least 70% of the Units being purchased by all Purchasers at the Closing shall mutually agree. The Company shall not be obligated to issue Units for an aggregate Subscription Amount in excess of $40,000,000.00 hereunder.
2.2Deliveries.
(a)Company Deliverables. On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser purchasing Units at the Closing the following:
(i) solely in the case of the Second Lead Purchaser, the Management Rights Letter, duly executed by the Company;
(ii) a copy of the irrevocable instructions to the Transfer Agent, duly executed by the Company, instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company’s Deposit or Withdrawal at Custodian system Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser, to the account(s) identified by such Purchaser;
(iii) a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Preferred Stock equal to 30% of such Purchaser’s Shares, with an initial exercise price per share equal to 110% of the Per Share Purchase Price, (such Warrant may be delivered within three (3) Trading Days of the Closing Date), duly executed by the Company;
(iv) the Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act);
(v) a legal opinion of Company Counsel, addressed to the Purchasers and dated the Closing Date, substantially in the form ofExhibit C attached hereto;
(vi) a certificate of the Secretary of the Company, dated as of the Closing Date, (A) certifying the resolutions adopted by the Board of Directors or a duly authorized committee thereof approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Units, (B) certifying that the shareholders of the Company have adopted resolutions approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Units, (C) certifying the current versions of the certificate of incorporation, as amended, and bylaws of the Company, and (D) certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company;
(vii) an officer’s certificate certifying that the conditions to close found in Section 2.3(b)(i) and (ii) have been satisfied;
(viii) a copy of the Registration Rights Agreement executed by the Company; and
(ix) an executed copy of an indemnification agreement with the director of the Company designated by the Second Lead Purchaser.
(b)Purchasers’ Deliverables. On or prior to the Closing Date, each Purchaser purchasing Units at the Closing shall deliver or cause to be delivered to the Company the following:
(i) such Purchaser’s Subscription Amount by wire transfer to the account specified by the Company;
(ii) solely in the case of the Second Lead Purchaser, a copy of the Second Lead Purchaser’s Management Rights Letter executed by the Second Lead Purchaser;
(iii) a copy of the Registration Rights Agreement executed by such Purchaser; and
(iv) solely in the case of the Second Lead Purchaser, an executed copy of the indemnification agreement referred to in Section 2.2(a)(ix) above.
2.3Closing Conditions.
(a)Company Conditions to Close. The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met or waived by the Company:
(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b).
(b)Purchasers’ Conditions to Close. The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met or waived by Purchasers purchasing at least 70% of the Units at Closing:
(i) (A) the accuracy in all material respects when made of the representations and warranties of the Company contained herein, (B) the accuracy in all material respects of the representations and warranties of the Company contained in Sections 3.1(a)—(f) and (s) on the Closing Date and (C) the accuracy of the representations and warranties of the Company contained in Sections 3.1(g)—(r) on the Closing Date, except where any inaccuracies in the representations and warranties in Sections 3.1(g)—(r) do not constitute a Material Adverse Effect;
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) the delivery by the Company of the items set forth in Section 2.2(a);
(iv) since the date of execution of this Agreement, no event or series of events shall have occurred that has had or would reasonably be expected to have a Material Adverse Effect with respect to the Company;provided,however, that no event, change or effect to the extent arising out of, resulting from or attributable to any of the following shall be deemed to constitute, nor be taken into account in determining whether any event or series of events shall have occurred that has had or would reasonably be expected to have a Material Adverse Effect with respect to the Company: (A) changes in the Company’s industry or the overall economy, the securities markets, financial markets or capital markets of the United States or worldwide generally; (B) general worldwide economic, business or political conditions; (C) any act of war (whether or not declared), sabotage, terrorism, military action or the escalation thereof; (D) any change in accounting requirements or principles or any change in applicable laws, rules or regulations,provided such change is not applicable solely to the Company; (E) any event, change or effect resulting from the announcement of this Agreement in compliance with the terms of this Agreement, and/or pendency of the transactions contemplated by this Agreement; (F) earthquakes, hurricanes, floods or other natural disasters; (G) any failure, in and of itself, by the Company to meet any internal or published financial projections, predictions, estimates or expectations for any period ending on or after the date of this Agreement; (H) actions taken or the failure to take action as a result of the covenants or restrictions set forth in this Agreement (I) continued losses from operations or decreases in cash balances of the Company, in either case incurred in or resulting from the ordinary course of the Company’s business; (J) any decline in the trading price of the Common Stock; or (K) any event, change or effect relating to the review of the Commission or the Trading Market of the transactions contemplated by this Agreement, including, without limitation, the Proxy Statement and the additional listing application relating to the Securities, except, in case of clause (A), (B), (C) or (D), to the extent that such change, effect, event, matter, occurrence or state of facts has a materially disproportionate effect on the Company relative to similarly-situated companies in the industry in which the Company operates;
(v) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission;
(vi) the Common Stock shall be registered under the Exchange Act and, as of the Closing Date, the Common Stock shall be listed and admitted and authorized for trading on the Trading Market, and, upon request, reasonably satisfactory evidence of such actions shall have been provided to counsel to the Purchasers;
(vii) the Company shall have taken no action designed to, or reasonably likely to have the effect of terminating the registration of the Common Stock under the Exchange Act or delisting or suspending from trading the Common Stock from the Trading Market, nor shall the Company have received any written information from the Commission or the Trading Market, as applicable, suggesting that the Commission or the Trading Market, as applicable, is contemplating terminating such registration or listing;
(viii) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Trading Market (except for (A) any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing and (B) any suspension of trading in securities generally as reported by Bloomberg L.P.);
(ix) no action shall have been taken and no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents; and
(x) approval of ILUVIEN shall not have been revoked in any jurisdiction in which such drug was, as of the date hereof, approved and authorized by the proper governmental authority for sale and distribution.
(c)Company Stockholder Approval. The approval by the Company’s stockholders of the transactions contemplated by this Agreement (the “Stockholder Approval”) shall have been obtained by the Company.
(d)Board of Directors. The Board of Directors shall have appointed, effective as of the Closing, Garheng Kong (or such other individual designated by the Second Lead Purchaser, which other individual is acceptable to the Company) to the Board of Directors of the Company, to serve as a Class II Director.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:
(a)Organization and Qualification. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own or lease and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation or default of any of the provisions of its Restated Certificate of Incorporation. The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified or in good standing would not have or reasonably be expected to result in a Material Adverse Effect. The Company does not have any direct or indirect subsidiaries.
(b)Authorization; Enforcement. Subject to obtaining Stockholder Approval, the Company has all requisite corporate power and corporate authority to enter into and to perform its obligations under the Transaction Documents, to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder, and to issue (or reserve for issuance) the Securities in accordance with the terms thereof. Subject to obtaining Stockholder Approval, the execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby in accordance with the terms hereof and thereof (including the issuance of the Securities) have been duly authorized by all necessary corporate action on the part of the Company, and no further action is required by the Company or the Board of Directors. This Agreement and each of the other Transaction Documents has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity and except as rights to indemnity and contribution may be limited by applicable laws or public policy underlying such laws (collectively, the “Enforceability Exceptions”).
(c)No Conflicts. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company, and after obtaining Stockholder Approval, the issuance of the Securities and the consummation by the Company of the transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of the Company’s Restated Certificate of Incorporation or bylaws, (ii) conflict with, violate, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations) or by which any property or asset of the Company is bound or affected; except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(d)Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents (including the issuance of the Securities), other than: (i) the filings required pursuant to Sections 4.2 and 4.10, (ii) the filing with the Commission of the Prospectus Supplement, (iii) a Notification Form: Listing of Additional Shares and Notification Form: Change in the Number of Shares Outstanding to the Trading Market for the listing of the Conversion Shares for trading thereon (iv) such filings as are required to be made under applicable state securities laws, and (v) the Stockholder Approval.
(e)Issuance of the Securities; Registration. The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Warrants are duly authorized, and when duly executed and delivered by the Company in accordance with the applicable Transaction Documents, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with their terms, except as limited by the Enforceability Exceptions. The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Conversion Shares, when issued in accordance with the Company’s Certificate of Incorporation, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum number of shares of Preferred Stock issuable pursuant to this Agreement and the Warrants as of the date hereof and the maximum number of Conversion Shares issuable upon conversion of the Shares and the Warrant Shares as of the date hereof. The Units, Shares, Warrants and Common Stock conform as to legal matters in all material respects to the respective descriptions thereof contained in the Registration Statement, Prospectus and Prospectus Supplement and such descriptions conform to the rights set forth in the instruments defining the same. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on June 17, 2011, including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the Knowledge of the Company, are threatened by the Commission. At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto
conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and as of the date of the Prospectus Supplement and at the Closing Date, the Prospectus Supplement, when taken together with the Prospectus, and any amendments or supplements thereto, when taken together with the Prospectus and Prospectus Supplement and any amendments and supplements thereto prior to such date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder.
(f)SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve (12) months preceding the date hereof (all of the foregoing and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the Commission promulgated thereunder applicable to the SEC Reports. To the Knowledge of the Company, none of the SEC Reports, at the time they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to, or identified in, Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports, the Prospectus and the Prospectus Supplement complied in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly presented in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(g)Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission and (C) additional fees paid or payable in connection with the pursuit of approval of ILUVIEN with the FDA to the consultant referenced in filings made with the Commission, (iii) the Company has not altered its method of accounting (other than in accordance with pronouncements under GAAP), (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information other than with respect to Exhibit 10.35 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 11, 2012.
(h)Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the Knowledge of the Company, threatened against the Company or any of its properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.
(i)Intellectual Property. The Company owns, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights sufficient for the operation of its business as described in the SEC Reports and which the failure to so have would reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). The Company has not received a notice (written or otherwise) within the two (2) year period prior to the date of this Agreement that any of the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned within two (2) years after the date of this Agreement. Except as otherwise described in the SEC Reports, the licenses relating to Intellectual Property Rights described in the SEC Reports, the Prospectus and the Prospectus Supplement (the “Intellectual Property Licenses”) are valid, binding upon and enforceable against the Company, and to the Knowledge of the Company, against the parties thereto, in accordance with their terms. The Company has complied in all material respects with, and is not in breach nor has received any written claim of breach of, any Intellectual Property License, and the Company has no Knowledge of any breach or anticipated breach by any other Person to any Intellectual Property License. The Company is not in breach of that certain Amended and Restated Collaboration Agreement by and between pSivida, Inc. (f/k/a/Control Delivery Systems, Inc.) and the Company, dated as of March 14, 2008. The Company has not received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise does not have any Knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to result in a Material Adverse Effect. To the Knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(j)Sarbanes-Oxley; Internal Accounting Controls. The Company is in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. Since the end of the period covered by the most recently filed periodic report under the Exchange Act, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company.
(k)Certain Fees. Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(k) that may be due in connection with the transactions contemplated by the Transaction Documents.
(l)Investment Company. The Company is not and immediately after receipt of payment for the Securities will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(m)Disclosure. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2.
(n)Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(o)Regulatory Permits; FDA. The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities (including, without limitation, those from the FDA and any other federal, state, local or foreign regulatory authorities performing functions similar to those performed by the FDA) necessary to conduct its business as described in the SEC Reports, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect. There is no pending, completed or, to the Knowledge of the Company, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company, and the Company has not received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) imposes a clinical hold on any clinical investigation by the Company, (ii) enjoins production at any facility of the Company, (iii) enters or proposes to enter into a consent decree of permanent injunction with the Company, or (iv) otherwise alleges any violation of any laws, rules or regulations by the Company, and which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. The properties, business and operations of the Company have been and are being conducted in all material respects in accordance with all applicable laws, rules and regulations of the FDA.
(p)Clinical Trials. All studies, tests and preclinical and clinical trials conducted by or on behalf of the Company were and, if still pending, are being, conducted in accordance with experimental protocols, procedures and controls pursuant to accepted professional scientific standards and applicable local, state and federal laws, rules, regulations and guidances, including, but not limited to the applicable requirements of Good Laboratory Practices or Good Clinical Practices, as applicable, except as, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. The descriptions of the results of such studies, tests and trials (including adverse events) contained in the SEC Reports, if any, are not inconsistent with the description made to governmental authorities of such results in any material respects. Except as described in the SEC Reports, no results of any other studies or tests have come to the attention of the Company that have caused the Company to believe that such results call into question the results described in the SEC Reports of the clinical trials. The Company has not received any notices or correspondence from the FDA or any other governmental authority requiring the termination, suspension or modification of any clinical trials currently conducted by, or on behalf of, the Company or in which the Company has participated that are described in the SEC Reports, if any, or the results of which are referred to in the SEC Reports.
(q)Foreign Corrupt Practices; Anti-Bribery; Office of Foreign Assets Control; Money Laundering. Neither the Company, nor to the Knowledge of the Company, any agent or other person acting on behalf of the Company, (i) has directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) has made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) has failed to disclose fully any contribution made by the Company which is in violation of law, (iv) has violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, (v) has taken or proposed to take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any government official (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to improperly influence official action or secure an improper advantage or (vi) is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department. To the Knowledge of the Company, the operations of the Company are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and anti-corruption laws and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company, threatened. The Company has instituted policies and procedures designed to promote and achieve material compliance with such laws and with the representation and warranty contained herein.
(r)Waiver of Section 203. The Company’s Board of Directors has waived the provisions of Section 203 of the Delaware General Corporation Law with respect to the issuance of the Shares and Warrants to the Purchasers.
(s)Capitalization.(i) The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock, $0.01 par value per share, of the Company. As of the date hereof, there were (i) 31,432,355 shares of Common Stock outstanding; (ii) no shares of Preferred Stock outstanding; (iii) an aggregate of 3,698,019 shares of Common Stock subject to outstanding stock options of the company; (iv) an aggregate of 85,437 shares of Common Stock subject to outstanding restricted stock units and (v) an aggregate of 152,714 shares of Company Stock subject to outstanding warrants of the Company. All outstanding shares of capital stock of the Company have been, and all shares that may be issued pursuant to any stock option plan of the Company will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued and fully paid.
(ii) Except as set forth in Section 3.1(s)(i) and for issuance of equity awards to officers, directors, employees, consultants, advisors or contractors of the Company pursuant to stock option, stock purchase plans or other equity incentive plans on terms approved by the Company’s Board of Directors, there are no issued, reserved for issuance or outstanding (A) shares of capital stock or other voting securities of or ownership interests in the Company, (B) securities of the Company convertible into or exchangeable for shares of capital stock or other voting securities of or ownership interests in the Company, (C) warrants, calls, options or other rights to acquire from the Company, or other obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company or (D) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of or voting securities of the Company.
3.2Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the execution of this Agreement on the date hereof to the Company as follows (unless as of a specific date therein):
(a)Organization; Authority. Such Purchaser is duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and the Warrant and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except as limited by the Enforceability Exceptions.
(b)No Conflicts. The execution, delivery and performance of the Transaction Documents to which it is a party by such Purchaser and the consummation by such Purchaser of the transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of the Purchaser’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) violate, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument to which such Purchaser is a party or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which such Purchaser is subject (including federal and state securities laws and regulations) or by which any property or asset of such Purchaser is bound or affected; except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not individually or in the aggregate, reasonably be expected to have a material adverse effect on the transactions contemplated hereby or in the other Transaction Documents or the authority or ability of such Purchaser to perform it obligations under the Transaction Documents.
(c)Understandings or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
(d)Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first entered into a confidentiality or non-disclosure agreement with the Company regarding this transaction (each such agreement a “CDA”) and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future. Each Purchaser acknowledges that it has had the opportunity to read the SEC Reports.
(e)Disclosure. Such Purchaser acknowledges and agrees that the Company is not making any representation or warranty and has not made any representation or warranty other than those set forth in the Transaction Documents. In addition, such Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and relating to the offer and sale of the Securities that have been requested by such Purchaser. The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated by this Agreement.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1Furnishing of Information. Until the earliest of the time that (a) no Purchaser (or any investment fund that is an Affiliate of a Purchaser) owns Securities or (b) the Warrants have expired, the Company shall use commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.
4.2Securities Laws Disclosure; Publicity. The Company (a) may, on or after the date hereof, issue a press release reasonably acceptable to the Lead Purchaser and Second Lead Purchaser disclosing the material terms of the transactions contemplated by this Agreement (the “Press Release”) and may, on or after the date hereof file a Current Report on Form 8-K describing the terms of the Transaction Documents and including the Press Release and the forms of the Transaction Documents, as exhibits thereto, with the Commission (the “Press Release 8-K”), and (b) shall file a Current Report on Form 8-K describing the terms of the Transaction Documents and including the Transaction Documents as exhibits thereto, with the Commission, no later than 9:00 A.M. Eastern time on the first (1st) Trading Day immediately following the Closing (the “Closing 8-K”). From and after the Closing, no Purchaser shall
be in possession of any material, non-public information received from the Company or any of its officers, directors, employees or agents with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, except for any material, non-public information provided to the Lead Purchaser and Second Lead Purchaser pursuant to the Management Rights Letter, as a result of a representative of the Lead Purchaser or the Second Lead Purchaser serving on the Board of Directors, or pursuant to a written confidentiality agreement entered into with such Purchaser after the date hereof. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior written consent of such Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) the filing of the Press Release and form of Transaction Documents, (b) as required by federal securities law in connection with the filing of the Closing 8-K and final Transaction Documents (including signature pages thereto) with the Commission after the Closing Date and (c) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (c).
4.3Use of Proceeds. The Company shall use the net proceeds to fund development and commercialization of the Company’s existing and pipeline drugs, maintenance of the Company’s credit facility with Silicon Valley Bank and MidCap Financial, as the same may be amended, refinanced or resyndicated from time to time, up to $35,000,000 in the aggregate and corporate purposes substantially related to the commercialization of the Company’s existing and pipeline drugs (including without limitation, general and administrative and research and development expenses, in each case, primarily related to such business and the maintenance of the Company’s infrastructure to continue such business).
4.4Indemnification of Purchasers. Subject to the provisions of this Section 4.4, the Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners and employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them
or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon (i) a breach of such Purchaser’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder, (ii) any violations by such Purchaser of state or federal securities laws or (iii) any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (A) the employment thereof has been specifically authorized by the Company in writing, (B) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (C) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.4 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others, and any liabilities the Company may be subject to pursuant to law.
4.5Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
4.6Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material, non-public information unless such material non-public information is provided by the Company to the Lead Purchaser or the Second Lead Purchaser pursuant to the Management Rights Letter, as a result of a representative of the Lead Purchaser or Second Lead Purchaser serving on the Board of Directors, or pursuant to a written confidentiality agreement entered into with such Purchaser after the date hereof. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.7Reservation of Preferred Stock and Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Preferred Stock and Conversion Shares for the purpose of enabling the Company to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.8Listing of Common Stock. The Company hereby agrees to use its commercially reasonable efforts to maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently with or prior to the Closing, the Company shall file a Notification Form: Listing of Additional Shares to apply to list or quote all of the Conversion Shares on such Trading Market, file a Notification Form: Change in the Number of Shares Outstanding with such Trading Market and promptly secure the listing of all of the Conversion Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Conversion Shares, and will take such other action as is necessary to cause all of the Conversion Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.
4.9Compliance with Securities Laws.
(a) At all times prior to Closing, the Company shall comply with the requirements of Rule 430B, and will promptly notify the Lead Purchaser and the Second Lead Purchaser (i) when any amendment or supplement to the Registration Statement, Prospectus or Prospectus Supplement shall have been filed, (ii) of the receipt of any written comments from the Commission, (iii) of any written request by the Commission for any amendment or supplement to the Registration Statement, Prospectus or any document incorporated by reference therein or otherwise deemed to be a part thereof or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the offering of the Units. The Company will effect the filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will use commercially reasonable efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company shall comply with the Securities Act, Exchange Act and the rules and regulations thereunder so as to permit the completion of the distribution of the Shares, Warrants, Warrant Shares and Conversion Shares as contemplated by the Transaction Documents and the Prospectus Supplement. If at any time prior to the issuance of the Shares, Warrants, Warrant Shares and Conversion Shares, any event shall occur or condition shall exist as a result of which it is necessary to amend the Registration Statement or amend or supplement the Prospectus Supplement in order that the Prospectus Supplement will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at such time, or if it shall be necessary to amend the Registration Statement or amend or supplement the Prospectus Supplement in order to comply with the requirements of the Securities Act, the Company will promptly prepare and file with the Commission such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus Supplement comply with such requirements.
4.10Preparation of the Proxy Statement and Company’s Stockholders Meeting.
(a) The Company shall use its reasonable best efforts to call, hold and convene a special meeting of its stockholders to vote on the approval of transactions contemplated by this Agreement, as required under the rules of the Trading Market, as soon as reasonable practicable after the date hereof but in any event not later than September 28, 2012 (the “Company Stockholders Meeting”). The board of directors of the Company shall recommend to the Company stockholders that the Company stockholders vote to approve the transactions contemplated by this Agreement, as required under the rules of the Trading Market (the “Recommendation”) and shall include such Recommendation in the proxy statement to be issued in connection with this Agreement (the “Proxy Statement”). In connection with the Company’s Stockholders Meeting, the Company shall prepare and file with the SEC as soon as reasonably practicable, but in any event, not later than ten (10) days after the date hereof the Proxy Statement in preliminary form, and the Company shall use its reasonable best efforts to respond as promptly as practicable to any comments of the SEC with respect thereto. The Company shall use its reasonable best efforts to prepare and file with the SEC the definitive Proxy Statement and to cause the definitive Proxy Statement to be mailed to the Company’s stockholders as promptly as practicable after the filing of the definitive Proxy Statement with the SEC. The Company shall take any action required to be taken under any applicable state securities laws in connection with this Agreement. The Company shall notify the Lead Investor and the Second Lead Investor promptly of the receipt of any written comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and shall supply the Lead Investor and the Second Lead Investor with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement. Prior to filing or mailing the preliminary or definitive Proxy Statement (or any amendment or supplement thereto) or responding to the comments of the SEC with respect thereto, the Company (i) shall provide the Lead Investor and the Second Lead Investor a reasonable opportunity to review such document or response and (ii) shall consider in good faith comments proposed by the Lead Investor and the Second Lead Investor on such document or response.
(b) Until the Closing, the Company shall not, and shall instruct its directors, officers, managers, partners, financial advisors and other Representatives not to, directly or indirectly, knowingly encourage, solicit, initiate or continue any inquiries or proposals from, discuss or negotiate with, or provide any non-public information to, any person or entity concerning any merger, sale of any material portion of the assets, sale of more than 2% of the outstanding shares of capital stock or similar transaction involving the Company or enter into any agreement with respect thereto, and each of them shall terminate and cease any existing activities, discussions or negotiations with respect to the foregoing.
4.11Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that such Purchaser will maintain the confidentiality of any confidential or material non-public information of the Company provided to it by or on behalf of the Company prior to or after the date of this Agreement, whether pursuant to a written confidentiality agreement, a Management Rights Letter or as a result of such Purchaser having a representative on the Board of Directors; provided, however, each Purchaser may disclose such confidential and material non-public information of the Company to such Purchaser’s employees, agents, and representatives who need to know such information for the purposes of this Agreement and such Purchaser advises such employees, agents and representatives of the confidentiality restrictions contained herein, and in accordance with its reporting obligations to its limited partners. Each Purchaser’s obligations under this Section 4.11 shall not apply to confidential information that (a) without any breach by such Purchaser of this Section 4.11 was in the public domain at or subsequent to the time communicated to such Purchaser by the Company; (b) was rightfully in such Purchaser’s possession free of any obligation of confidentiality to the Company at the time communicated to such Purchaser by the Company; (c) was received from a third party who rightfully disclosed it to such Party without an obligation of confidentiality to the Company on its subsequent disclosure; or (d) was developed by employees or agents of such Purchaser independently of and without reference to any confidential information. In addition, any disclosure of any portion of confidential or material non-public information of the Company either (i) in response to a valid order by a court or other governmental body, or (ii) otherwise required by law, shall not be considered to be a breach of this Section 4.11 or a waiver of confidentiality for other purposes; provided, however, that such Purchaser shall provide prompt prior written notice thereof to the Company to enable the Company to seek a protective order or otherwise prevent such disclosure.
4.12Board of Director Seat for Second Lead Purchaser. The Board of Directors shall appoint, effective as of the Closing, a designee of the Second Lead Purchaser, which designee shall initially be Garheng Kong, to the Board of Directors as a Class II Director (as such term is defined in the Company’s Restated Certificate of Incorporation as filed with the Secretary of State of Delaware) with such designee’s initial term expiring at the Company’s 2015 annual meeting of stockholders;provided that if the Company shall amend the Company’s Restated Certificate of Incorporation to de-classify the Board of Directors and provide that the members of the Board of Directors shall be subject to annual election, the Board of Directors shall nominate a designee of the Second Lead Purchaser for inclusion as a nominee for election to the Board of Directors in each of the Company’s proxy statements for its annual meetings of stockholders; provided the Second Lead Purchaser holds at least 50% of the Conversion Shares it originally purchased. Immediately following the appointment of the Second Lead Purchaser’s designee to the Board of Directors, the Company shall (a) add such designee as a covered party under the Company’s current director and officer insurance policy, and (b) deliver to such designee an indemnification agreement, duly executed by the Company and in the same form entered into by the Company with each of the Company’s other directors.
4.13Absence of Certain Changes or Events. From the date of this Agreement to the Closing Date, except with respect to actions taken by the Company with respect to the commercialization of ILUVIEN in Europe, the Company shall conduct its business in the ordinary course of business consistent with past practices, and during such period the Company shall not cause or permit:
(a) any redemption or repurchase, directly or indirectly, of any shares of any capital stock of the Company or other equity security or declaration, setting aside or payment of any dividends or making of any other distributions (whether in cash or kind) with respect to any shares of the Company’s capital stock or other equity security of any subsidiary of the Company, provided, however, that this Section 4.13(a) shall not apply to the repurchases of stock from former employees, officers, directors or consultants who performed services for the Company in connection with the cessation of such employment or service pursuant to the terms of existing agreements with such individuals;
(b) any split, combination or reclassification of any capital stock of the Company or any capital stock or other equity securities of any subsidiary of the Company or any issuance, sale or transfer of any equity securities, any securities convertible, exchangeable or exercisable into shares of the capital stock of the Company or other equity securities, or warrants, options or other rights to acquire shares of the Company’s capital stock or other equity security of any subsidiary of the Company or any issuance or incurrence of indebtedness (other than trade payables incurred in the ordinary course of business and operating, capital and equipment leases entered into in the ordinary course of business), provided, however, the foregoing shall not apply to (i) issuances of Common Stock or rights to purchase Common Stock issued to employees, directors, consultants or other service providers pursuant to an equity incentive plan of the Company maintained in the ordinary course of business and approved by its Board of Directors or (ii) incurrence of secured indebtedness up to an aggregate of $35,000,000 pursuant to the Corporation’s credit facility with Silicon Valley Bank and/or MidCap Financial, as the same may be amended, refinanced or resyndicated from time to time;
(c) any material change in accounting methods or principles, except insofar as may have been required by a change in GAAP or applicable Law;
(d) any disposal of any of the properties or assets of the Company or any subsidiary of the Company, other than in the ordinary course of business, including, but not limited to, any sale, assignment or transfer of any material tangible assets or any material Intellectual Property or any merger, consolidation or liquidation of the Company; and
(e) any contract, whether or not in writing, to take any action described in this Section 4.13.
4.14Conversion to Common Stock. In order to facilitate a timely conversion of the Preferred Stock into Common Stock, at the election of a Purchaser, the Company and the Purchasers shall execute an election of conversion notice in substantially the same form asExhibit D-1 attached hereto and the Company shall provide the transfer agent of the Company with an opinion in substantially the same form asExhibit D-2 attached hereto. The Company represents and warrants that the foregoing documents are the only documents that the Company’s transfer agent requires in order to convert the Preferred Stock into Common Stock within 2 business days of a request to so convert.
ARTICLE V.
MISCELLANEOUS
5.1Termination. This Agreement shall automatically terminate if the Closing has not been consummated on or before November 30, 2012;provided,however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties). Notwithstanding the foregoing, the Company and each Purchaser, with respect to such Purchaser only and without any effect whatsoever on the obligations between the Company and any other Purchaser, may, by mutual written agreement, extend the term of this Agreement beyond November 30, 2012.
5.2Fees and Expenses. Except as expressly set forth in this Section 5.2 to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers. Notwithstanding the foregoing, the Company shall reimburse (a) the Lead Purchaser for its reasonable and documented fees and disbursements of O’Melveny & Myers LLP, in an amount not to exceed $150,000 in the aggregate and (b) the Second Lead Purchaser for its reasonable and documented consultant fees, in an amount not to exceed $15,000 in the aggregate; provided that in the event either such Purchaser fails to consummate the transaction contemplated hereby when the Company has satisfied each of the conditions to Closing set forth in Section 2.3(b) and complied with Sections 2.3(c) and 2.3(d), the Company shall have no obligation to reimburse the fees of such Purchaser.
5.3Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties solely with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, solely with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. For the avoidance of doubt, the parties acknowledge and agree that each of the confidentiality agreements entered into prior to the date hereof between any Purchaser and the Company is superseded by entry into this Agreement and the parties hereby agree that each such agreement shall be deemed terminated in its entirety and of no further force or effect, in each case effective as of the execution of this Agreement by the Company and the applicable Purchaser who is a counterparty to such agreement (or an Affiliate of such Purchaser).
5.4Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile or e-mail at the facsimile number or e-mail address set forth on the signature pages attached hereto prior to 5:30 p.m. (Eastern time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or e-mail at the facsimile number or e-mail address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (Eastern time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
5.5Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed by the Company and the Purchasers purchasing at least 70% of the Units at Closing;provided,however, that (a) if any amendment or waiver of this Agreement adversely and directly affects the rights of any Purchaser in a materially adverse and different manner than the other Purchasers, such amendment or waiver shall also require the written consent of such adversely affected Purchaser, and (b) with respect to any amendment or waiver of Section 5.1, or that changes the Per Share Purchase Price or Subscription Amount of any Purchaser, such amendment or waiver shall require the written consent of a Purchaser in order to bind such Purchaser. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Purchaser and the Company. Notwithstanding the foregoing, additional Persons purchasing Units under this Agreement may become parties as Purchasers under this Agreement, by executing a counterpart of this Agreement, without any amendment of this Agreement pursuant to this Section 5.5 or any consent or approval of any other Purchaser other than the Lead Purchaser.
5.6Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.7Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Prior to the Closing Date, no Purchaser may assign any or all of its rights under this Agreement to any Person without the prior written consent of the Company. If, after the Closing Date, any Purchaser is permitted to assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, such transferee shall agree in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”
5.8No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.4.
5.9Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates) shall be commenced exclusively in the state and federal courts sitting in the State of Delaware. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
5.10Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities,provided,however, that the representations and warranties of the Company contained herein shall terminate with respect to a Purchaser when such Purchaser no longer holds any Securities.
5.11Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
5.12Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
5.13Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also execute a customary affidavit and pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.14Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.15Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
5.16Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
5.17Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Preferred Stock or Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Preferred Stock or Common Stock that occur after the date of this Agreement.
5.18WAIVER OF JURY TRIAL.IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
5.19Exercise Procedures. The form of Notice of Exercise included in the Warrants sets forth the totality of the procedures required of each of the Purchasers in order to exercise their respective Warrants. No legal opinion or additional other information or instructions shall be required of any of the Purchasers to exercise their respective Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares in accordance with the terms, conditions and time periods set forth in the Warrants.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
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ALIMERA SCIENCES, INC. | | Address for Notice: |
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By: | | /s/ C. Daniel Myers
| | 6120 Windward Parkway, Suite 290 |
| | Name: C. Daniel Myers | | Alpharetta, GA 30005 |
| | Title: Chief Executive Officer | | Facsimile: |
With a copy to (which shall not constitute notice): | | Email: |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
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Name of Purchaser:
| | PALO ALTO INVESTORS, LLC |
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Signature of Authorized Signatory of Purchaser: | | /s/ Scott R. Smith
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Name of Authorized Signatory: | | Scott R. Smith
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Title of Authorized Signatory: | | VP, Chief Compliance Officer
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Email Address of Authorized Signatory: | | ssmith@pa-investors.com
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Facsimile Number of Authorized Signatory: | | (650) 325-5028
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Address for Notice to Purchaser: | | Palo Alto Investors, LLC
Attn: Scott Smith
470 University Avenue
Palo Alto, California 94301
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| | With a copy to: |
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| | O’Melveny & Myers LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
Attention: Paul Scrivano, Esq.
Fax: (415) 984-8701
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Address for Delivery of Warrants to Purchaser (if not same as address for notice): |
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Subscription Amount: $ | | 24,000,000
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Shares*: | | 600,000
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Name and Contact for Broker: | | | | |
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Account Holder: | | | | |
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Warrant Shares*: | | 180,000
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* | To be completed at Closing |
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
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Name of Purchaser:
| | SOFINNOVA VENTURE PARTNERS VIII, L.P. |
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| | By: Sofinnova Management VIII, L.L.C., its General Partner |
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Signature of Authorized Signatory of Purchaser: | | /s/ Garheng Kong
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Name of Authorized Signatory: | | Garheng Kong
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Title of Authorized Signatory: | | Managing Member
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Email Address of Authorized Signatory: | | garheng@sofinnova.com
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Facsimile Number of Authorized Signatory: | | (650) 322-2037
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Address for Notice to Purchaser: | | Sofinnova Venture Partners VIII, L.P.
2800 Sand Hill Road, Suite 150
Menlo Park, CA 94025
Attention: Hooman Shahlavi
Fax: (650) 322-2037
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| | With a copy to: |
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| | O’Melveny & Myers LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
Attention: Paul Scrivano, Esq.
Fax: (415) 984-8701
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Address for Delivery of Warrants to Purchaser (if not same as address for notice): |
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Subscription Amount: $ | | 10,000,000
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Shares*: | | 250,000
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Name and Contact for Broker: | | | | |
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Broker No.: | | |
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Account No.: | | |
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Account Holder: | | |
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Warrant Shares*:75,000 | | |
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EIN Number: | | |
* | To be completed at Closing |
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
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Name of Purchaser: | | GROWTH EQUITY OPPORTUNITIES FUND III, LLC
By: New Enterprise Associates 14, L.P., its
sole member
By: NEA Partners 14, L.P., its general partner
By: NEA 14 GP, LTD, its general partner
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Signature of Authorized Signatory of Purchaser: | | /s/ Jake R. Nunn
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Name of Authorized Signatory: | | Jake R. Nunn
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Title of Authorized Signatory: | | Assistant Vice President
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Email Address of Authorized Signatory: | | jnunn@nea.com
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Facsimile Number of Authorized Signatory: | | |
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Address for Notice to Purchaser: | | New Enterprise Associates 14, L.P.
New Enterprise Associates
2855 Sand Hill Road
Menlo Park, CA 94025
Ph: 650-854-9499
Attention: Frank M. Torti, MD
Email: ftorti@nea.com
With a copy to:
New Enterprise Associates
1954 Greenspring Drive, Suite 600
Timonium, MD 21093
Attention: Louis S. Citron, Chief Legal Officer
Email: lcitron@nea.com
Fax: 410-842-4100
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and
Proskauer Rose LLP
One International Place
Boston, MA 02110
Attention: Ori Solomon
email: osolomon@proskauer.com
Fax: 617-526-9899
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Address for Delivery of Warrants to Purchaser (if not same as address for notice): |
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Subscription Amount: $6,000,000 �� | | |
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Shares*:150,000 (DWAC Information Below) | | |
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Name and Contact for Broker: | | | | |
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Broker No.: | | |
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Account No.: | | |
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Account Holder: | | |
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Warrant Shares*:45,000 | | |
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EIN Number: | | |
* | To be completed at Closing |
EXHIBIT A
PREFERRED STOCK PURCHASE WARRANT
EXHIBIT B
MANAGEMENT RIGHTS LETTER
EXHIBIT C
COMPANY COUNSEL OPINION
EXHIBIT D-1
ELECTION OF CONVERSION NOTICE
EXHIBIT D-2
OPINION
Exhibit B
ALIMERA SCIENCES, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware)
Pursuant to Section 151 of the General Corporation Law of the State of Delaware (the “DGCL”), Alimera Sciences, Inc. (the “Corporation”), a corporation organized and existing under the DGCL, in accordance with the provisions of Section 103 thereof, does hereby certify that:
Pursuant to the authority vested in the Board of Directors of the Corporation (the “Board of Directors”) by the Certificate of Incorporation of the Corporation, as amended (the “Certificate of Incorporation”), the Board of Directors, on July 16, 2012, in accordance with Section 151(g) of the DGCL, duly adopted the following resolution establishing a series of 1,300,000 shares of the Corporation’s preferred stock, par value $0.01 per share (the “Preferred Stock”), to be designated as its Series A Convertible Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors by the Certificate of Incorporation, the Board of Directors hereby establishes a series of Series A Convertible Preferred Stock of the Corporation and hereby states the number of shares, and fixes the powers, designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions thereof, of such series of shares as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
1.Designation; Number of Shares.
(a) There shall be created from the 10,000,000 shares of Preferred Stock authorized to be issued by the Certificate of Incorporation, a series of Preferred Stock designated as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”), and the authorized number of shares of Preferred Stock constituting the Series A Preferred Stock shall be 1,300,000.
2.Dividends.
(a) Any dividends or distributions declared by the Board of Directors out of funds legally available therefor shall be distributed among the holders of Common Stock and the Series A Preferred Stock on a pro rata basis based on the number of shares of Common Stock held by each (determined on an as-converted to Common Stock basis) as of the record date fixed for determining those entitled to receive such distribution.
(b) In the event the Corporation shall declare a distribution on the Common Stock payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution pursuant to this Section 2(b) as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution.
3.Liquidation Preferences.
(a) Upon any Liquidation Transaction (as defined below), whether voluntary or involuntary, each holder of outstanding shares of Series A Preferred Stock shall be entitled to be paid out of the assets of the Corporation legally available for distribution to stockholders, whether such assets are capital, surplus or earnings, prior and in preference to any distribution of any of the assets of the Corporation to the holders of the Common Stock or of any other stock or equity security, an amount in cash, equal to the greater of (i) $40.00 per share of Series A Preferred Stock (as adjusted for stock splits, combinations, stock dividends, recapitalizations and the like with respect to the Series A Preferred Stock) (as adjusted, the “Series A Original Issue Price”) held by such holder plus any declared but unpaid dividends to which such holder of outstanding shares of Series A Preferred Stock is then entitled, if any, or (ii) the amount each holder of a share of Series A Preferred Stock would be entitled to receive had all shares of Series A Preferred Stock been converted into shares of Common Stock pursuant to Section 6(a) hereof at the then applicable Conversion Price immediately prior to such Liquidation Transaction (the amount payable pursuant to this sentence is referred to herein as the “Series A Liquidation Preference Amount”). If, upon any Liquidation Transaction, the funds legally available for distribution to all holders of Series A Preferred Stock shall be insufficient to permit the payment to all such holders of the full Series A Liquidation Preference Amount, then the entire funds legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock ratably in proportion to the full preferential amounts to which they are entitled under this Section 3(a).
(b) Upon any Liquidation Transaction, after payment in full of the distribution required by Section 3(a) above, if any assets remain in the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets and funds legally available therefor distributed ratably among the holders of Common Stock based on the number of shares of Common Stock then held by each.
(c) Unless waived by the holders of at least 70% of the then-outstanding shares of Series A Preferred Stock, voting together as a separate class (a “Series A Supermajority”), the following shall be deemed to constitute a Liquidation Transaction: (A) any acquisition of the Corporation by means of merger, consolidation, stock sale, tender offer, exchange offer or other form of corporate reorganization in which outstanding shares of the Corporation are exchanged or sold, in one transaction or a series of related transactions, for cash, securities, property or other consideration issued, or caused to be issued, by the acquiring entity or its subsidiary, or any other person or group or affiliated persons and in which the holders of capital stock of the Corporation hold less than a majority of the voting power of the surviving entity and (B) any sale, transfer, exclusive license or lease of all or substantially all of the properties or assets of the Corporation and its subsidiaries (each of such transactions in clause (A) and (B), together with an actual liquidation, dissolution or winding up of the Corporation, a “Liquidation Transaction”),provided that none of the following
shall be deemed to constitute a Liquidation Transaction: (x) a transaction for which the sole purpose is to change the state of the Corporation’s incorporation, (y) a transaction for which the sole purpose is to create a holding company that will hold no assets other than shares of the Corporation and that will have securities with rights preferences, privileges and restrictions substantially similar to those of the Corporation and that are owned in substantially the same proportions by the persons who held such securities of the Corporation, in each case immediately prior to such transaction or (z) a license transaction entered into by the Corporation for the purpose of developing and/or commercializing one or more of the Corporation’s products, so long as such license transaction would not be reasonably considered to be a sale or license of all or substantially all of the assets of the Corporation.
(d) At least ten (10) days prior to the occurrence of any Liquidation Transaction, the Corporation will furnish each holder of the Series A Preferred Stock notice at the address for such holder on record with the Corporation or the transfer agent of the Series A Preferred Stock in accordance with Section 6(k) hereof, together with a certificate prepared by the chief financial officer of the Corporation describing in reasonable detail the terms of such Liquidation Transaction, stating in detail to the extent known (if such amounts are not known at the time of such notice, the Board of Directors shall in good faith determine an approximate amount) the amount(s) per share of the Series A Preferred Stock each holder of the Series A Preferred Stock would receive pursuant to the provisions of Section 3 hereof and stating in reasonable detail the facts and assumptions upon which such amounts were determined.
(e) Unless otherwise provided in the definitive documents relating to such Liquidation Transaction, any securities or other consideration to be delivered to the holders of the Corporation’s capital stock in connection with a Liquidation Transaction shall be valued as follows:
(i) If traded on a nationally recognized securities exchange or inter dealer quotation system, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty (30) day period ending three (3) business days prior to the closing;
(ii) If traded over the counter, the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors.
4.Redemption.
(a) The Series A Preferred Stock is not redeemable.
5.Voting Rights; Directors.
(a) On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of the stockholders of the Corporation, each holder of shares of Series A Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Series A Preferred Stock are convertible (assuming for purposes of this Section 5(a) only, that the Conversion Price for such shares of Series A Preferred Stock is $2.95, as adjusted pursuant to
Section 6(e) below) as of the record date for determining stockholders entitled to vote on such matter and shall have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any such stockholders’ meeting in accordance with the Bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares of Common Stock into which shares of Series A Preferred Stock held by each holder are convertible as of the applicable record date) shall be rounded down to the nearest whole number.(b) For as long as the Second Lead Purchaser (as defined in that certain Securities Purchase Agreement dated on or about July 17, 2012 by and among the Corporation and the investors party thereto (the “Purchase Agreement”), together with its Affiliates (as such term is defined under Rule 501 of the Securities Act of 1933, as amended), continues to hold at least 50% of the shares of Series A Preferred Stock originally issued to such Second Lead Purchaser at the closing under the Purchase Agreement (or shares of Common Stock issued upon conversion thereof), the holders of Series A Preferred Stock, voting as single class, shall be entitled to elect, at any election of the Corporation’s Class II Directors (as defined in the Corporation’s Restated Certificate of Incorporation) one individual to the Board of Directors to serve as a Class II Director (the “Series A Director”), who shall be designated by the Second Lead Purchaser.
6.Conversion. The holders of the Series A Preferred Stock shall have conversion rights as follows:
(a)Right to Convert. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series A Original Issue Price by the Conversion Price (as defined below) applicable to such share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion or notice is provided for non-certificated shares. The initial “Conversion Price” for shares of Series A Preferred Stock shall be $2.91 per share of Series A Preferred Stock. Such Conversion Price shall be adjusted as hereinafter provided. Except as provided pursuant to Section 6(b), the Series A Preferred Stock is not convertible at the option of the Corporation.
(b)Automatic Conversion. Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the then-effective Conversion Price applicable to such share upon the occurrence of the later to occur of (i) the date on which the Corporation has received and publicly announces the approval by the United States Food and Drug Administration of the Corporation’s New Drug Application for ILUVIEN (the date of such announcement, the “FDA Approval Date”) and (ii) the Corporation consummates an equity financing transaction pursuant to which it sells to one or more third party investors either (A) Common Stock or (B) other equity securities that are convertible into Common Stock and that have rights, preference or privileges senior to or on a parity with, the Series A Preferred Stock, in each case having an as-converted per share of Common Stock price of not less than $10.00 (adjusted for stock splits, combinations, stock dividends, recapitalizations and the like) and that results in total gross proceeds to the Corporation of at least $30,000,000 (such a transaction, a “Qualified Financing”). For the avoidance of doubt, no conversion shall occur pursuant to this Section 6(b) unless both events described in clauses (i) and (ii) hereof shall have occurred.
(c)Mechanics of Conversion.
(i) Before any holder of Series A Preferred Stock shall be entitled to convert the same into shares of Common Stock, to the extent such shares of Series A Preferred Stock are certificated, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same and shall state therein the name or names in which he, she or it wishes the certificate or certificates, or book entry or book entries, as the case may be, for shares of Common Stock to be issued. The Corporation shall, as soon as reasonably practicable thereafter, and in any event within two business days (except to the extent of delays not caused by the Corporation), issue and deliver at such office to such holder of Series A Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid or make an appropriate book entry, and shall promptly pay to the holder thereof, (i) in cash or, to the extent sufficient funds are not then legally available therefor, in Common Stock (at the then applicable Conversion Price), any declared and unpaid dividends on the shares of Series A Preferred Stock being so converted and (ii) the amount payable pursuant to Section 6(j) hereof. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.
(ii) If the conversion is pursuant to Section 6(b) upon the occurrence of a Qualified Financing, the conversion may, at the option of any holder tendering shares of Series A Preferred Stock for conversion, be conditioned upon the closing of such Qualified Financing, in which event the person(s) entitled to receive the Common Stock upon conversion of the Series A Preferred Stock shall not be deemed to have converted such Series A Preferred Stock until immediately prior to the closing of such sale of securities. If the conversion is pursuant to Section 6(b) upon the occurrence of the FDA Approval Date, such conversion shall be deemed to have been made at the close of business on the FDA Approval Date, and the persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holders of such shares of Common Stock as of such date.
(d)Adjustments to Conversion Prices for Certain Diluting Issuances.
(i)Special Definitions. For purposes of this Section 6(d), the following definitions apply:
(1) “Options” shall mean rights, options, or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities (defined below).
(2) “Original Issue Date” shall mean the first date on which a share of Series A Preferred Stock was issued by the Corporation.
(3) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities convertible into or exchangeable for Common Stock.
(4) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 6(d)(iii), deemed to be issued) by the Corporation after the Original Issue Date, other than:
(A) shares of Common Stock issuable or issued (including restricted stock units) to officers, directors, employees, consultants, advisors or contractors of the Corporation pursuant to stock option, stock purchase plans or other equity incentive plans on terms approved by the Board of Directors;
(B) shares for which adjustment of the Conversion Price, as applicable, is made pursuant to Sections 6(e) or 6(f);
(C) shares of Common Stock issuable or issued upon the conversion of shares of Series A Preferred Stock or as a dividend or distribution on the Series A Preferred Stock;
(D) shares of Common Stock issuable or issued upon the conversion of Convertible Securities outstanding as of the Original Issue Date;
(E) shares of Common Stock for which adjustment of the Conversion Price has been specifically waived by the Series A Supermajority; or
(F) up to an aggregate of 500,000 shares of Common Stock (adjusted for stock splits, combinations, stock dividends, recapitalizations and the like) issued or issuable pursuant to equipment lease financings or bank credit arrangements approved by the Board of Directors that are for primarily non-equity financing purposes.
(ii)No Adjustment of Conversion Prices. Any provision herein to the contrary notwithstanding, no adjustment in the Conversion Price of Series A Preferred Stock shall be made (1) in respect of the issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Section 6(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Conversion Price applicable to the Series A Preferred Stock in effect on the date of, and immediately prior to such issue or (2) after the FDA Approval Date.
(iii) Deemed Issue of Additional Shares of Common Stock. In the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities then entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein designed to protect against dilution) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date;provided that in any such case in which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities;
(3) upon the expiration of any such Options or rights, the termination of any such rights to convert or exchange or the expiration of any Options or rights related to such Convertible Securities or exchangeable securities, the Conversion Price, to the extent in any way affected by or computed using such Options, rights or Convertible Securities or Options or rights related to such Convertible Securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such Options or rights or upon the conversion or exchange of such Convertible Securities or upon the exercise of the Options or rights related to such Convertible Securities; and
(4) no readjustment pursuant to clause (2) or (3) above shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (a) the Conversion Price on the original adjustment date immediately prior to making such original adjustment, or (b) if there have been adjustments made to the Conversion Price between the original adjustment date and such readjustment date, the Conversion Price that has resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date.
(iv)Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event this Corporation, at any time after the Original Issue Date and before the FDA Approval Date, shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6(d)(iii)) without consideration or for a consideration per share less than the Conversion Price applicable to the Series A Preferred Stock in effect on the date of and immediately prior to such issue, then and in such event, such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, (A) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Conversion Price in effect immediately prior to such issuance, and (B) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common Stock so issued,provided that if the foregoing formula results in a Conversion Price that is less than $1.00 (adjusted for stock splits, combinations, stock dividends, recapitalizations and the like), the Conversion Price shall instead be adjusted to $1.00 (adjusted for stock splits, combinations, stock dividends, recapitalizations and the like) concurrently with such issue. For the purpose of the above calculation, the number of shares of Common Stock outstanding immediately prior to such issue shall be calculated on a fully diluted basis, as if all outstanding shares of Preferred Stock and all Convertible Securities had been fully converted into shares of Common Stock and any outstanding warrants, options or other rights for the purchase of shares of stock or convertible securities had been fully exercised (and the resulting securities fully converted into shares of Common Stock, if so convertible) as of such date.
(v)Determination of Consideration. For purposes of this Section 6(d), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:
(1)Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation excluding amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received for such Additional Shares of Common Stock, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board of Directors.
(2)Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6(d)(iii), relating to Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against dilution) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against the dilution) issuable upon the exercise of such Options or conversion or exchange of such Convertible Securities.
(e)Adjustments to Conversion Prices for Stock Dividends and for Combinations or Subdivisions of Common Stock. In the event that this Corporation at any time or from time to time after the Original Issue Date shall declare or pay, without consideration, any dividend on the Common Stock payable in Common Stock or in any right to acquire Common Stock for no consideration without a corresponding dividend declared or paid to the holders of Series A Preferred Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise than by payment of a dividend in Common Stock or in any right to acquire Common Stock), or in the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock without a corresponding subdivision or combination of shares of Series A Preferred Stock, then the Conversion Price in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate. In the event that this Corporation shall declare or pay, without consideration, any dividend on the Common Stock payable in any right to acquire Common Stock for no consideration without a corresponding dividend or other distribution to holders of Series A Preferred Stock then the Corporation shall be deemed to have made a dividend payable in Common Stock in an amount of shares equal to the maximum number of shares issuable upon exercise of such rights to acquire Common Stock.
(f)Adjustments for Reclassifications, Reorganizations, Mergers or Consolidations. If the Common Stock issuable upon conversion of Series A Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification, merger, consolidation or otherwise (other than a subdivision or combination of shares provided for in Section 6(e) above or a Liquidation Transaction), provision shall be made so that, concurrently with the effectiveness of such transaction, the shares of Series A Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series A Preferred Stock immediately before that change.
(g)Certificates as to Adjustments. Upon the occurrence of each adjustment or readjustment of any Conversion Price pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock a certificate executed by the Corporation’s President or Chief Financial Officer setting forth such adjustment or readjustment and showing in reasonable detail the relevant facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series A Preferred Stock.
(h)Notices of Record Date. In the event that the Corporation shall propose at any time: (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or (iii) to merge or consolidate with or into any other corporation, or sell, lease or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; then, in connection with each such event, the Corporation shall send to the holders of Series A Preferred Stock: (1) at least ten (10) days prior written notice of the date on which a record shall be taken for such dividend, distribution rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (ii) and (iii) above; and (2) in the case of the matters referred to in (ii) and (iii) above, at least ten (10) days prior written notice of the date when the consummation of same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event).
(i)Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.
(j)Fractional Shares. No fractional share shall be issued upon the conversion of any share or shares of Series A Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Corporation shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors).
(k)Notices. Any notice required by the provisions of this Section 6 to be given to the holders of shares of Series A Preferred Stock shall be in writing and shall deemed sufficient, in each case upon confirmation of delivery, when delivered personally or by overnight courier or sent by facsimile, or after being deposited in the mail, postage prepaid as certified or registered mail, and addressed to each holder of record at his or its address appearing on the books of the Corporation. The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively on behalf of all holders of Series A Preferred Stock by the vote or written consent of the Series A Supermajority.
7.Restrictions and Limitations.
(a) For so long as at least 37.5% of the shares of Series A Preferred Stock originally issued to the Purchasers (as defined in the Purchase Agreement) at the closing of the Purchase Agreement are held by the Purchasers or their Affiliates, the Corporation shall not (whether effected, directly or indirectly, by means of an amendment, merger, consolidation, reorganization, reclassification or otherwise), without first obtaining the affirmative vote or written consent of the Series A Supermajority:
(i) increase or decrease the authorized number of shares of Series A Preferred Stock;
(ii) authorize, create, issue or obligate itself to issue (by reclassification, merger or otherwise) any security (or any class or series thereof) or any indebtedness, in each case that has any rights, preferences or privileges senior to, or on a parity with, the Series A Preferred Stock, or any security convertible into or exercisable for any such security or indebtedness (other than (1) the issuance of up to an aggregate of $35,000,000 of indebtedness pursuant to the Corporation’s credit facility with Silicon Valley Bank and/or MidCap Financial, as the same may be amended, refinanced or resyndicated from time to time or (2) the issuance of up to an aggregate of $500,000 of indebtedness pursuant to operating, capital or equipment leases entered into in the ordinary course of business);
(iii) amend the Certificate of Incorporation (including by filing any new certificate of designation or elimination) or this Certificate of Designation, in each case in a manner that adversely affects the rights, preference or privileges of the Series A Preferred Stock;
(iv) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of Common Stock or Preferred Stock;provided,however, that this restriction shall not apply to (A) the redemption of rights issued pursuant to any “poison pill” rights plan or similar plan adopted by the Corporation after the Original Issue Date or (B) the repurchases of stock from former employees, officers, directors or consultants who performed services for the Corporation in connection with the cessation of such employment or service pursuant to the terms of existing agreements with such individuals;
(v) declare or pay any dividend or distribution on any shares of capital stock;provided,however, that this restriction shall not apply to (A) dividends payable to holders of Common Stock that consist solely of shares of Common Stock for which adjustment to the Conversion Price of the Series A Preferred Stock is made pursuant to Section 6(e) or (B) dividends or distributions issued pro rata to all holders of capital stock (on an as-converted basis) in connection with the implementation of a “poison pill” rights plan or similar plan by the Corporation;
(vi) authorize or approve any increase to the number of aggregate shares of capital stock reserved for issuance pursuant to stock option, stock purchase plans or other equity incentive plans of the Corporation such that the total aggregate number of shares issued under such plans and reserved for issuance under such plans (on an as-converted basis) exceeds the number of shares issued and reserved for issuance under such plans (on an as-converted basis) on the Original Issue Date by more than 20% (adjusted for stock splits, combinations, stock dividends, recapitalizations and the like),provided that any increases resulting solely from the annual increases resulting from the “evergreen” provisions of the Corporation’s equity incentive plans in effect on the Original Issue Date shall not be subject to this restriction and shall not be included for purposes of determining whether such 20% increase has occurred;
(vii) issue stock or other equity securities of any subsidiary of the Corporation (other than to the Corporation or another wholly-owned subsidiary of the Corporation) or declare or pay any dividend or other distribution of cash, shares or other assets or redemption or repurchase of shares of any subsidiary of the Corporation; or
(viii) incur any secured indebtedness other than (1) up to an aggregate of $35,000,000 of indebtedness pursuant to the Corporation’s credit facility with Silicon Valley Bank and/or MidCap Financial, as the same may be amended, refinanced or resyndicated from time to time or (2) up to an aggregate of $500,000 of indebtedness pursuant to operating, capital or equipment leases entered into in the ordinary course of business.
8.Waiver. Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived prospectively or retrospectively on behalf of all holders of Series A Preferred Stock by the vote or written consent of the Series A Supermajority.
9.No Reissuance of Preferred Stock. No share or shares of Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed by its President and Chief Executive Officer on [ ], 2012.
| | |
By: | | |
| | C. Daniel Myers |
| | President and Chief Executive Officer |
Exhibit C
| | |
Warrant No: PS-
| | Warrant Shares: |
Date of Issuance
| | Void after |
, 201
| | , 201 |
ALIMERA SCIENCES, INC.
WARRANT TO PURCHASE SHARES OF SERIES A PREFERRED STOCK
Pursuant to the terms of that certain Securities Purchase Agreement (as may be amended or restated from time to time, the “Purchase Agreement”) dated as of July , 2012, among Alimera Sciences, Inc., a Delaware corporation (the “Company”), the Holder (as defined below) and certain other investors, for consideration, the receipt and sufficiency of which is hereby acknowledged, this Warrant (this “Warrant”) is issued to Palo Alto Investors, LLC, a California limited liability company, or its assigns (the “Holder”) by the Company. Capitalized terms not defined herein shall have the meanings set forth in the Purchase Agreement.
1.Purchase of Shares.
(a)Number of Shares. Subject to the terms and conditions set forth herein, the Holder is entitled upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the Holder in writing in accordance with Section 15 below) (the “Principal Office”) or delivery of a duly executed copy of the Notice of Exercise attached hereto, to purchase from the Company up to [ ]1 fully paid and nonassessable shares of the Company’s Series A Preferred Stock, par value $0.01 per share (the “Preferred Stock”), subject to adjustment as provided in this Warrant; provided that (a) if the Preferred Stock has been converted pursuant to Section 6(b) of the Certificate of Designation of Series A Preferred Stock of the Company (“Mandatory Conversion”) or (b) if the Holder so elects in writing, upon delivery of a duly executed copy of the Notice of Exercise, the Holder shall purchase from the Company up to that number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) as would be issuable upon conversion of the Preferred Stock subject to this Warrant, subject to adjustment as provided in this Warrant. As used herein, the term “Shares” shall mean either the Preferred Stock or the Common Stock for which this Warrant is exercised as applicable.
(b)Exercise Price. The exercise price for the Shares shall be $44.00 per share, subject to adjustment as provided in this Warrant (the “Exercise Price”), provided that if this Warrant is exercised for Common Stock pursuant to the terms hereof, the exercise price per share of Common Stock shall equal the quotient of (i) $44.00 divided by (ii) the number of shares of Common Stock then issued or issuable upon conversion of one share of Preferred Stock.
2.Exercise Period. This Warrant shall be exercisable, in whole or in part, at any time or from time to time, during the term (the “Exercise Period”) commencing on the date hereof (the “Issuance Date”) and ending at 5:00 p.m. Eastern Time on [ ], 201 2 (the “Expiration Date”);provided,however, that this Warrant shall be treated in the manner set forth in Section 3(d) and shall thereafter no longer be exercisable and shall become null and void upon a Corporate Transaction (as defined below) if (i) the Company has delivered written notice of the proposed Corporate Transaction at least ten (10) days prior to the consummation thereof (the “Closing”); (ii) the Company is not in breach of any term of this Warrant as of immediately prior to the Closing; (iii) the Fair Market Value (as defined in Section 4 below) of one (1) Share, computed in accordance with Section 4 below, is greater than the Exercise Price
1 | 0.30 shares of Preferred Stock per Unit purchased.
|
2 | 5 years from Closing Date, as defined in the Securities Purchase Agreement.
|
at the date of such calculation and (iv) the consideration issued in the Corporate Transaction is cash or publicly-traded securities. For purposes of this Warrant, a “Corporate Transaction” shall mean (a) any sale or exclusive license of all or substantially all of the assets of the Company to a third party, (b) or any reorganization, consolidation, merger or sale of outstanding equity securities of the Company where the holders of the Company’s outstanding voting equity securities as of immediately before the transaction beneficially own less than a majority of the outstanding voting equity securities of the surviving or successor entity as of immediately after the transaction; provided, however, that (i) a transaction for which the sole purpose is to change the state of Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately prior to such transaction and (y) a license transaction entered into for the purpose of developing and/or commercializing one or more of the Company’s products, so long as such license would not reasonably be considered to be a sale or license of all or substantially all of its assets, shall not constitute a Corporate Transaction.
3.Method of Exercise.
(a) While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the Holder may exercise, in whole or in part, at any time or from time to time, the purchase rights evidenced hereby. Such exercise shall be effected by:
(i) delivery of a duly executed copy of the Notice of Exercise attached hereto, to the Secretary of the Company at the Principal Office, together with payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased unless the net exercise procedure specified in Section 4 below is specified in the Notice of Exercise; and
(ii) if the Holder is purchasing all of the Shares available hereunder and this Warrant is being exercised in full pursuant to the Notice of Exercise delivered under Section 3(a)(i) above, the delivery of this Warrant to the Secretary of the Company at the Principal Office within five (5) Business Days after the Holder delivers the Notice of Exercise.
Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Shares available hereunder and this Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within five (5) Business Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Shares available hereunder shall have the effect of lowering the outstanding number of Shares purchasable hereunder in an amount equal to the applicable number of Shares purchased.
(b) Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which the Notice of Exercise and payment of the aggregate Exercise Price (if applicable) are delivered to the Company as provided in Section 3(a) above. At such time, the person or persons in whose name or names any Shares shall be issuable upon such exercise as provided in Section 3(c) below shall be deemed to have become the holder or holders of record of the Shares represented by such certificate.
(c) By no later than three (3) Business Days after the exercise of this Warrant in whole or in part, the Company will issue or cause to be issued in the name of, and delivered to, the Holder, or to such other party or parties as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct a certificate or certificates for the number of Shares to which such Holder shall be entitled (or if requested by the Holder, crediting the Holder’s account by a notation in book entry form with the Company’s transfer agent and registrar for the Preferred Stock or the Common Stock or crediting the account of the Holder’s prime broker with The Depository Trust Company (the “DTC”) through its DWAC system.
In the event the Company fails to deliver the Shares to the Holder within such three (3) Business Day period, the Holder shall have the right to rescind the previously submitted Notice of Exercise and the Company shall return all consideration paid by the Holder for such Shares upon such rescission.
(d) Notwithstanding the provisions of Section 2 above, if any portion of this Warrant has not been exercised by the Holder prior to the close of business on the latest Trading Day prior to the Expiration Date, the unexercised portion of this Warrant shall automatically be deemed to be exercised in full in the manner set forth in Section 4 below, without any further action on behalf of the Holder, as of immediately prior to the Expiration Date. Notwithstanding the provisions of Section 2 above, if any portion of this Warrant has not been exercised by the Holder prior to the occurrence of a Closing that takes place before the Expiration Date, the unexercised portion of this Warrant shall automatically be exchanged for that amount and form of consideration that would be payable to the holder of this Warrant if the Warrant was exercised in full in the manner set forth in Section 4 below, without any further action on behalf of the Holder, as of immediately prior to such Closing.
4.Net Exercise.
(a) In lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with notice of such election (a “Net Exercise”). A Holder who Net Exercises shall have the rights described in Sections 3(b) and 3(c) above, and the Company shall issue to such Holder (or as such Holder may direct) a number of Shares computed using the following formula:
Where
| X = | The number of Shares to be issued to the Holder (or as such Holder may direct). |
| Y = | The number of Shares purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being exercised (at the date of such calculation). |
| A = | The Fair Market Value of one (1) Share (at the date of such calculation). |
| B = | The Exercise Price (as adjusted to the date of such calculation). |
(b) For purposes of this Section 4, the “Fair Market Value” of a Share shall mean, (i) if this Warrant is being exercised for Preferred Stock pursuant to the delivery of a Notice of Exercise to the Company or automatically pursuant to Section 3(d) above, the product of (x) the closing price of the Common Stock as quoted on the Trading Market (as defined below) on the Trading Day immediately prior to the delivery of the duly executed Notice of Exercise to the Company in accordance with Section 3 above, or the date on which this Warrant is deemed exercised under Section 3(d), as applicable, as published inThe Wall Street Journaland (y) the number of shares of Common Stock issuable upon conversion of one Share, and (ii) if this Warrant is being exercised for Common Stock pursuant to the delivery of a Notice of Exercise to the Company or automatically pursuant to Section 3(d) above, the closing price of the Common Stock as quoted on the Trading Market (as defined below) on the Trading Day immediately prior to the date of delivery of the duly executed Notice of Exercise to the Company in accordance with Section 3 above, on which this Warrant is deemed exercised under Section 3(d) above as applicable, as published inThe Wall Street Journal. If the Shares are not traded on a Trading Market, the Fair Market Value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company from authorized but unissued Shares, as such price shall be determined in good faith by the Board of Directors.
(c) As used herein, the following terms shall have the following respective meanings:
(i) “Eligible Market” means any of the New York Stock Exchange, the NYSE AMEX, The NASDAQ Global Market, The NASDAQ Global Select Market or The NASDAQ Capital Market, including any successor exchanges of any of the foregoing;
(ii) “Trading Day” means a day on which the Trading Market is open for trading; and
(iii) “Trading Market” shall mean the OTC Bulletin Board or any other Eligible Market, or any national securities exchange, market or trading or quotation facility on which the Common Stock is then primarily listed or quoted.
(d) For purposes of Rule 144(d) promulgated under the Securities Act, as in effect on the Issuance Date, assuming the Holder is not an Affiliate of the Company, it is intended that the Shares issued in a Net Exercise shall be deemed to have been acquired, and the holding period for the Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Purchase Agreement (or if previously transferred by the Holder and the tacking rules under Rule 144 are not available in connection with such transfer, the date of such transfer).
5.Representations, Warranties and Covenants of the Company. In connection with the transactions provided for herein, the Company hereby represents, warrants and covenants to the Holder that as of the date hereof:
(a)Organization, Good Standing, and Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.
(b)Authorization. This Warrant has been duly authorized, is validly issued, and constitutes the valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights. All corporate action has been taken on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution and delivery of this Warrant. The Company has taken all corporate action required to make all the obligations of the Company reflected in the provisions of this Warrant the valid and enforceable obligations they purport to be. The issuance of this Warrant will not be subject to preemptive rights of any stockholders of the Company. The Company has duly authorized and reserved sufficient shares of Preferred Stock and Common Stock to allow for the exercise of this Warrant in full.
(c)Valid Issuance of Preferred Stock. The Shares, when issued, sold, and delivered in accordance with the terms of this Warrant for the consideration expressed therein, will be duly authorized, validly issued, fully paid and nonassessable and will be issued in compliance with all applicable federal and state securities laws. The Company hereby agrees that it will at all times during the Exercise Period have duly authorized and reserved such number of shares of Preferred Stock as will be sufficient to permit the exercise in full of this Warrant. The Company will take all such reasonable action as may be necessary to assure that the Shares may be issued at the time of exercise as provided herein without violation of any applicable law or regulation.
(d)Valid Issuance of Common Stock. The Company hereby agrees that it will at all times during the Exercise Period have duly authorized and reserved such number of shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant should the Preferred Stock convert into Common Stock or should the Holder elect to exercise in full this Warrant for Common Stock. The Company will take all such reasonable action as may be necessary to assure that the Shares may be issued at the time of exercise as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company will take all such action as may be necessary to assure that such Shares may be issued as provided herein without violation of any requirements of the Trading Market.
6.Adjustment of Exercise Price and Number of Shares. The number and kind of Shares or other property or rights purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:
(a)Subdivisions, Combinations and Other Issuances. If the Company shall at any time after the issuance but prior to the expiration of this Warrant subdivide its Preferred Stock or Common Stock, as applicable, by split-up or otherwise, or combine its Preferred Stock or Common Stock, or issue additional shares of its Preferred Stock or Common Stock as a dividend with respect to any shares of its Preferred Stock or Common Stock (each, a “Share Reorganization”), the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price payable per share, but the aggregate Exercise Price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 6(a) shall become effective at the close of business on the date the Share Reorganization becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend. The provisions of this Section 6(a) shall similarly apply to successive Share Reorganizations.
(b)Reclassification, Reorganization and Consolidation. In case of any: (i) reclassification, capital reorganization or change in the capital stock of the Company (other than as a result of a subdivision, combination or stock dividend provided for in Section 6(a) above); (ii) merger, consolidation or reorganization or other similar transaction or series of related transactions which results in the voting securities of the Company outstanding immediately prior thereto representing immediately thereafter (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) less than 50% of the combined voting power of the voting securities of or economic interests in the Company or such surviving or acquiring entity outstanding immediately after such merger, consolidation or reorganization; (iii) sale, lease, exclusive license, transfer, conveyance or other disposition of all or substantially all of the assets of the Company (other than a license transaction entered into for the purpose of developing and/or
commercializing one or more of the Company’s products, so long as such license would not reasonably be considered to be a sale of all or substantially all of its assets); (iv) sale of shares of capital stock of the Company, in a single transaction or series of related transactions, representing at least 50% of the voting power of the voting securities of or economic interests in the Company; or (v) acquisition, directly or indirectly, by any “person” (together with his, her or its Affiliates) or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) of the beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) of outstanding shares of capital stock and/or other equity securities of the Company, in a single transaction or series of related transactions (including, without limitation, one or more tender offers or exchange offers), representing at least 50% of the voting power of or economic interests in the then outstanding shares of capital stock of the corporation, in each case other than a Corporate Transaction that results in the termination of this Warrant in accordance with Section 2(a) above, (each of (i)-(v) above a “Corporate Reorganization”), then, as a condition of such Corporate Reorganization, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities or property receivable in connection with such Corporate Reorganization by a holder of the same number and type of securities as were purchasable as Shares by the Holder immediately prior to such Corporate Reorganization. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities or property deliverable upon exercise hereof, and appropriate adjustments shall be made to the Exercise Price per Share payable hereunder;provided the aggregate Exercise Price shall remain the same. The provisions of this Section 6(b) shall similarly apply to successive Corporate Reorganizations.
(c)Calculations. All calculations under this Section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
(d)Notices of Adjustment.
(i) Not less than ten (10) days prior to the record date or effective date, as the case may be, of any action which requires or might require an adjustment or readjustment pursuant to Section 6(b) or Section 6(c) above, or of any Special Distribution (as defined below), the Company shall give notice to the Holder of such event, describing such event in reasonable detail and specifying the record date or effective date, as the case may be, and, if determinable, the required adjustment and computation thereof. If the required adjustment is not determinable as the time of such notice, the Company shall give notice to the Holder of such adjustment and computation as soon as reasonably practicable after such adjustment becomes determinable. A “Special Distribution” shall mean the Company’s issuance or distribution, to any holder or holders of shares of Preferred Stock or Common Stock based on such holdings, of evidences of indebtedness, any other securities of the Company or rights or warrants to subscribe for or purchase any security of the Company or any cash, property or other assets (excluding a Share Reorganization), whether or not accompanied by a purchase, redemption or other acquisition of shares of Preferred Stock or Common Stock.
(ii) When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of this Warrant, or in the Exercise Price, the Company shall promptly, but in any event no later than three (3) Business Days after the effective date of the adjustment, notify the Holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.
7.No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.
8.No Stockholder Rights; No Liability. Except as otherwise specifically provided herein, prior to exercise of this Warrant, the Holder shall not be entitled to any rights of a stockholder with respect to the Shares, including (without limitation) the right to vote such Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of stockholder meetings, and, except as otherwise provided in this Warrant, such Holder shall not be entitled to any stockholder notice or other communication concerning the business or affairs of the Company. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase the Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Preferred Stock or Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
9.Transfer of Warrant. Subject to compliance with applicable federal and state securities laws and any other contractual restrictions between the Company and the Holder contained herein, this Warrant and all rights hereunder are transferable in whole or in part by the Holder to any person or entity upon written notice to the Company. Within a reasonable time after, but in any event no later than five (5) Business Days following, the Company’s receipt of an executed Assignment Form in the form attached hereto, the transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Company at the Principal Office, and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. In the event of a partial transfer, the Company shall issue to the new holders one (1) or more appropriate new warrants of like tenor.
10.Restrictions on Exercise. The Company shall provide to the Holder prompt written notice of any time that the Company is unable to issue the Shares via DTC transfer (or otherwise without restrictive legend), because (a) the Commission has issued a stop order with respect to the Registration Statement, (b) the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or (c) the Registration Statement is otherwise not then effective;provided,however, that notwithstanding the foregoing, the Company shall use its reasonable best efforts to keep the Registration Statement covering the issuance of the Shares effective until the earliest to occur of (i) the expiration or termination of this Warrant in accordance with its terms, and (ii) the exercise in full of this Warrant.
11.Governing Law; Jurisdiction. This Warrant shall be governed by and construed under the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.
12.Successors and Assigns. The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the holders hereof and their respective successors and assigns.
13.Counterparts. This Warrant may be executed in one or two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
14.Titles and Subtitles; Construction; Attachments. The titles and subtitles used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant. Any reference to this Warrant includes any and all permitted alterations, amendments, changes, extensions, modifications, renewals, or supplements thereto or thereof, as applicable. The attachments hereto shall be deemed incorporated herein by reference.
15.Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at the following addresses (or at such other address(es) as shall be specified by notice given in accordance with this Section 15):
If to the Company:
ALIMERA SCIENCES, INC.
6120 Windward Parkway, Suite 290
Alpharetta, Georgia 30005
Attention: Chief Financial Officer
Facsimile:
Email address:
If to Holder:
At the address shown on the signature page hereto.
16.Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. The Holder agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Holder or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless the Holder from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
17.Expenses of Actions. If any action at law or in equity is necessary to enforce or interpret the terms of this Warrant, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
18.Equitable Remedies. To the extent permitted by law, the Company’s obligations to issue and deliver Shares in accordance with and subject to the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Shares. Without limiting the rights of the Company and the Holder to pursue all other legal and equitable rights available to such party for the other parties’ failure to perform its obligations hereunder, the Company and the Holder each acknowledge and agree that the remedy at law for any failure to perform any obligations hereunder would be inadequate and that each shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure, without proof of actual damages and without posting any bond.
19.Lost, Mutilated or Missing Warrants. Upon receipt by the Company of notice of the loss, theft, destruction or mutilation of any Warrant, and, in the case of loss, theft or destruction, upon receipt of indemnification satisfactory to the Company (in the case of the initial Holder its unsecured, unbonded agreement of indemnity or affidavit of loss shall be sufficient) or, in the case of mutilation, upon surrender and cancellation of the mutilated Warrant, the Company shall execute and deliver a new warrant of like tenor and representing the right to purchase the same aggregate number of Shares.
20.Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the Principal Office, for a new warrant or warrants representing in the aggregate the right to purchase the number of Shares then underlying this Warrant, and each such new warrant will represent the right to purchase such portion of such Shares as is designated by the Holder at the time of such surrender;provided,however, that no warrant for fractional shares of Common Stock shall be given.
21.Entire Agreement; Amendments and Waivers. This Warrant and the Purchase Agreement and any other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Nonetheless, any term of this Warrant may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holder; or if this Warrant has been assigned in part, only with the written consent of the Company and the holders of rights to purchase a majority of the shares originally issuable pursuant to this Warrant. No failure or delay of the Company or the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereon or the exercise of any other right or power. The rights and remedies of the Company and the Holder hereunder are cumulative and not exclusive of any rights or remedies which it would otherwise have.
22.No Avoidance. The Company shall not, by amendment of its certificate of incorporation or bylaws or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms hereof. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be necessary to enable the Company to perform its obligations under this Warrant.
23.Severability. If any provision of this Warrant is held to be unenforceable under applicable law, such provision shall be excluded from this Warrant and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
[REMAINDEROF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Warrant as of the date first written above.
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ALIMERA SCIENCES, INC. |
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By: | | |
Name: | | |
Title: | | |
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ACKNOWLEDGED AND AGREED:
HOLDER
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By: | | |
Name: | | |
Title: | | |
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Address: | | Palo Alto Investors, LLC
Attn: Scott Smith
470 University Avenue
Palo Alto, California 94301
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Facsimile:
Email:
| | (650) 325-5028
ssmith@pa-investors.com
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NOTICE OF EXERCISE
ALIMERA SCIENCES, INC.
Attention: Corporate Secretary
The undersigned hereby elects to purchase, pursuant to the provisions of the Warrant, as follows:
| ¨ | shares of [Common Stock / Preferred Stock] (circle one) pursuant to the terms of the attached Warrant, and tenders herewith payment in cash of the Exercise Price of such Shares in full, together with all applicable transfer taxes, if any. |
| ¨ | Net Exercise the attached Warrant with respect to Shares. |
| ¨ | Combination of the foregoing: |
Cash Exercise Shares:
Net Exercise Shares:
If the Shares are not registered and the holder does not utilize net exercise, the undersigned is representing in connection with the exercise of the Warrant that it is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
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| | | | HOLDER: |
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Date: | | | | By: | | |
| | | | Name: | | |
| | | | Title: | | |
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Name(s) in which Shares should be registered: | | | | | | |
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The Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this
form and supply required information. Do not
use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
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Name: | | | | |
| | (Please Print) | | |
Address: | | | | |
| | (Please Print) | | |
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Holder’s
Signature:
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Holder’s
Address:
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NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant. Officers of corporations and those acting in a fiduciary or other representative capacity should provide proper evidence of authority to assign the foregoing Warrant.
Exhibit D
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of [ ], 2012, among Palo Alto Investors, LLC a California limited liability company (“PAI”), Sofinnova Venture Partners VIII, L.P., a Delaware limited partnership (“Sofinnova”) and Growth Equity Opportunities III, L.P. (each a “Shareholder” and collectively, the “Shareholders”) on the one hand, and Alimera Sciences, Inc., a Delaware corporation (the “Company”), on the other hand.
WHEREAS, the Shareholders, and the Company have entered into a Securities Purchase Agreement, dated as of July 17, 2012 (the “Securities Purchase Agreement”), pursuant to which the Shareholders have acquired beneficial ownership of an aggregate of 1,000,000 shares of Series A Preferred Stock of the Company, par value $0.01 per share (the “Preferred Stock”) and warrants to purchase an aggregate of 300,000 shares of Preferred Stock (the “Warrants”); and
WHEREAS, the parties each desire to make certain covenants and agreements concerning, among other things, the registration from time to time of the Shareholders’ shares of Common Stock issued upon conversion of the Preferred Stock (including any shares of Common Stock issued upon conversion of the Preferred Stock issuable upon exercise of the Warrants the “Shares”) under the Securities Act of 1933, as amended (the “Securities Act”).
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein, the Company and the Shareholder hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1.Defined Terms. In addition to other terms defined elsewhere in this Agreement, as used in this Agreement, the following capitalized terms have the respective meanings set forth below:
“Affiliate” shall mean, with respect to any person, any other person that directly or indirectly through one or more intermediaries controls or is controlled by or is under Common control with such person. For the purposes of this definition, “control” when used with respect to any particular person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Blackout Period” shall have the meaning assigned to such term in Section 3.1(b).
“Board” shall mean the board of directors of the Company.
“Claims” shall have the meaning assigned to such term in Section 3.6(a).
“Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Demand Period” shall have the meaning assigned to such term in Section 3.1(a).
“Demand Registration” shall have the meaning assigned to such term in Section 3.1(a).
“Demand Request” shall have the meaning assigned to such term in Section 3.1(a).
“Effective Period” shall have the meaning assigned to such term in Section 3.4(a)(iii).
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Inspectors” shall have the meaning assigned to such term in Section 3.4(a)(iv).
“Maximum Number” shall have the meaning assigned to such term in Section 3.2(b).
“Material Transaction” shall have the meaning assigned to such term in Section 3.1(b).
“Other Holder” shall have the meaning assigned to such term in Section 3.2(b).
“Person” shall mean any individual, corporation, company, partnership, joint venture, trust, group (as such term is used in Rule 13d-5 under the Exchange Act), business association, government or political subdivision thereof, governmental body or other entity.
“Piggy-Back Registration” shall have the meaning assigned to such term in Section 3.2(a).
“Piggy-Back Request” shall have the meaning assigned to such term in Section 3.2(a).
“Records” shall have the meaning assigned to such term in Section 3.4(a)(iv).
“Registrable Securities” means (x) any shares of Common Stock issued or issuable upon conversion of the Preferred Stock issued to any Shareholder pursuant to the Securities Purchase Agreement, the Warrant Shares, and any Common Stock subsequently issued or issuable with respect to such securities upon any recapitalization, stock dividend, stock split or similar event and (y) any shares of Common Stock held by a Shareholder as of the date hereof. As to any particular Registrable Securities held by any particular Shareholder, once issued, such Registrable Securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale by the Shareholder of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been distributed to the public pursuant to Rule 144 under the Securities Act (or any successor provision), (iii) the date on which all such Registrable Securities
may be freely sold publicly in a single quarter under Rule 144(k) under the Securities Act (or any successor provision) (assuming the “holding period” for purposes of Rule 144 under the Securities Act commenced on the date hereof) and the Company shall have issued to the applicable holder new unlegended shares and cancelled any stop transfer restrictions or other restrictions with respect to such securities; or (iv) such securities shall have ceased to be outstanding. For purposes of this Agreement, any required calculation of the amount of, or percentage of, Registrable Securities shall be based on the number of shares of Common Stock issuable upon conversion of the Preferred Stock and Warrant Shares, as applicable, which are Registrable Securities. For the avoidance of doubt, (1) “Registrable Securities” shall not include Shares of Preferred Stock that have not converted into Common Stock or Common Stock purchased in the open market or acquired from a third party following such closing, (2) no Shareholder shall be required to actually convert shares of Preferred Stock into Common Stock in order to exercise its rights hereunder with respect to Registrable Securities, and any such conversion into Common Stock may be conditioned on the occurrence of a registration of the Registrable Securities and (3) any Registrable Securities held by a Subsidiary Holder of a Shareholder shall be deemed to be held by such Shareholder for purposes of this Agreement and shall be deemed to be “Registrable Securities”.
“Registration” shall have the meaning assigned to such term in Section 3.2(a).
“Registration Expenses” shall have the meaning assigned to such term in Section 3.5.
“SEC” shall mean the United States Securities and Exchange Commission or any other United States federal agency at the time administering the Securities Act or the Exchange Act, as applicable, whichever is the relevant statute.
“Shelf Registration” shall have the meaning assigned to such term in Section 3.1A(a)(i).
“Subsidiary Holder” shall mean any direct or indirect, majority-owned subsidiary of the Shareholder, and/or any investment fund that is an Affiliate of the Shareholder, which has beneficial ownership of any of the Registrable Securities during the term of this Agreement.
“Warrant” means a warrant to purchase shares of Preferred Stock delivered to the Shareholders at the closing of the purchase and sale of the securities pursuant to the Securities Purchase Agreement.
“Warrant Shares” means the shares of Common Stock issued or issuable upon conversion of the Preferred Stock issued upon exercise of the Warrants or upon exercise of the Warrants if such Warrants are exercised for Common Stock.
Section 1.2.General. Unless the context otherwise requires, references in this Agreement to any “section” or “article” shall mean a section or article of this Agreement, as the case may be, and the terms “hereof,” “hereunder” and “hereto” and words of similar meaning shall mean this Agreement in its entirety and not any particular provisions of this Agreement. Unless the context otherwise requires, the terms defined herein include the singular as well as the plural.
Unless the context otherwise requires, each reference herein to the Securities Act, the Exchange Act or Rule 144 (or any other rule, regulation or form promulgated under either such statute) shall be deemed to mean, as of any time, such statute, rule, regulation or form as then in effect, after all amendments thereto, or, if not then in effect, any successor statute, rule, regulation or form as then in effect, after all amendments thereto.
Section 1.3.Headings. The descriptive headings of the several Sections and paragraphs of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1.Representations and Warranties of Each Shareholder. Each Shareholder, severally and not jointly, hereby represents and warrants to the Company, as to itself only (i) that it has been duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) that it has all requisite corporate power and authority and has received all requisite approvals (including all necessary corporate, partnership, limited liability company or similar action, as applicable) to complete the transactions contemplated hereby, and (iii) that this Agreement has been duly authorized, executed and delivered by such Shareholder and constitutes a valid and binding agreement of such Shareholder enforceable against such Shareholder in accordance with its terms.
Section 2.2.Representations and Warranties of the Company. The Company hereby represents and warrants to the Shareholders (i) that it has been duly organized and is an existing corporation in good standing under the laws of the State of Delaware, (ii) that it has all requisite corporate power and authority, and has received all requisite approvals (including any necessary approval of the Board) to complete the transactions contemplated hereby and (iii) this Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement enforceable against the Company in accordance with its terms.
ARTICLE III
REGISTRATION RIGHTS
Section 3.1.Demand Registrations. (a) At any time following March 1, 2013 and prior to the date on which the Company shall have obtained a written opinion of legal counsel reasonably satisfactory to the Shareholders (it being agreed that Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (“Gunderson Dettmer”) is reasonably satisfactory) and addressed to the Company and the Shareholders to the effect that the Shares may be publicly offered for sale in the United States by the Shareholders or any Subsidiary Holder without restriction as to manner of sale and amount of securities sold and without registration or other restriction under the Securities Act (such period, the “Demand Period”), PAI shall have the right on one occasion and Sofinnova shall have the
right on one occasion to require the Company to file a registration statement under the Securities Act in respect of all or a portion of the Registrable Securities by delivering to the Company written notice, signed by holders of the Registrable Securities representing 25% of the then outstanding shares of Registrable Securities, stating that such right is being exercised, specifying the number of the Registrable Securities to be included in such registration and describing the intended method of distribution thereof, provided that such Registrable Securities have an aggregate value of at least $5,000,000 (a “Demand Request”). As promptly as practicable, but in no event later than forty-five (45) days after the Company receives a Demand Request, the Company shall effect such Demand Request pursuant to the Shelf Registration (it being understood that the Company shall also maintain the Shelf Registration available for resales of Registrable Securities by the Shareholders in accordance with Section 3.1A);provided,however, that if the Company shall not be permitted by applicable law (including without limitation the rules and regulations promulgated by the SEC) to effect such Demand Request pursuant to the Shelf Registration, then the Company shall file with the SEC and thereafter use its best efforts to cause to be declared effective promptly a registration statement (including, without limitation, by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested) (such registration as described in this sentence, a “Demand Registration”) providing for the registration of such number of Registrable Securities the Shareholders shall have demanded be registered for distribution in accordance with such intended method of distribution.
(b) Anything in this Agreement to the contrary notwithstanding, the Company shall be entitled to postpone and delay, for a reasonable period of time, not to exceed ninety (90) days in the case of clauses (i) and (ii) below, or thirty (30) days in the case of clause (iii) below (each, a “Blackout Period”), the filing of any Demand Registration if the Company shall determine that any such filing or the offering of any Registrable Securities would (i) in the good faith judgment of the Board, unreasonably impede, delay or otherwise interfere with any pending or contemplated material acquisition, corporate reorganization or other similar material transaction involving the Company (each, a “Material Transaction”), (ii) based upon advice from the Company’s investment banker or financial advisor, materially adversely affect any pending or contemplated financing, offering or sale of any class of securities by the Company, or (iii) in the good faith judgment of the Board require disclosure of material non-public information (other than information relating to an event described in clause (i) or (ii) of this subSection (b) which, if disclosed at such time, would be materially harmful to the interests of the Company and its stockholders;provided,however, that in the case of a Blackout Period pursuant to clause (i) or (ii) above, the Blackout Period shall earlier terminate upon the completion or abandonment of the relevant securities offering or sale, financing, acquisition, corporate reorganization or other similar material transaction unless the Blackout Period is also permitted for a different reason under clauses (i), (ii) or (iii); andprovided,further, that in the case of a Blackout Period pursuant to clause (iii) above, the Company shall give written notice of its determination to postpone or delay the filing of any Demand Registration and in the case of clause (iii) above, the Blackout Period shall earlier terminate upon public disclosure by the Company or public admission by the Company of such material non-public information or such time as such material non-public information shall be publicly disclosed without breach by the Shareholders of the penultimate sentence of this subSection (b); andprovided,further, that in the case of a Blackout Period pursuant to clause (i), (ii) or (iii) above, the Company shall furnish to the Shareholders a certificate of an executive officer of the Company to the effect that an event permitting a Blackout Period has occurred.
Notwithstanding anything herein to the contrary, the Company shall not exercise pursuant to clause (i) or (ii) of the preceding sentence the right to postpone or delay the filing of any Demand Registration more than twice in any twelve (12) month period. Upon notice by the Company to each Shareholder of any such determination, each Shareholder covenants that it shall keep the fact of any such notice strictly confidential, and, in the case of a Blackout Period pursuant to clause (iii) above or Section 3.1(c) below, promptly halt any offer, sale, trading or transfer by it or any of its Affiliates of any Registrable Securities for the duration of the Blackout Period set forth in such notice (or until such Blackout Period shall be earlier terminated in writing by the Company) and promptly halt any use, publication, dissemination or distribution of the Demand Registration, each prospectus included therein, and any amendment or supplement thereto by it and any of its Affiliates for the duration of the Blackout Period set forth in such notice (or until such Blackout Period shall be earlier terminated in writing by the Company) and, if so directed by the Company, will deliver to the Company any copies then in such Shareholder’s possession of the prospectus covering such Registrable Securities, that was in effect at the time of receipt of such notice. After the expiration of any Blackout Period and without further request from the Shareholders, the Company shall effect the filing of the relevant Demand Registration and shall use its best efforts to cause any such Demand Registration to be declared effective as promptly as practicable unless the Shareholders shall have, prior to the effective date of such Demand Registration, withdrawn in writing its initial request, in which case such withdrawn request shall not constitute a Demand Registration for purposes of determining the number of Demand Registrations to which the Shareholder is entitled under this Agreement.
(c) Anything in this Agreement to the contrary notwithstanding, in case a Demand Registration has been filed, if a Material Transaction has occurred, the Company may cause such Demand Registration to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such Demand Registration for a reasonable period of time, not to exceed ninety (90) days;provided,however, that in no event shall a Demand Registration so withdrawn by the Company count for the purposes of determining the number of Demand Registrations to which the Shareholders are entitled under Section 3.1(a).
(d) The Shareholders may withdraw a Demand Request in circumstances including, but not limited to, the following: if (i) the Company is in material breach of its obligations hereunder and has not cured such breach after having received notice thereof and a reasonable opportunity to do so or (ii) the withdrawal occurs during a Blackout Period. Any Demand Request withdrawn (x) pursuant to subSection (d)(ii) prior to such Demand Registration becoming effective or (y) pursuant to subSection (d) (i) shall not constitute a Demand Registration for the purposes of determining the number of Demand Registrations to which the Shareholders are entitled under Section 3.1(a). For the avoidance of doubt, any Demand Request withdrawal not contemplated by subsections (d)(i) or (d)(ii) shall constitute a Demand Registration for the purposes of determining the number of Demand Registrations to which the Shareholders are entitled under Section 3.1(a) unless the Shareholders reimburse the Company for all expenses related to such registration and withdrawal.
(e) The Company may elect to include in any registration statement filed pursuant to this Section 3.1 any securities to be issued by it or held by any of its subsidiaries or by any other shareholders only to the extent such securities are offered and sold pursuant to, and on the terms and subject to the conditions of, any underwriting agreement or distribution arrangements entered into or effected by the Shareholders and only to the extent the managing underwriter thereof does not reasonably and in good faith advise the Shareholders prior to the consummation of any Demand Registration that the inclusion in such registration statement of any such securities to be issued by the Company or sold by any of its subsidiaries or any other shareholder will not create a substantial risk that the price per share of Registrable Securities that the Shareholders will derive from such Demand Registration will be materially and adversely affected or that the number of securities sought to be registered (including any securities sought to be registered at the request of the Company and any other shareholder and those sought to be registered by the Shareholders) is a greater number than can be reasonably sold.
(f) The managing underwriter for any Demand Registration shall be selected by the Shareholders,provided that such managing underwriter or underwriters shall be of recognized international standing.
Section 3.1A.Shelf Registration Statement. (a) Subject to Section 4.1, the Company shall:
(i) file an “evergreen” shelf registration statement on Form S-3 (or, in the event Form S-3 is unavailable to the Company, Form S-1) pursuant to Rule 415 under the Securities Act (or any successor provisions), providing for an offering to be made on a continuous basis of the Registrable Securities (the “Shelf Registration”), with the Company to use reasonable best efforts to make such filing on or before the date 45 days from the date hereof;
(ii) use reasonable best efforts to cause the Shelf Registration to become effective as soon as practicable after such filing, and in any event within 120 days from the date hereof;
(iii) use commercially reasonable efforts to maintain in effect, supplement and amend, if necessary, the Shelf Registration, as required by the instructions applicable to such registration form or by the Securities Act;
(iv) furnish, upon request, to the holders of the Registrable Securities to which the Shelf Registration relates copies of any supplement or amendment to such Shelf Registration prior to such supplement or amendment being used and/or filed with the SEC; and
(v) pay all Registration Expenses in connection with the Shelf Registration, whether or not it becomes effective, and whether all, some or none of the Registrable Securities to which it relates are sold pursuant to it.
(b) If at any time before the third anniversary of the effectiveness of the Shelf Registration, the Shelf Registration ceases to be effective, the Company shall use commercially reasonable efforts to file and use its commercially reasonable efforts to cause to become effective a new “evergreen” shelf registration statement providing for an offering to be made on a continuous basis of the Registrable Securities by the Shareholders. Such shelf registration statement shall be filed on Form S-3 or, if Form S-3 is unavailable to the Company, on Form S-1.
(c) If, after the Shelf Registration has become effective, it is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or authority, the Company shall use its commercially reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment.
Section 3.2. “Piggy-Back” Registrations. (a) If, at any time following the purchase of the securities pursuant to the Securities Purchase Agreement, the Company proposes to register any securities under the Securities Act on a registration statement on Form S-1, Form S-2 or Form S-3 (or any equivalent general registration form then in effect other than (i) pursuant to a Demand Registration under Section 3.1, a Shelf Registration under Section 3.1A or (iii) pursuant to the Company’s Registration Statement on Form S-3, filed with the SEC on May 27, 2011, as the same may be amended from time to time) for purposes of a primary offering, secondary offering or combined offering of such securities, the Company shall give prompt written notice to each Shareholder of its intention to do so. Such notice shall specify, at a minimum, the number of securities so proposed to be registered, the proposed date of filing of such registration statement, any proposed means of distribution of such securities, any proposed managing underwriter or underwriters of such offering and a good faith estimate by the Company of the proposed maximum offering price thereof, as such price is proposed to appear on the facing page of such registration statement. Upon the written direction of the Shareholders (a “Piggy-Back Request”), given within fifteen (15) business days following the receipt by the Shareholders of any such written notice (which direction shall specify the number of the Registrable Securities intended to be disposed of by the Shareholders), the Company shall include in such registration statement (a “Piggy-Back Registration” and, collectively with a Demand Registration or a Shelf Registration, a “Registration”), subject to the provisions of Section 3.2 hereof, such number of the Registrable Securities as shall be set forth in such Piggy-Back Request.
(b) In the event that the Company proposes to register securities in connection with an underwritten offering and a nationally recognized independent investment banking firm selected by the Company to act as managing underwriter thereof reasonably and in good faith shall have advised the Company, any holder of securities intending to offer such securities in a secondary offering or combined offering (each, an “Other Holder”) or the Shareholders in writing that, in its opinion, the inclusion in the registration statement of some or all of the Registrable Securities sought to be registered by the Shareholders creates a substantial risk that the price per share of Common Stock that the Company or any other Holder will derive from such registration will be materially and adversely affected or that the number of securities sought to be registered (including any securities sought to be registered at the request of the Company and any other Holder and those sought to be registered by the Shareholders) is a greater number than can reasonably be sold, the Company shall include in such registration statement such number of securities as the Company, any other Holder and the Shareholders are so advised can be sold in such offering without such an effect (the “Maximum Number”) as follows and in the following order of priority: (A) first, such number of securities as the Company intended to be registered and sold by the Company and (B) second, in the case of a secondary offering or a combined offering and if and to the extent that the number of securities to be registered under clause (A) is less than the Maximum Number, such number of securities as the Shareholders and any other Holder shall have intended to register which, when added to the number of securities to be registered under clause (A), is less than or equal to the Maximum Number; provided that if such number exceeds the Maximum Number, the securities of the Shareholders and such other Holders will be excluded on a pro rata basis according to the total number of Registrable Securities and securities requested to be registered by such persons.
(c) No Piggy-Back Registration effected under this Section 3.2 shall be deemed to have been effected pursuant to Section 3.1 hereof or shall release the Company of its obligations to effect any Demand Registration upon request as provided under Section 3.1 hereof.
(d) Notwithstanding any request under this Section 3.2, each of the Shareholders and all other Holders may elect in writing to withdraw its request for inclusion of its securities in any registration statementprovided,however, that (i) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (ii) such withdrawal shall be irrevocable and, after making such withdrawal, the Shareholders and/or any such other Holder shall no longer have any right to include securities in the registration as to which such withdrawal was made.
(e) If, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each of the Shareholders and all other Holders and (i) in the case of a determination not to register, shall be relieved of its obligation to register any securities in connection with such abandoned registration, without prejudice, however, to the rights of the Shareholders under Section 3.1 and (ii) in the case of a determination to delay such registration of the Company’s securities, shall be permitted to delay the registration of such securities for the same period as the delay in registering such other securities.
(f) If, as a result of the proration provisions of this Section 3.2, the Shareholders and/or any other Holder shall not be entitled to include all securities in a registration that the Shareholders and/or any other Holder has requested to be included, the Shareholders and/or any other Holder may elect to withdraw his request to include securities in such registration or may reduce the number of securities requested to be included, provided that the same limitations in subSection (d) shall apply.
Section 3.3.Additional Agreements. Anything in this Agreement to the contrary notwithstanding, if at any time the Company shall obtain a written opinion of legal counsel reasonably satisfactory to the Shareholders (it being agreed that Gunderson Dettmer is reasonably satisfactory) and addressed to the Company and the Shareholders to the effect that the Registrable Securities may be publicly offered for sale in the United States by the Shareholders or any Subsidiary Holder without restriction as to manner of sale and amount of securities sold and without registration or other restriction under the Securities Act, the Company shall no longer be obligated to file or maintain a registration statement with respect to the Registrable Securities pursuant to this Agreement. In such case, the Company shall issue to the Shareholders certificates representing the Registrable Securities without any legend restricting transfer and shall remove all stop transfer orders relating to the Registrable Securities.
Section 3.4.Registration Procedures. (a) In connection with each registration statement prepared pursuant to this Agreement, and in accordance with the intended method or methods of distribution of the Registrable Securities as described in such registration statement, the Company shall, as soon as reasonably practicable (and, in any event, subject to the terms of this Agreement, including, without limitation, Section 3.1(a), at or before the time required by applicable laws and regulations):
(i) Prepare and file with the SEC a registration statement on an appropriate registration form of the SEC, with respect to such Registrable Securities, which form shall be selected by the Company with each Shareholder’s reasonable consent, and use its commercially reasonable efforts to cause such registration statement to become and remain effective promptly; provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to one counsel selected by the Shareholders, and the sales or placement agent or agents, if any, for the Registrable Securities and the managing underwriter or underwriters, if any, draft copies of all such documents proposed to be filed at least seven (7) days prior to such filing, which documents will be subject to the reasonable review of the Shareholders, the sales or placement agent or agents, if any, for the Registrable Securities and the managing underwriter or underwriters, if any, and their respective agents and representatives and (x) the Company will not include in any registration statement information concerning or relating to the Shareholders to which the Shareholders shall reasonably object in writing (unless the inclusion of such information is required by applicable law or the regulations of any securities exchange to which the Company may be subject), and (y) the Company will not file any Demand Registration or amendment thereto or any prospectus or any supplement thereto to which the Shareholders shall reasonably object in writing;
(ii) Furnish without charge to the Shareholders, the sales or placement agent or agents, if any, and the managing underwriter or underwriters, if any, such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the summary, preliminary, final, amended or supplemented prospectuses included in such registration statement in conformity with the requirements of the Securities Act and any regulations promulgated thereunder and (upon the reasonable request by the Shareholders) any documents incorporated therein by reference and such other documents as the Shareholders may reasonably request in order to facilitate the public sale or other disposition of such Registrable Securities (the Company hereby consenting to the use in accordance with all applicable law of the prospectus or any amendment or supplement thereto by the Shareholders in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto);
(iii) Use its commercially reasonable efforts to keep such registration statement effective for at least 180 days (not counting any period that such registration statement is not effective pursuant to Section 3.1(c)) (the “Effective Period”); prepare and file with the SEC such amendments, post-effective amendments and supplements to the registration statement and the prospectus as may be necessary to maintain the effectiveness of the registration for the Effective Period and to cause the prospectus (and any amendments or supplements thereto) to be filed pursuant to Rules 424 and 430A under the Securities Act and/or any successor rules that may be adopted by the SEC, as such rules may be amended from time to time; and comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement during the applicable period in accordance with the intended method or methods of distribution thereof, as specified in writing by the Shareholders;
(iv) Make available for inspection by the Shareholders or by any underwriter, attorney, accountant or other agent retained by the Shareholders (collectively, the “Inspectors”) financial and other records and pertinent corporate documents of the Company (collectively, the “Records”), provide the Inspectors with opportunities to discuss the business of the Company with its officers and provide opportunities to discuss the business of the Company with the independent public accountants who have certified its most recent annual financial statements, in each case to the extent customary for transactions of the size and type intended, as specified by the Shareholder, but only to the extent reasonably necessary to enable the Shareholders or any underwriter retained by the Shareholders to conduct a “reasonable investigation” for purposes of Section 11 (a) of the Securities Act. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspector unless (A) the disclosure of such Records is necessary to avoid or correct a misstatement or a material fact or omission to state a material fact in the Registration, (B) the disclosure of such Records is required by any court or governmental body with jurisdiction over either Shareholder or Inspector or (C) all of the information contained in such Records has been made generally available to the public. Each Shareholder agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction or by any governmental body, promptly give prior notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of those Records deemed confidential;
(v) If requested by the Shareholders and reasonably agreed to by the Company, promptly incorporate in a prospectus, prospectus supplement or post-effective amendment such information as the Shareholders reasonably specify should be included therein, including, without limitation, information relating to the planned distribution of Registrable Securities, the number of Registrable Securities being sold by the Shareholders, the name and description of each Shareholder, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect of the Registrable Securities being sold, the purchase price being paid therefor to the Shareholders and information with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering, except to the extent that the Company is advised by outside counsel that the inclusion of such information is reasonably likely to violate applicable securities laws; and make all required filings of such prospectus, prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus, prospectus supplement or post-effective amendment;
(vi) If requested by the Shareholders, use reasonable efforts to participate in and assist with a “road show” and other customary marketing efforts in connection with the sale of Registrable Securities pursuant to such registration statement, at such times and in such manner as the Company and the Shareholder mutually may determine (and as do not unreasonably interfere with the Company’s operations);
(vii) Use its best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Shareholders shall reasonably request, keep such registrations or qualifications in effect for so long as the registration statement remains in effect, and do any and all other acts and things which may be reasonably necessary to enable the Shareholders or any underwriter to consummate the public sale or other disposition of the Registrable Securities in such jurisdictions;provided,however, that in no event shall the Company be required to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified; to execute or file any general consent to service of process under the laws of any jurisdiction; to take any action that would subject it to service of process in suits other than those arising out of the offer and sale of the Registrable Securities covered by the registration statement; or to subject itself to taxation in any jurisdiction where it would not otherwise be obligated to do so, but for this paragraph (vii);
(viii) Use commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Shareholder to consummate the public sale or other disposition of the Registrable Securities;
(ix) Use commercially reasonable efforts to cause all Registrable Securities covered by such registration statement to be approved for trading on a national interdealer quotation system or listed on the securities exchanges on which similar securities issued by the Company are then listed or traded;
(x) Promptly notify each Shareholder, at any time when a prospectus relating to any of the Registrable Securities covered by such registration statement is required to be delivered under the Securities Act, of the Company’s becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and, at the request of the Shareholders, promptly prepare and furnish to the Shareholders a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(xi) Promptly notify each Shareholder, the sales or placement agent or agents, if any, for the Registrable Securities and the managing underwriter or underwriters, if any, thereof, after becoming aware thereof, when the registration statement or any related prospectus or any amendment or supplement has been filed, and, with respect to the registration statement or any post-effective amendment, when the same has become effective, (A) of any request by the SEC for amendments or supplements to the registration statement or the related prospectus or for additional information, (B) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose, (C) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose or (D) within the Effective Period of the happening of any event which makes any statement in the registration statement or any post-effective amendment thereto, prospectus or any amendment or supplement thereto, or any document incorporated therein by reference untrue in any material respect or which requires the making of any changes in the registration statement or post- effective amendment thereto or any prospectus or amendment or supplement thereto so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in light of the circumstances under which they were made) not misleading;
(xii) During the Effective Period, use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement or any posteffective amendment thereto;
(xiii) Permit each Shareholder if, in its sole judgment exercised in good faith, it believes it might be deemed to be a controlling person of the Company, to participate in the preparation of such registration statement and all discussions between the Company and the SEC or its staff with respect to such registration statement, and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of the Shareholders should be included;
(xiv) Deliver promptly to each Shareholder, upon such Shareholder’s request, copies of all correspondence between the SEC and the Company, its counselor auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement and permit the Shareholders to do such investigation, with respect to information contained in or omitted from the registration statement, as it deems reasonably necessary. Each Shareholder agrees that it will use commercially reasonable efforts not to interfere unreasonably with the Company’s business when conducting any such investigation;
(xv) Provide a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement, which transfer agent and registrar may be the Company, subject to any applicable law or regulations;
(xvi) Cooperate with the Shareholders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing such Registrable Securities to be sold under the registration statement, which certificates shall not bear any restrictive legends except as required by law; and, in the case of an underwritten offering, enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, may request in writing at least five (5) business days prior to any sale of the Registrable Securities to the underwriters;
(xvii) Enter into such agreements (including, if the offering is an underwritten offering, an underwriting agreement) as are customary in transactions of such kind and take such other actions as are reasonably necessary in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities; and (A) make such representations and warranties with respect to the registration statement, post-effective amendment or supplement thereto, prospectus or any amendment or supplement thereto, and documents incorporated by reference, if any, to the managing underwriter or underwriters, if any, of the Registrable Securities and, at the option of each Shareholder, make to and for the benefit of such Shareholder the representations, warranties and covenants of the Company which are being made to the underwriters, in form, substance and scope as are customarily made by the Company in connection with offerings of Registrable Securities in transactions of such kind (representations and warranties by the other Holders shall also be made as are customary in agreements of that type); provided that the Company shall not be required to make any representations or warranties with respect to information specifically provided by such other Holders or their respective representatives for inclusion in the registration documents; (B) obtain an opinion of counsel to the Company (which counsel may be internal counsel for the Company unless the managing underwriter or underwriters shall otherwise reasonably request) in customary form and covering matters of the type customarily covered by such an opinion, addressed to such managing underwriter or underwriters, if any, and to the Shareholders and dated the date of the closing of the sale of the Registrable Securities relating thereto; (C) obtain a “comfort” letter or letters from the independent certified public accountants who have certified the Company’s most recent audited financial statements that are incorporated by reference in the registration statement which is addressed to each Shareholder and the managing underwriter or underwriters, if any, and is dated the date of the prospectus used in connection with the offering of such Registrable Securities and/or the date of the closing of the sale of such Registrable Securities relating thereto, such letter or letters to be in customary form and covering such matters of the type customarily covered by “comfort” letters of such type; (D) deliver such documents and certificates as may be reasonably requested by the Shareholders and the managing underwriter or underwriters, if any, of the Registrable Securities to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as provided in Sections 3.5 and 3.6 hereof; and
(xviii) Comply with all applicable rules and regulations of the SEC.
(b) In the event that the Company would be required, pursuant to Section 3.4(a)(xi)(D) above, to notify the Shareholders, the sales or placement agent or agents, if any, for the Registrable Securities and the managing underwriter or underwriters, if any, thereof, the Company shall, subject to the provisions of Section 3.1(b) hereof, as promptly as reasonably practicable, prepare and furnish to each Shareholder, to each placement or sales agent, if any, and to each underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such prospectus shall not contain an untrue statement or a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Shareholders agree that, upon receipt of any notice from the Company pursuant to Section 3.4(a)(xi)(D) hereof, each Shareholder shall, and shall use its best efforts to cause any sales or placement agent or agents for the Registrable Securities and the underwriters, if any, thereof, to forthwith discontinue disposition of the Registrable Securities until such person shall have received copies of such amended or supplemented prospectus and, if so directed by the Company, to destroy or to deliver to the Company all copies, other than permanent file copies, then in its possession of the prospectus (prior to such amendment or supplement) covering such Registrable Securities as soon as practicable after the Shareholder’s receipt of such notice.
(c) Each Shareholder shall furnish to the Company in writing such information regarding such Shareholder and its intended method of distribution of the Registrable Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order for the Company to comply with its obligations under all applicable securities and other laws and to ensure that the prospectus relating to such Registrable Securities conforms to the applicable requirements of the Securities Act and the rules and regulations thereunder. The Shareholders shall notify the Company as promptly as reasonably practicable of any inaccuracy or change in information previously furnished by or on behalf of the Shareholders to the Company or of the occurrence of any event, in either case as a result of which any prospectus relating to the Registrable Securities contains or would contain an untrue statement of a material fact regarding the Shareholders or its intended method of distribution of such Registrable Securities or omits to state any material fact regarding the Shareholders or its intended method of distribution of such Registrable Securities required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to the Shareholders or the distribution of the Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(d) The Shareholders agree not to, and shall not cause any Subsidiary Holder to, effect any sale or distribution of any Registrable Securities, including any sale pursuant to Rule 144 under the Securities Act, and not to effect any such sale or distribution of any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering) during the ten (10) days prior to, and during the ninety (90) day period (or such longer period as the Shareholder and/or the applicable Subsidiary Holder agrees with the underwriter of such offering) beginning on, the consummation of any underwritten public offering of the Registrable Securities covered by a registration statement referred to in Section 3.2 if such Shareholder’s or such Shareholder’s Subsidiary Holder’s Registrable Securities are being sold thereunder.
(e) In the case of any registration under Section 3.1 pursuant to an underwritten offering, or in the case of a Registration under Section 3.2 if the Company has determined to enter into an underwriting agreement in connection therewith, all Registrable Securities to be included in such Registration shall be subject to such underwriting agreement and no person may participate in such Registration unless such person agrees to sell such person’s securities on the basis provided therein and completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) which must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be reasonably requested to register such person’s Registrable Securities.
Section 3.5.Registration Expenses. The Company agrees to bear and to pay, or cause to be paid, promptly upon request being made therefor, all expenses incident to the Company’s performance of or compliance with this Agreement, including, without limitation: (a) all fees and expenses in connection with the qualification of the Registrable Securities for offering and sale under state securities or “blue sky” laws referred to in Section 3.4(a)(vii) hereof, including reasonable fees and disbursements of counsel for any placement or sales agent or underwriter in connection with such qualifications, (b) all expenses relating to the preparation, printing, distribution and reproduction of the registration statement, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the certificates representing the Registrable Securities and all other documents relating hereto, (c) the costs and charges of any escrow agent, transfer agent or registrar, (d) fees, disbursements and expenses of the Company’s counsel and its other advisors and experts and independent certified public accountants of the Company (including the expenses of any opinions or “comfort” letters required by or incident to such performance and compliance), (e) the fees and expenses incurred in connection with the listing of the Registrable Securities on The NASDAQ Global Market and any other stock exchange or national securities exchange on which Registrable Securities shall at such time be listed, and (f) reasonable fees and disbursements of counsel retained by the Shareholders in connection with registration pursuant to this Agreement (collectively, the “Registration Expenses”). To the extent that any Registration Expenses are incurred, assumed or paid by the Shareholders, any sales or placement agent or agents for the Registrable Securities and the underwriters, if any, thereof, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor. The Shareholders shall pay all underwriting discounts and commissions and any capital gains, income or transfer taxes, if any, attributable to the sale of the Registrable Securities being registered.
Section 3.6.Indemnification: Contribution. (a) Indemnification by the Company. To the extent permitted by law, the Company shall, and it hereby agrees to, indemnify and hold harmless each Shareholder, and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of the Registrable Securities, against any losses, claims, damages or liabilities to which the Shareholder or such agent or underwriter may become subject, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) (collectively, “Claims”) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement, or any preliminary or final prospectus contained therein, or any amendment or supplement thereto, or any document incorporated by reference therein, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, and the Company shall, and it hereby agrees to, promptly reimburse each Shareholder or any such agent or underwriter for any legal or other out-of-pocket expenses reasonably incurred by them in connection with investigating or defending any such Claims;provided,however, that the Company shall not be liable to any such person in any such case to the extent that any such Claims arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary or final prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by the Shareholders or any agent, underwriter or representative of the Shareholders, or by the Shareholders’ failure to furnish the Company, upon request, with the information with respect to the Shareholders, or any agent, underwriter or representative of the Shareholders, or the Shareholders’ intended method of distribution, that is the subject of the untrue statement or omission or if the Company shall sustain the burden of proving that the Shareholders or such agent or underwriter sold securities to the person alleging such Claims without sending or giving, at or prior to the written confirmation of such sale, a copy of the applicable prospectus (excluding any documents incorporated by reference therein) or of the applicable prospectus, as then amended or supplemented (excluding any documents incorporated by reference therein), if the Company had previously furnished copies thereof to each Shareholder or such agent or underwriter, and such prospectus corrected such untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement.
(b)Indemnification by the Shareholders and Any Agents or Underwriters. To the extent permitted by law, the Shareholders shall, and hereby agree, severally and not jointly, to (i) indemnify and hold harmless the Company, its directors, officers, employees and controlling persons, if any, and each underwriter, its partners, officers, directors, employees and controlling persons, if any, in any offering or sale of Registrable Securities, against any Claims to which the Company, its directors, officers, employees and controlling persons, if any, may become subject, insofar as such Claims (including any amounts paid in settlement as provided herein), or actions or proceedings in respect thereof, arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary or final prospectus contained therein, or any amendment or supplement thereto, or any document incorporated by reference therein, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Shareholders or any agent, underwriter, or representative (as the case may be) expressly for use therein, and (ii) promptly reimburse the Company for any legal or other out-of-pocket expenses reasonably incurred by the Company in connection with investigating or defending any such Claim,provided that in no event shall any indemnification and reimbursement obligations under this Section 3.6(b) exceed the net proceeds from the offering received by a Shareholder.
(c)Notice of Claims, Etc. Promptly after receipt by an indemnified party under subSection (a) or (b) above of written notice of the commencement of any action or proceeding for which indemnification under subSection (a) or (b) may be requested, such indemnified party shall, without regard to whether a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of, or as contemplated by, this Section 3.6, notify such indemnifying party and the underwriter in writing of the commencement of such action or proceeding; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party in respect of such action or proceeding on account of the indemnification provisions of or contemplated by Section 3.6(a) or 3.6(b) hereof unless the indemnifying party was materially prejudiced by such failure of the indemnified party to give such notice, and in no event shall such omission relieve the indemnifying party from any other liability it may have to such indemnified party. In case any such action or proceeding shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, such indemnifying party shall be entitled to participate therein and, to the extent that it shall determine, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal or any other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation (unless such indemnified party reasonably objects to such assumption on the grounds that there may be defenses available to it which are different from or in addition to the defenses available to such indemnifying party, in which event the indemnified party shall have the right to control its defense and shall be reimbursed by the indemnifying party for the expenses incurred in connection with retaining one separate counsel). If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for each indemnified party with respect to such claim. The indemnifying party will not be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld, conditioned or delayed. No indemnifying party shall, without the prior written consent of the indemnified party, compromise or consent to entry of any judgment or enter into any settlement agreement with respect to any action or proceeding in respect of which indemnification is sought under Section 3.6(a) or (b) (whether or not the indemnified party is an actual or potential party thereto), unless such compromise, consent or settlement includes, as an unconditional term thereof, the giving by the claimant or plaintiff to the indemnified party of a release from all liability in respect of such claim or litigation and does not subject the indemnified party to any material injunctive relief or other material equitable remedy.
(d)Contribution. The Shareholders and the Company agree that if, for any reason, the indemnification provisions contemplated by Sections 3.6(a) or 3.6(b) hereof are unavailable to or are insufficient to hold harmless an indemnified party in respect of any Claims referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such Claims in such proportion as is appropriate to reflect the relative fault of, and benefits derived by, the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The relative benefit derived by the parties shall be determined by reference to the fact that the Company entered into this Agreement as an integral part of the transactions pursuant to which the Shares were acquired. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 3.6(d) were determined (i) by pro rata allocation (even if the Shareholders or any agents for, or underwriters of, the Registrable Securities, or all of them, were treated as one entity for such purpose); or (ii) by any other method of allocation which does not take account of the equitable considerations referred to in this Section 3.6(d). The amount paid or payable by an indemnified party as a result of the Claims referred to above shall be deemed to include (subject to the limitations set forth in Section 3.6(c) hereof) any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action, proceeding or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
(e) The indemnification and contribution required by this Section 3.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred.
(f)Beneficiaries of Indemnification. The obligations of the Company under this Section 3.6 shall be in addition to any liability that it may otherwise have and shall extend, upon the same terms and conditions, to each employee, officer, director and partner of the Shareholders or any Subsidiary Holder, each agent of the Shareholders or any Subsidiary Holder, each underwriter of the Registrable Securities and each person, if any, who controls the Shareholders or any Subsidiary Holder or any such agent or underwriter within the meaning of the Securities Act; and the obligations of the Shareholders and each Subsidiary Holder and any agents or underwriters contemplated by this Section 3.6 shall be in addition to any liability that the Shareholders or any Subsidiary Holder or their respective agents or underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his consent, is named in any registration statement as about to become a director of the Company) and to each person, if any, who controls the Company within the meaning of the Securities Act.
Section 3.7.Underwriters. If any of the Registrable Securities are to be sold pursuant to an underwritten offering, the investment banker or bankers and the managing underwriter or underwriters thereof shall be selected by the Company except in the case of a Demand Registration, in which the managing underwriter or underwriters shall be selected by the Shareholders,provided that such managing underwriter or underwriters must be of recognized international standing.
Section 3.8.Exchange Act Filings; Rule 144: Rule 144A. (a) For so long as any Registrable Securities remain outstanding, the Company covenants to and with the Shareholders that to the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including, but not limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(I) of Rule 144 adopted by the SEC under the Securities Act and the rules and regulations adopted by the SEC thereunder) and shall take such further action as the Shareholders may reasonably request, all to the extent required from time to time to enable the Shareholders to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar Rule or regulation hereafter adopted by the SEC. Upon the request of the Shareholders, the Company shall deliver to each Shareholder a written statement as to whether it has complied with such requirements.
(b) If at any time the Company is not subject to Section 13 or 15(d) of the Exchange Act and is not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, the Company agrees, upon the request of the Shareholders seeking to transfer Registrable Securities in conformity with Rule 144A under the Securities Act, to furnish to each Shareholder or prospective purchasers of the Registrable Securities from the Shareholders the information required by Rule 144A(d)(4)(i) under the Securities Act in the manner and at the times contemplated by such Rule.
(c) The Company covenants to make available “adequate current public information” concerning the Company within the meaning of Rule 144(c) under the Securities Act.
Section 3.9.Agreement of the Shareholders. The Shareholders agree not to, and they shall cause their respective subsidiaries not to, make any sale, transfer or other disposition of Registrable Securities except in compliance with the registration requirements of the Securities Act and the rules and regulations thereunder and in accordance with the terms of this Agreement.
Section 3.10.Legends. (a) Stop transfer restrictions will be given to the Company’s transfer agent(s) with respect to the Registrable Securities and there will be placed on the certificates or instruments representing the Registrable Securities, and on any certificate or instrument delivered in substitution therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO SUCH REGISTRATION OR IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(b) The Company hereby agrees that it will cause stop transfer restrictions to be released with respect to any Registrable Securities that are transferred (i) pursuant to an effective registration statement under the Securities Act, (ii) pursuant to Rule 144 or 145 under the Securities Act, (iii) in accordance with the requirements of Rule 903 or 904 of Regulation S under the Securities Act, or (iv) pursuant to another exemption from the registration requirements of the Securities Act;provided,however, that in the case of any transfer pursuant to clause (ii), (iii) or (iv) above, the request for transfer is accompanied by a written statement signed by the Shareholder confirming compliance with the requirements of the relevant exemption from registration; andprovided,further, that in the case of any transfer pursuant to clause (iv) above, other than any transfer by a Shareholder to one or more of the such Shareholder’s direct or indirect subsidiaries, or among such subsidiaries, or by any such subsidiary to either Shareholder, the Company shall have received a written opinion of counsel reasonably satisfactory to the Company. The Company further agrees that it will cause the legend described in subSection (a) of this Section 3.10 to be removed in the event of any transfer as provided in clause (i), (ii) or (iii) above.
ARTICLE IV
MISCELLANEOUS
Section 4.1.Term of Agreement; Termination. The terms of this Agreement shall commence on the date hereof and shall terminate on the fifth anniversary of the date hereof.
Section 4.2.Recapitalizations, Exchanges, Etc. Affecting the Shares. The provisions of this Agreement shall apply to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of the Registrable Securities, by reason of a stock dividend, stock split, stock issuance, reverse stock split, combination, recapitalization, reclassification, merger, consolidation or otherwise. Upon the occurrence of any such event, amounts hereunder shall be appropriately adjusted.
Section 4.3.Amendment. This Agreement may not be amended and no waiver shall be effective except by a written instrument, duly executed by the Company and the Shareholders holding at least 70% of the Registrable Securities outstanding at the time of such amendment or waiver.
Section 4.4.Notices. Except as otherwise provided in this Agreement, all notices, requests, claims, demands, waivers ,and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, when delivered personally or by courier, three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested), or when received by facsimile transmission if promptly confirmed by one of the foregoing means, as follows:
If to PAI:
Palo Alto Investors, LLC
470 University Avenue
Palo Alto, CA 94301
Attention: Scott Smith
Fax: (650) 325-5028
with a copy to:
O’Melveny & Myers LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
Attention: Paul Scrivano, Esq.
Fax: (415) 984-8701
If to Sofinnova:
Sofinnova Venture Partners VIII, L.P.
2800 Sand Hill Road, Suite 150
Menlo Park, CA 94025
Attention: Hooman Shahlavi
Fax: (650) 322-2037
with a copy to:
O’Melveny & Myers LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
Attention: Paul Scrivano, Esq.
Fax: (415) 984-8701
If to Growth Equity Opportunities III, L.P.:
New Enterprise Associates 14, L.P.
New Enterprise Associates
2855 Sand Hill Road
Menlo Park, CA 94025
Ph: 650-854-9499
Attention: Frank M. Torti, MD
email: ftorti@nea.com
with a copy to:
New Enterprise Associates
1954 Greenspring Drive, Suite 600
Timonium, MD 21093
Attention: Louis S. Citron, Chief Legal Officer
email: lcitron@nea.com
Fax: 410-842-4100
and
Proskauer Rose LLP
One International Place
Boston, MA 02110
Attention: Ori Solomon
email: osolomon@proskauer.com
Fax: 617-526-9899
If to the Company:
Alimera Sciences, Inc.
6120 Windward Parkway, Suite 290
Alpharetta, GA 30005
Attention: Richard S. Eiswirth, Jr.
Fax: (678) 990-5744
with a copy to:
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
850 Winter Street
Waltham, MA 02451
Attention: Gregg A. Griner, Esq.
Fax: (877) 881-9197
Section 4.5.Integration. This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to its subject matter other than those expressly set forth or referred to herein.
Section 4.6.Binding Effect; Benefit. This Agreement shall inure to the benefit of and be binding upon the parties hereto, and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
Section 4.7.Assignability. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, directly or indirectly, by the Shareholders or any Subsidiary Holder without the prior written consent of the Company;provided that this Agreement may be assigned by any Shareholder without the written consent of the Company to an Affiliate of such Shareholder. Notwithstanding the foregoing, no assignment will be effective unless (i) such Shareholder has provided the Company with written notice at the time of such assignment stating the name and address of the assignee and identifying the securities with respect to which the rights under this Agreement are being assigned, and (ii) the assignee has at the time of such assignment agreed in writing to acquire and hold such securities subject to the provisions of this Agreement as if such assignee were such Shareholder or Subsidiary Holder.
Section 4.8.Counterparts. This Agreement may be executed by the parties hereto in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 4.9.Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to principles of conflicts flaw.
Section 4.10.Severability. In the event anyone or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired, and such unreasonable, unlawful or unenforceable provision shall be interpreted, revised or applied in the manner that renders it lawful and enforceable to the fullest extent possible under law.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties named below have hereto set their hands as of the day and year first above written.
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ALIMERA SCIENCES, INC. |
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By: | | |
| | Name: |
| | Title: |
[Signature Page to Registration Rights Agreement]
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PALO ALTO INVESTORS, LLC |
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By: | | |
| | Name: |
| | Title: |
[Signature Page to Registration Rights Agreement]
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Sofinnova Venture Partners VIII, L.P. |
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By: | | Sofinnova Management VIII, L.L.C. its General Partner |
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By: | | |
Name: | | |
Title: | | Managing Member |
[Signature Page to Registration Rights Agreement]
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Growth Equity Opportunities Fund III, LLC |
By: New Enterprise Associates 14, L.P., its sole member |
By: NEA Partners 14, L.P., its general partner |
By: NEA 14 GP, LTD, its general partner |
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By: | | |
Name: | | |
Title: | | |
[Signature Page to Registration Rights Agreement]
