Check the appropriate box: | ☐ Preliminary Proxy Statement | | ☐ Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | | ☒ Definitive Proxy Statement | | ☐ Definitive Additional Materials | | ☐ Soliciting Material under§240.14a-12240.14a-l2 |
RECRO PHARMA, INC.Societal CDMO, Inc.
(Name of Registrant as Specified In Its Charter) | | | | | (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): | ☒ | | No fee required. | | | ☐ | | Fee computed on table below per Exchange Act Rules14a-6(i)(1) and0-11. | | | (1) | | Title of each class of securities to which transaction applies: | | | (2) | | Aggregate number of securities to which transaction applies: | | | (3) | | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | | | (4) | | Proposed maximum aggregate value of transaction: | | | (5) | | Total fee paid: | | | ☐ | | Fee paid previously with preliminary materials. | | | ☐ | | Check box if any part of the fee is offset as provided Fee computed on table in exhibit required by Item 25(b) per Exchange Act RuleRules 0-11(a)(2)14a-6(i)(1) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | | | | | | (1) | | Amount Previously Paid: | | | (2) | | Form, Schedule or Registration Statement No.: | | | (3) | | Filing Party: | | | (4) | | Date Filed:
0-11. |
 
490 Lapp Road1 E. Uwchlan Ave., Suite 112
Malvern, PA 19355Exton, Pennsylvania 19341
20182022 ANNUAL MEETING OF SHAREHOLDERS
To be Held on May 4, 201818, 2022 March 23, 2018April 1, 2022
Dear Shareholder: We are pleased to invite you to attend Recro Pharma Inc.’s 2018the 2022 Annual Meeting of Shareholders, or Annual Meeting, of Societal CDMO, Inc., or Societal or the Company, which will be held at 9:10:00 a.m., Eastern Time,time, on Friday, May 4, 2018, at18, 2022. The Annual Meeting can be accessed via the offices of Pepper Hamilton LLP, 400 Berwyn Park, 899 Cassatt Road, Berwyn PA 19312.Internet at: www.virtualshareholdermeeting.com/SCTL2022. Details regarding admission to the meetingAnnual Meeting and the business to be conducted are more fully described in the accompanying Notice of 20182022 Annual Meeting of Shareholders, or Notice, and 20182022 Annual Meeting Proxy Statement, or Proxy Statement. Other than the proposals described in the Proxy Statement, theour board of directors, or Board, of Directors is not aware of any other matters to be presented for a vote at the Annual Meeting. We are pleased to take advantage of Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. We are mailing to many of our shareholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of our proxy materials and our Annual Report on Form10-K for the year ended December 31, 2017, or the 2017 Annual Report. The Notice contains instructions on how to access those documents and to cast your vote via the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials and our 2017 Annual Report. All shareholders who do not receive a Notice will receive a paper copy of the proxy materials and our 2017 Annual Report by mail. This process allows us to provide our shareholders with the information they need on a more timely basis, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials.
Your vote is important. Whether or not you plan to virtually attend the Annual Meeting, we hope you will vote as soon as possible. Information about voting methods is set forth in the accompanying Notice of 2018 Annual Meeting of Shareholders and Proxy Statement. If you have any questions with respect to voting, please call our Chief Financial Officer, Ryan D. Lake, at(484) 395-2470. (770) 531-8365. Sincerely, | | | | | 
Chairman of the Board | |  
| | | Wayne Weisman | | Gerri Henwood | | | Chairman of the Board | | J. David Enloe, Jr. Director, President and Chief Executive Officer | | |
THIS PROXY STATEMENT AND ENCLOSED PROXY CARD ARE FIRST BEING MADE AVAILABLE TO SHAREHOLDERS ON OR ABOUT MARCH 23, 2018.APRIL 1, 2022.
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS Dear Shareholders:Shareholder: You are invited to attend Recro Pharma, Inc.’s 2018the Annual Meeting of Shareholders.Meeting. At the Annual Meeting, shareholders will vote:vote on the following: to elect the two director nominees that are set forth in the attached proxy statementProxy Statement to serve as class IClass II directors, whose term will expire in 2021;2025; to approve a one-time stock option exchange for non-executive employees; to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the attached Proxy Statement; and to ratify the selection of KPMG LLP, or KPMG, as our independent registered public accounting firm for the 20182022 fiscal year; and year. to approve Recro Pharma, Inc.’s 2018 Amended and Restated Equity Incentive Plan.
Shareholders also will transact any other business that may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting. MEETING INFORMATION: Date:May 18, 2022 | | | Date: | | May 4, 2018 | | | Time: | | 9:00 a.m. | | | Location: | | Pepper Hamilton LLP
Time: 10:00 a.m. Location: Via the Internet www.virtualshareholdermeeting.com/SCTL2022 Record Date: You can vote if you were a shareholder of record on March 21, 2022 400 Berwyn Park
899 Cassatt Road
Berwyn PA 19312
| | | Record Date: | | You can vote if you were a shareholder of record on March 19, 2018. |
Your vote matters. Whether or not you plan to virtually attend the Annual Meeting, please ensure that your shares are represented by voting, signing, dating and returning your proxy in the enclosed envelope, which requires no postage if mailed in the United States. | By Order of the Board of Directors | |  | Michael Celano
Corporate Secretary
March 23, 2018
|
IMPORTANT NOTICE REGARDINGINTERNET AVAILABILITY OF PROXY MATERIALS. This proxy statementMATERIALS
As permitted by Securities and the proxy cardExchange Commission, or SEC, rules, we are being furnished to our shareholders on or about March 23, 2018. Thismaking this proxy statement and our 2017 Annual Report areon Form 10-K, or Annual Report, available to holdersour shareholders primarily via the Internet, rather than mailing printed copies of these materials to each shareholder. We believe that this process will expedite shareholders’ receipt of the proxy materials, lower the costs of the Annual Meeting and help to conserve natural resources. On or about April 1, 2022, we intend to begin mailing to each shareholder a Notice of Internet Availability of Proxy Materials, containing instructions on how to access and review the proxy materials, including our common stock atwww.proxyvote.com.Proxy Statement and our Annual Report, on the Internet and how to access an electronic proxy card to vote on the Internet or by telephone. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive a paper copy of the proxy materials. If you receive the Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request one. If you receive the Notice of Internet Availability of Proxy Materials by mail and would like to receive without charge, a paperprinted copy of our 2017proxy materials, please follow the instructions included therein. Only shareholders who owned our common stock on March 21, 2022 are entitled to vote at the Annual Report, includingMeeting. | Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 18, 2022: The Notice, Proxy Statement, and our 2021 Annual Report on Form 10-K are available at: www.proxyvote.com |
By Order of the financial statements, please send your request to Chief Financial Officer, Recro Pharma, Inc., 490 Lapp Road, Malvern, PA 19355.Board of Directors, 
Carla Lusby Corporate Secretary April 1, 2022
| PROXY SUMMARY INFORMATION |
To assist you in reviewing this year’s proposals, we call your attention to the following proxy summary. This is only a summary; please review this proxy statementProxy Statement and our 20172021 Annual Report in full. Summary of Shareholder Voting MattersSUMMARY OF SHAREHOLDER VOTING MATTERS
| | | | | Proposal
| | | | Proposal | | For More
Information | | Board of Directors
Recommendation | Item 1: Election of two Class I DirectorsII directors for a Three-Year Term Expiringthree-year term expiring in 20212025 | | Page 3044 | | ✓FOREach Nominee | | | | Winston J. Churchill Wayne B. WeismanDavid Enloe, Jr. Bryan M. Reasons
| | | | | | | | Item 2: Approval of a one-time stock option exchange for non-executive employees | | Page 45 | | ✓ FOR | | | | Item 3: Approval, on an advisory basis, of the comprensation of our named executive officers | | Page 52 | | ✓ FOR | | | | Item 4: Ratification of Appointmentappointment of KPMG LLP as our Independent Registered Public Accounting Firmindependent registered public accounting firm for 20182022 | | Page 3053 | | ✓ FOR | Item 3: Approval of Recro Pharma, Inc.’s 2018 Amended and Restated Equity Incentive Plan
| | Page 30 | | ✓ FOR |
Our Director NomineesOUR DIRECTOR NOMINEES
You are being asked to vote on the election of Winston J. ChurchillDavid Enloe, Jr. and Wayne B. WeismanBryan M. Reasons as Class III directors, each to serve for a three-year term expiring at our 20212025 Annual Meeting of Shareholders. The number of members of our Board is currently set at eight members and is divided into three classes, each of which has a three-year term. Currently, Class I and Class III each consist of three directors; Class II consists of two directors, and each of Class II and Class III consist of three directors. The term of office of our Class III directors expires at the Annual Meeting. We are nominating Winston J. ChurchillDavid Enloe, Jr. and Wayne B. WeismanBryan M. Reasons forre-election election at the Annual Meeting to serve until the 20212025 Annual Meeting of Shareholders and until their successors, if any, are elected or appointed, or their earlier death, resignation, retirement, disqualification or removal. Directors are elected by a plurality of the votes cast by our shareholders at the Annual Meeting. The two nominees receiving the most FOR votes (among votes properly cast in person or by proxy) will be elected. If no contrary indication is made, shares represented by executed proxies will be voted FOR the election of Mr. ChurchillEnloe and Mr. Weisman.Reasons. Each nominee has agreed to serve as a director if elected, and we have no reason to believe that any nominee will be unable to serve. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Committee Memberships | | | | Name | | Age | | Director
Since | | Occupation | | Independent | | AC | | CC | | NGCC | | Other Current
Public
Company
Boards | | Winston J. Churchill | | 77 | | 2008 | | Partner, Venture Capital Fund | | Yes | | | | M | | C | | Innovative Solutions and Support, Inc.; Amkor Technology, Inc. | Wayne B.
Weisman | | 62 | | 2008
(C) | | Partner, Venture Capital Fund | | Yes | | | | | | M | | ReWalk Robotics Ltd. |
| | | | | AC = Audit Committee | | CC = Compensation Committee | | C = Chair | NCGC = Nominating and Corporate Governance Committee | | M = Member |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | ii
| | | | | | | | | | | | | | | | | | Name | | Age | | Director
Since | | Occupation | | Independent | | Committee Memberships | | Other Current Public Company Boards | | | AC | | CC | | GC | J. David Enloe, Jr. | | 58 | | 2020 | | President and Chief Executive Officer of the Company | | No | | - | | - | | - | | N/A | Bryan M. Reasons | | 54 | | 2017 | | Chief Financial Officer, Mallinckrodt PLC | | Yes | | C | | - | | - | | Aclaris Therapeutics, Inc. | AC = Audit Committee | | CC = Compensation Committee | | | | C = Chair | | | GC = Nominating and Corporate Governance Committee | | | | M = Member | | |
| SUMMARY INFORMATION (continued)
|
CORPORATE GOVERNANCE SUMMARY FACTS The following table summarizes our current Board structure and key elements of our corporate governance framework: | | | | | Governance ItemItems | | | | | | Size of Board (set by the Board) | | 8 | | | | Number of Independent Directors | | 7 | | | | Independent Chairman of the Board | | Yes | | | | Board Self-Evaluation | | Annual | | | | Review of Independence of Board | | Annual | | | | Independent Directors Meet Without Management Present | | Yes | | | | Voting Standard for Election of Directors in Uncontested Elections | | Plurality | | | | Diversity of Board background, experience and skills | | Yes |
RECENT CORPORATE HIGHLIGHTS In March 2022, we rebranded from Recro Pharma, Inc. to “Societal CDMO, Inc.” to more accurately reflect our commitment to customer-centric service and make clear that we are a company that helps its customers make a difference. In August 2021, we acquired IriSys, LLC, a San Diego-based CDMO that possesses capabilities that complement and expand our own. We acquired IriSys for approximately $50 million in a combination of cash, shares of our common stock and a seller promissory note. With our acquisition of IriSys, we have transformed our organization into a full service CDMO with operations on both the East and West Coast of the U.S. capable of offering our now expanded global client base access to services spanning from pre-Investigational New Drug development to commercial manufacturing and packaging for wide range of dosage forms. In June 2021, we appointed Laura L. Parks, Ph.D. to our Board. Dr. Parks is an experienced business leader with a track record of developing high performance, market-focused teams at a number of leading global biopharma, CDMO and food industry companies. Retired since 2017, her more than three decades of expertise spans global leadership team collaboration, profit and loss accountability, team culture development, product lifecycle planning and brand development. In May 2021, we announced the closing of an underwritten public offering of our common stock. We received approximately $34.5 million in gross proceeds from the offering, before underwriting discounts and commissions and estimated offering expenses. During 2021, we entered into two amendments to our outstanding credit agreement with Athyrium Capital Management to, among other things, allow for the IriSys acquisition described above and extend the maturity date of the loan issued under the credit agreement from March 2023 to December 2023. 2017 Corporate Highlights
In November 2017, we announced that we secured a $100 million credit facility from funds managed by Athyrium Capital Management, LP, or Athyrium, a leading healthcare-focused investment firm. Proceeds from the facility were used to repay our prior credit facility, and will be used to help pay a $45 million milestone due to Alkermes plc upon the approval of our new drug application, or NDA, for intravenous, or IV, meloxicam 30mg by the U.S. Food and Drug Administration, or FDA, and to help fund working capital.
In October 2017, we announced that the FDA accepted for review our NDA for IV meloxicam 30mg for the management of moderate to severe pain and set a date for decision on the NDA under the Prescription Drug User Fee Act, or PDUFA, of May 26, 2018.
In July 2017, we announced that we submitted our NDA to the FDA for IV meloxicam 30mg for the management of moderate to severe pain.
In July 2017, we announced the acquisition of exclusive global rights to two novel neuromuscular blocking agents, or NMBs, and a proprietary chemical reversal agent from Cornell University.
In May 2017, we announced successfultop-line results from our Phase III safety study evaluating IV meloxicam (30mg bolus injection) following major surgery. The study demonstrated that the adverse event profile of IV meloxicam 30mg was consistent with previously completed studies, and was similar to placebo.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | iii
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | iv
| TABLE OF CONTENTS(continued)
|
| | | 40 | | | | SHAREHOLDER COMMUNICATIONS TO THE BOARD
| | | 40 | | | | AVAILABILITY OF MATERIALS
| | | 41 | |
PROXY STATEMENT This proxy statement,Proxy Statement, with the enclosed proxy card, is being furnished to shareholders of Recro Pharma, Inc.Societal in connection with the solicitation by our Board of proxies to be voted at our Annual Meeting and at any postponements or adjournments thereof. The Annual Meeting will be held on Friday, May 4, 2018,18, 2022, at 9:10:00 a.m., Eastern Time,time via the Internet at the offices of Pepper Hamilton LLP, 400 Berwyn Park, 899 Cassatt Road, Berwyn PA 19312. www.virtualshareholdermeeting.com/SCTL2022. This proxy statementProxy Statement and the enclosed proxy card are first being furnishedmade available to our shareholders on or about March 23, 2018. The Notice of Internet Availability of Proxy Materials being mailed to the shareholders is not part of the proxy statement. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | vApril 1, 2022.
| GENERAL INFORMATION ABOUT THE MEETING |
PROXY SOLICITATION Our Board is soliciting your vote on matters that will be presented at the Annual Meeting and at any adjournment or postponement thereof. This proxy statementProxy Statement contains information on these matters to assist you in voting your shares. This proxy statementProxy Statement and the proxy card are being furnished to our shareholders on or about March 23, 2018.April 1, 2022. This proxy statementProxy Statement and our 20172021 Annual Report are available to holders of our common stock at www.proxyvote.com. If you would like to receive, without charge, a paper copy of our 2017 Annual Report, including the financial statements, please send your request to Chief Financial Officer, Recro Pharma, Inc., 490 Lapp Road, Malvern, PA 19355. www.proxyvote.com. SHAREHOLDERS ENTITLED TO VOTE All shareholders of record of our common stock par value $0.01 per share, at the close of business on March 19, 2018,21, 2022, or the Record Date, are entitled to receive the Notice and to vote their shares at the Annual Meeting. As of that date, 19,398,66456,471,866 shares of our common stock were outstanding. Each share is entitled to one vote on each matter properly brought to the meeting. VOTING METHODS You may vote at the Annual Meeting by delivering a proxy card in person (virtually) or you may cast your vote in any of the following ways: | | | | |   | |   | |   | | | | Mailing your signed proxy card or
voter instruction card.card | | Using the Internet
internet atwww.proxyvote.com. | | Calling toll-free from the United
States, U.S. territories and
Canada to1-800-690-6903. |
HOW YOUR SHARES WILL BE VOTED In each case, your shares will be voted as you instruct. If you return a signed card, but do not provide voting instructions, your shares will be voted FOR each of the proposals.proposals in Items 1, 2, 3, and 4. If you are the record holder of your shares, you may revoke or change your vote any time before the proxy is exercisedexercised. To do so, you must do one of the following: Vote over the internet or by filing withtelephone as instructed above. Only your latest internet or telephone vote is counted. You may not revoke or change your vote over the internet or by telephone after 11:59 p.m., Eastern time, on May 17, 2022; Sign a new proxy card and submit it by mail, which must be received no later than May 17, 2022. Only your latest dated proxy card will be counted; | • | | Virtually attend the Annual Meeting at www.virtualshareholdermeeting.com/SCTL2022. Virtually attending the Annual Meeting will not by itself revoke a previously granted proxy; or |
Give our Corporate Secretary awritten notice of revocationbefore or a duly executed proxy bearing a later date. You may also vote in person at the meeting although attendance at the meeting will not by itselfthat you want to revoke a previously grantedyour proxy. If your shares are held by your broker, bank or other holder of record as a nominee or agent (i.e., the shares are held in “street name”), you should follow the instructions provided by your broker, bank or other holder of record. Deadline for Voting. The deadline for voting by telephone or Internetinternet, other than virtually attending the Annual Meeting, is 11:59 PMp.m., Eastern Timetime on May 3, 2018.17, 2022. If you are a registered shareholder and virtually attend the meeting,Annual Meeting, you may deliver your completed proxy card in person. “Street name” shareholders who wish to vote atonline during the meeting will need to obtain a proxy form from the institution that holds their shares. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 1
| GENERAL INFORMATION ABOUT THE MEETING
(continued)
|
Meeting. BROKER VOTING AND VOTES REQUIRED FOR EACH PROPOSAL If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in street name. The Notice has been forwarded to you by your broker, bank or other holder of record who is considered the shareholder of record of those shares. As the beneficial owner, you may direct your broker, bank or other holder of record on how to vote your shares by using the proxy card included in the materials made available or by following their instructions for voting on the Internet.internet. A brokernon-vote occurs when a broker or other nominee that holds shares for another does not vote on a particular item because the nominee does not have discretionary voting authority for that item and has not received instructions from the beneficial owner of the shares. The following table summarizes how brokernon-votes and abstentions are treated with respect to our proposals: | | | | | | | | | | | | Proposal | | Votes Required | | Treatment of
Abstentions and Broker
Non-Votes | | Broker
Discretionary
Voting | | | | | Item 1: Election of Class II directors for a three-year term expiring in 2025 | | Plurality of the
votes cast | | Abstentions and broker non-votes will not be taken into account in determining the outcome of the proposal | | No | | | | | Item 2: Approval of a one-time stock option exchange for non-executive employees | | Majority of the
votes cast | | Abstentions and broker non-votes will not be taken into account in determining the outcome of the proposal | | No | | | | | Item 3: Approval, on an advisory basis, of the compensation of our named executive officers | | Majority of the
votes cast | | Abstentions and broker non-votes will not be taken into account in determining the outcome of the proposal | | No | | | | | Item 4: Ratification of appointment of KPMG LLP as our independent registered public accounting firm for 2022 | | Broker
Discretionary
Voting
| Item 1: ElectionMajority of Class I Directors for a Three-Year Term Expiring in 2021
| | Plurality of the
votes cast
| | Abstentions and brokernon-votes will not be taken into account in determining the outcome of the proposal | | No | Item 2: Ratification of Appointment of KPMG LLP as our Independent Registered Public Accounting Firm for 2018
| | Majority of the votes cast
| | Abstentions and brokernon-votes will not be taken into account in determining the outcome of the proposal
| | Yes | Item 3: Approval of Recro Pharma, Inc.’s 2018 Amended and Restated Equity Incentive Plan
| | Majority of the votes cast
| | Abstentions and brokernon-votes will not be taken into account in determining the outcome of the proposal
| | No
|
QUORUM We must have a quorum to conduct business at the Annual Meeting. A quorum consists of the presence at the meeting either in personvirtually or represented by proxy of the holders of a majority of the outstanding shares of our common stock entitled to vote. For the purpose of establishing a quorum, abstentions, including brokers holding customers’ shares of record who cause abstentions to be recorded at the meeting,Annual Meeting, and brokernon-votes are considered shareholders who are present and entitled to vote, and count toward the quorum. If there is no quorum, the holders of a majority of shares present atvirtually attending the meetingAnnual Meeting in person or represented by proxy or the chairman of the meetingAnnual Meeting may adjourn the meeting to another date. PROXY SOLICITATION COSTS We pay the cost of soliciting proxies. Proxies will be solicited on behalf of the Board by mail, telephone, and other electronic means or in person. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners. HOUSEHOLDING The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and other Annual Meeting materials with respect to two or more shareholders sharing the same address by delivering a proxy statement or other Annual Meeting materials addressed to those shareholders. This process, which is commonly referred to as householding, potentially provides extra convenience for shareholders and cost savings for companies. Shareholders who participate in householding will continue to be able to access and receive separate proxy cards. If you share an address with another shareholder and have received multiple copies of our proxy materials, you may write us at the address below to request delivery of a single copy of the Notice of Annual MeetingInternet Availability of ShareholdersProxy Materials and, 2018 Proxy Statement | 2if applicable, other proxy materials in the future. We undertake to deliver promptly upon written or oral request a separate copy of the proxy materials, as requested, to a shareholder at a shared address to which a single copy of the proxy materials was delivered. If you hold stock as a record shareholder and prefer to receive separate copies of our proxy materials either now or in the future, please contact us at 1 E. Uwchlan Ave., Suite 112, Exton, Pennsylvania 19341, Attn: Corporate Secretary. If your stock is held through a brokerage firm or bank and you prefer to receive separate copies of our proxy materials either now or in the future, please contact your brokerage firm or bank.
Our Board has nominated Winston J. ChurchillDavid Enloe, Jr. and Wayne B. Weisman forre-electionBryan M. Reasons as Class II directors at our Annual Meeting to hold office until our 2021 annual meeting2025 Annual Meeting of shareholders.Shareholders. Our Board is our company’sthe Company’s ultimate decision-making body, except with respect to those matters reserved to the shareholders. Our boardBoard selects the members of our senior management team, who in turn are responsible for theday-to-day operations of our company.the Company. Our Board acts as an advisor and counselor to senior management and oversees its performance. Our Board consists of directors divided into three classes, with each class holding office for a three-year term. Winston J. ChurchillDavid Enloe, Jr. and Wayne B. Weisman,Bryan M. Reasons, current Class I Directors,II directors, have been nominated by our Board for electionre-election at the Annual Meeting for three-year terms that will expire at the 20212025 Annual Meeting of Shareholders and until their successors, if any, are elected or appointed, or their earlier death, resignation, retirement, disqualification or removal. Each of the nominees has agreed to be named and to serve, and we expect each nominee to be able to serve if elected. If any nominee is unable to serve, the Nominating and Corporate Governance Committee, or the Governance Committee, of our Board will recommend to our Board a replacement nominee. The Board may then designate the other nominee to stand for election. If you voted for the unavailable nominee, your vote will be cast for his or her replacement. BOARD STRUCTURE AND COMPOSITION The Governance Committee of our Board is responsible for recommending the composition and structure of our Board and for developing criteria for Board membership. ThisThe Governance Committee regularly reviews director competencies, qualities and experiences, with the goal of ensuring that our Board is comprised of an effective team of directors who function collegially and who are able to apply their experience toward meaningful contributions to general corporateour business strategy and oversight of corporateour performance, risk management, organizational development and succession planning. Our Third Amended and Restated Bylaws, or Bylaws, provide that the number of members of our Board shall be fixed by the Board from time to time. Our Board is currently fixed at eight members andmembers. Our Board is divided into three classes with staggered three-year terms. The Governance Committee is responsible for identifying individuals that the Committeeit believes are qualified to become Board members. BOARD DIVERSITY Board diversity and inclusion is critical to our success. While we do not have a formal policy on Board diversity, the Board is committed to building a Board that consists of the optimal mix of skills, expertise, and diversity capable of effectively overseeing the execution of our business and meeting our evolving needs, with diversity reflecting gender, age, race, ethnicity, background, professional experience and perspectives. The Governance Committee has identified certain criteria that it will consider in identifying director nominees. These criteria include: personal integrity and ethical character;
capability to fairly and equally represent our shareholders;
demonstrated achievement in one or more fields of business, professional, governmental, communal, scientific or education endeavor;
sound business judgment demonstrating an ability to function effectively in an oversight role;
business understanding regarding major issues facing public companies of a size and operation similar to the Company; and
actual and potential conflicts of interest.
The Governance Committee also considers the value of diversity on the Board in evaluating director nominees. Accordingly, the Governance Committee’s evaluation of director nominees includes consideration of their ability to contribute to the diversity of personal and professional experiences, opinions, perspectives and backgrounds on the Board.
NoticeAs presently constituted, the Board represents a deliberate mix of Annual Meetingmembers who have a deep understanding of Shareholdersour business as well as members who have different skill sets and 2018 Proxy Statement | 3points of view.
The matrix below provides certain highlights of the composition of our Board members based on self-identification. Each of the categories listed in the matrix below has the meaning as it is used in Nasdaq Listing Rule 5605(f). | | | | | | | | | | | | | | | | | | Board Diversity Matrix (As of March 21, 2022) | | | | | | | | | | | | | | | | | | Total Number of Directors | | | | | | 8 | | | | | | | | | | | | | | Female | | Male | | | | Non-Binary | | Did Not Disclose | | | | | | | | Part I: Gender Identity | | | | | | | | | | | | | | | | | | | Directors | | 1 | | 7 | | | | — | | — | | | | | | | | | Part II: Demographic Background | | | | | | | | | | | | | | | | | | African American or Black | | — | | — | | | | — | | — | | | | | | | | Alaskan Native or Native American | | — | | — | | | | — | | — | | | | | | | | Asian | | — | | — | | | | — | | — | | | | | | | | Hispanic or Latinx | | — | | — | | | | — | | — | | | | | | | | Native Hawaiian or Pacific Islander | | — | | — | | | | — | | — | | | | | | | | White | | 1 | | 7 | | | | — | | — | | | | | | | | Two or More Races or Ethnicities | | — | | — | | | | — | | — | | | | | | | | LGBTQ+ | | | | | | 1 | | | | | | | | | | | | Did Not Disclose Demographic Background | | | | | | — | | | | |
CRITERIA FOR BOARD MEMBERSHIP The Governance Committee has identified certain criteria that it will consider in identifying director nominees. Important general criteria and considerations for Board membership include: | | BOARD OF DIRECTORS (continued)GENERAL CRITERIA | Ability to contribute to the Board’s range of talent, skill and experience to provide sound and prudent guidance with respect to the Company’s strategy and operations, including, but not limited to: • Experience at senior levels in public companies; • Technology and financial expertise; • Experience in leadership roles in the life sciences, healthcare or public health fields, including experience in the areas of development and commercialization of drug products and pharmaceutical manufacturing and quality control, including oversight and expansion of contract manufacturing and development operations; • Personal integrity and ethical character, commitment and independence of thought and judgment; • Capability to fairly and equally represent our shareholders; • Confidence and willingness to express ideas and engage in constructive discussion with other Board members and management, to actively participate in the Board’s decision-making process and make difficult decisions in the best interest of the Company; • Willingness and ability to devote sufficient time, energy and attention to the affairs of the Company and the Board; and • Lack of actual and potential conflicts of interest. |
The Governance Committee also considers, on an ongoing basis, the background, experience and skills of the incumbent directors that are important to our current and future business needs, including, among others, the combined mix of experience in the following areas: | | | | | | | | | DIRECTOR SKILLSAND EXPERIENCE |  | | Business Leadership & Operations | |  | | International Business |  | | Medicine & Science | |  | | Risk Management |  | | Life Sciences, Healthcare & Public Health | |  | | Government, Regulatory & Public Policy |  | | Financing & Accounting | |  | | Pharmaceutical Manufacturing & Supply |  | | Academia | |  | | Technology |
SELECTION OF CANDIDATES Director Skill Set Considerations; Use of Matrix In recruiting and selecting Board candidates, the Governance Committee takes into account the size of the Board and considers a skills matrix. This skills matrix helps the Governance Committee determine whether a particular Board member or candidate possesses one or more of the skill sets, as well as whether those skills and/or other attributes qualify him or her for service on a particular committee. The Governance Committee also considers a wide range of additional factors, including: each director’s or candidate’s projected retirement date, to assist in Board succession planning; other positions the director or candidate holds, including other boards of directors on which he or she serves; and the independence of each director or candidate, to ensure that a substantial majority of the Board is independent. While the Company does not have a formal policy on Board diversity, the Governance Committee considers the value of diversity on the Board in evaluating director nominees. Accordingly, the Governance Committee’s evaluation of director nominees includes consideration of their ability to contribute to the diversity of personal and professional experiences, opinions, perspectives and backgrounds on the Board. POTENTIAL DIRECTOR CANDIDATES On an ongoing basis, the Governance Committee considers potential director candidates identified on its own initiative as well as candidates referred or recommended to it by other directors, members of management, search firms, shareholders and others (including individuals seeking to join the Board). Shareholders who wish to recommend candidates may contact the Governance Committee in the manner described inunder the heading “Shareholder Communications to the Board.”Board” in this Proxy Statement. Shareholder nominations must be made according to the procedures required under ourBy-laws Bylaws and described in this Proxy Statement under the heading “Requirements for Submission of Shareholder Proposals for Next Year’s Annual Meeting.” Shareholder-recommended candidates and shareholder nominees whose nominations comply with these procedures and who meet the criteria referred to above will be evaluated by the Governance Committee in the same manner as the Governance Committee’s nominees. In each of the director nominee and continuing director biographies that follow, we highlight the specific experience, qualifications, attributes and skills that led the Board to conclude that the director nominee or continuing director should serve on our Board at this time. DIRECTOR NOMINEES CLASS I DIRECTORS— PRESENTII DIRECTORS — TERMS EXPIRING AT THE ANNUAL MEETING AND PROPOSED TERMS TO EXPIRE IN 2021 All of the nominees are current directors on our Board and have been determined by our Board to be independent. Our Governance Committee reviewed the qualifications of each of the nominees and recommended to our Board that each nominee be submitted to a vote of our shareholders at the Annual Meeting. The Board approved the Committee’s recommendation on March 22, 2018.
| | | | | | | | Winston J. ChurchillDAVID ENLOE, JR. | | | | Age:77 58 Director Since: 2020 | | Committee Memberships:Compensation; Nominating and Corporate Governance (Chair) | Director Since: 2008None
| | Other Public Directorships: InnovativeNone | | | Business Leadership & Operations | | J. David Enloe, Jr. has been a member of our Board since December 2020. Mr. Enloe has served as our President and Chief Executive Officer since December 2020 and formerly served as President and Chief Executive Officer of Ajinomoto Bio-Pharma Services, a global, fully integrated CDMO from December 2013 to December 2020. Before joining Ajinomoto, Mr. Enloe served as the Head of the Viral Therapeutics Business Unit at Lonza Group AG, a Swiss multinational chemicals and biotechnology company, which unit was the result of Lonza’s acquisition of Vivante GMP Solutions, a gene therapy CDMO, that Mr. Enloe founded in June 2009 and Support, Inc.; Amkor Technology, Inc.where he served as President and CEO until its sale to Lonza AG. Before founding Vivante, Mr. Enloe spent 14 years with Introgen Therapeutics, joining as its first employee in 1995 and spending several years as Senior Vice President and COO before ultimately being named President and CEO. He is a Certified Public Accountant and started his career in public accounting with Arthur Andersen & Co. Mr. Enloe received a B.B.A. in Accounting from the University of Texas at Austin. | | | Life Sciences, Healthcare & Public Health | | | International Business | | | Government, Regulatory & Public Policy | | | Risk Management | | | Finance & Accounting | | | Medicine & Science | Skills & Qualifications: Mr. Enloe’s extensive leadership experience in the CDMO industry, including holding senior leadership positions at a number of CDMOs, along with his deep knowledge of the pharmaceutical industry and insights into the CDMO market contributed to our Board’s conclusion that he should serve as a director of our Company. |
Winston J. Churchill has been a member of our Board since 2008. Since 2007, Mr. Churchill has been a director of the corporate general partner of the common general partner of SCP Vitalife Partners II, L.P. and SCP Vitalife Partners (Israel) II, L.P., collectively referred to herein as SCP Vitalife, which beneficially owns 15.2% of our outstanding stock as of March 22, 2018. He has also served as a managing member of SCP Vitalife Management Company, LLC, which by contract provides certain management services to the common general partner of SCP Vitalife. Mr. Churchill has also served since 1993 as the President of CIP Capital Management, Inc., the general partner of CIP Capital, L.P., anSBA-licensed private equity fund. Prior to that, Mr. Churchill was a managing partner of Bradford Associates, which managed private equity funds on behalf of Bessemer Securities Corporation and Bessemer Trust Company. From 1967 to 1983, Mr. Churchill practiced law at the Philadelphia firm of Saul Ewing, LLP, where he served as Chairman of the Banking and Financial Institutions Department, Chairman of the Finance Committee and was a member of the Executive Committee. Mr. Churchill is a director of Innovative Solutions and Support, Inc., Amkor Technology, Inc. and various SCP Vitalife portfolio companies and he previously served as a director of Griffin Industrial Realty from April 1997 until May 2016. In addition, he serves as a director on the boards of a number of charities and as a trustee of educational institutions, including the Gesu School and Young Scholars Charter School and is a Trustee Fellow of Fordham University. From 1989 to 1993, Mr. Churchill served as Chairman of the Finance Committee of the Pennsylvania Public School Employees’ Retirement System. He was awarded a B.S. in Physics, summa cum laude, from Fordham University followed by an M.A. in Economics from Oxford University, where he studied as a Rhodes Scholar, and a J.D. from Yale Law School.
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Skills & Qualifications: Mr. Churchill’s insight into financial and investment matters from his experience in private equity investing in life sciences companies, his financial and corporate governance experience from serving on numerous public and private boards of directors, as well as his long service as a director on our Board, where he gained extensive knowledge of our business and history, contributed to our Board’s conclusion that he should serve as a director of our company.
| | | | | | BRYAN M. REASONSWayne B. Weisman | | | | Age: 6254 Director Since: 2017 | | Committee Memberships:Memberships Nominating and Corporate Governance | Director Since: 2008
:
Audit (Chair) | | Other Public Directorships:Directorships ReWalk Robotics:
Aclaris Therapeutics, Inc. | | | Business Leadership & Operations | | Bryan M. Reasons has been a member of our Board since 2017. Mr. Reasons has served as the Chief Financial Officer of Mallinckrodt plc, a global specialty pharmaceutical company since March 2019. Prior to that, Mr. Reasons served as the Senior Vice President, Finance and Chief Financial Officer of Impax Laboratories, Inc., or Impax, a specialty pharmaceutical company, from December 2012 until February 2019. He previously served as the Acting Chief Financial Officer of Impax from June 2012 to December 2012 and as the Vice President, Finance of Impax from January 2012 to June 2012. Prior to joining Impax, Mr. Reasons served as Vice President, Finance, from January 2010 to November 2011 and as Vice President, Risk Management and General Auditor, from October 2005 to January 2010 at Cephalon, Inc., or Cephalon, a biopharmaceutical company. Following the acquisition of Cephalon by Teva Pharmaceutical Industries Ltd., or Teva, a generic pharmaceuticals company, he served as Vice President, Finance of Teva from November 2011 to January 2012. Prior to joining Cephalon, Mr. Reasons held various finance management positions at E.I. Du Pont De Nemours and Company from 2003 to 2005 and served as senior manager at PricewaterhouseCoopers LLP from 1992 to 2003. Mr. Reasons currently serves as a director and chair of the audit committee of Aclaris Therapeutics, Inc., a position he has held since April 2018. Mr. Reasons has a B.S. in accounting from Pennsylvania State University and an M.B.A. from Widener University and is a certified public accountant. | | | Finance & Accounting | | | Life Sciences, Healthcare & Public Health | | | Risk Management | | | | | | | | | | Skills & Qualifications: Mr. Reasons’ extensive experience in the pharmaceutical industry, including his experience in senior leadership positions at a number of large pharmaceutical companies, as well as his expertise in financial and accounting matters, contributed to our Board’s conclusion that he should serve as a director of our Company. |
Wayne B. Weismanhas been a member and the chairman of our Board since 2008. Since 2007, Mr. Weisman has been a director of the corporate general partner of the common general partner of SCP Vitalife, which beneficially owns approximately 15.2% of our outstanding stock as of March 22, 2018. He has also served as a managing member of SCP Vitalife Management Company, LLC, which by contract provides certain management services to the common general partner of SCP Vitalife. He has also led the activities of SCP Private Equity Partners II, L.P., a venture capital fund of which he and Mr. Churchill are principals, in the life sciences area; these activities include investments in the United States and Israel. He has also led several other technology investments for SCP Private Equity Partners II, L.P. He has been a member of the investment committee of the Vitalife Life Sciences funds since their inception in 2002 and has worked closely with these funds since then. Mr. Weisman was a member of the board of directors of CIP Capital L.P., a small business investment company licensed by the U.S. Small Business Administration since its inception in 1991 until 2017. From 1992 to 1994, Mr. Weisman was executive vice president and member of the board of a public drug delivery technology company. In addition, he also operated a management and financial advisory firm focusing on the reorganization and turnaround of troubled companies and began his career practicing reorganization law at a large Philadelphia law firm. Mr. Weisman possesses extensive experience in venture capital investing, particularly in the life sciences area. In addition to being our Chairman, Mr. Weisman serves on the board of directors of ReWalk Robotics Ltd. and on the board of directors for a number of private companies. He is the vice-chairman of the board of trustees of Young Scholars Charter School. He is also an advisory board member of the Philadelphia-Israel Chamber of Commerce andMid-Atlantic Diamond Ventures, the venture forum of Temple University. Mr. Weisman holds a B.A. from the University of Pennsylvania, and a J.D. from the University of Michigan Law School.
Skills & Qualifications:Mr. Weisman’s leadership as a director of various pharmaceutical and healthcare companies, his experience serving on the board of directors of life sciences companies, his insight into the legal issues facing our business, as well as hisin-depth knowledge of our business and history as a long time director, contributed to our Board’s conclusion that he should serve as a director of our company.
CONTINUING DIRECTORS CLASS IIIII DIRECTORS —TERMS— TERMS EXPIRING AT THE 20192023 ANNUAL MEETING OF SHAREHOLDERS | | | | | | | | WILLIAM L. ASHTONKaren Flynn | | | | Age:55 71 Director Since: 2009 | | Committee Memberships:Memberships Audit; :
Compensation (Chair) | Director Since: 2015
and Governance | | Other Public Directorships:Directorships:
Spectrum Pharmaceuticals, Inc.; Baudax Bio, Inc. | | | Business Leadership & Operations | | William L. Ashton has been a member of our Board since 2009. Since the beginning of 2013, Mr. Ashton has been a principal at Harrison Consulting Group, Inc., a privately-held biopharmaceutical consulting firm. From August 2009 to June 2013, Mr. Ashton was the senior vice president of external affairs reporting to the president and an assistant professor at the University of the Sciences in Philadelphia, Pennsylvania. From August 2005 to August 2009, Mr. Ashton was the founding Dean of the Mayes College of Healthcare Business and Policy. Mr. Ashton has 29 years’ experience in the biopharmaceutical industry. From 1989 to 2005, Mr. Ashton held a number of positions at Amgen Inc., a biotechnology company, including vice president of U.S. sales and vice president of commercial and government affairs. Mr. Ashton currently serves on the boards of directors of Spectrum Pharmaceuticals, Inc. and Baudax Bio. He previously served on the board of directors of Galena Biopharma, Inc. from April 2013 until January 2018. He is also a member of the board of directors of the National Osteoporosis Foundation and Friends of the National Library of Medicine at the National Institutes of Health. Mr. Ashton holds a B.S. in Education, from the California University of Pennsylvania and an M.A. in Education, from the University of Pittsburgh. | | | Government, Regulatory & Public Policy | | | Risk Management | | | Academia | | | Medicine & Science | Skills & Qualifications: NoneMr. Ashton’s extensive experience with pharmaceutical and biological product commercialization and reimbursement issues, including developing and leading a commercial sales force, his past advisory role during the early years of Auxilium Pharmaceuticals, Inc., as well as his governance experience as a board member of public and privately-held companies and his reimbursement and scientific expertise contributed to our Board’s conclusion that he should serve as a director of our Company. |
Karen Flynn has been a member of our Board since 2015. Ms. Flynn has served as Senior Vice President and Chief Commercial Officer of West Pharmaceutical Services, Inc., or West, a manufacturer of packaging components and delivery systems for healthcare products, since January 2016. Prior to that, Ms. Flynn served as President of the
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Pharmaceutical Packaging Systems of West from October 2014 to January 2016. Prior to her appointment as President of the Pharmaceutical Packaging Systems, Ms. Flynn served as President, Americas Region, Pharmaceutical Packaging Systems at West, where she was responsible for the Americas regional business segment, including both the manufacturing and commercial aspects of the business. From 2000 to 2008, Ms. Flynn worked in the Sales Management department of Catalent (formerly known as a division of Cardinal Health), a drug development, delivery and supply partner for drugs, biologics and consumer health products, where she ultimately served as Vice President, Global Accounts. Prior to joining Catalent, Ms. Flynn spent 15 years at West, in roles spanning Quality, R&D, Technical Services and Sales. She is a member of the Healthcare Businesswomen’s Association and the Forum of Executive Women, and she serves on the Downingtown STEM Academy Advisory Board. Ms. Flynn holds a B.S. inPre-Professional Studies(Pre-Med) from The University of Notre Dame, an M.S. in Business Administration from Boston University, and an M.S. in Engineering from The University of Pennsylvania.
Skills & Qualifications:Ms. Flynn’s extensive experience in the pharmaceutical industry, including her experience in senior leadership positions working at and with large pharmaceutical companies, as well as her insight into the manufacture of pharmaceutical products, contributed to our Board’s conclusion that she should serve as a director of our company.
| | | | | | DR. MICHAEL BERELOWITZGerri Henwood | | | | Age:65 77 Director Since: 2014 | | Committee Memberships:Memberships None | Director Since: 2008
:
Governance (Chair) | | Other Public Directorships:Directorships: Tetraphase Pharmaceuticals, Inc. |
Gerri Henwoodhas served as our President and Chief Executive Officer and a member of our Board since our inception in 2008. From 2006 to 2013, Ms. Henwood served as the President of Malvern Consulting Group, or MCG, a pharmaceutical incubator and consulting firm. From 1999 to 2006, Ms. Henwood was the President and Chief Executive Officer of Auxilium Pharmaceuticals, Inc., or Auxilium, a biopharmaceutical company she founded in late 1999. From 1985 to 1999, Ms. Henwood was the founder and Chief Executive Officer of IBAH, Inc., or IBAH, a contract research organization. Ms. Henwood began her career with Smith Kline & French, now part of GlaxoSmithKline plc, in the pharmaceutical management program. She rose through the ranks to be a brand manager, then the head of Regulatory and Medical Affairs for the U.S. business and then to the position of Group Director—Marketing in the International Pharmaceutical Division. Ms. Henwood currently serves on the board of directors of Tetraphase Pharmaceuticals, Inc., a clinical stage biopharmaceutical company, a position she has held since May 2015, and she previously served on the board of directors of Alkermes, Inc. and its successor company, Alkermes, plc, a global biopharmaceutical company, from 2003 until March 2015, and on the board of directors of MAP Pharmaceuticals, Inc., a biopharmaceuticals company, from 2004 until its acquisition by Allergan, Inc. in March 2013. Ms. Henwood also serves on the compensation committee of the board of directors of Tetraphase Pharmaceuticals, Inc. Ms. Henwood holds a B.S. in Biology from Neumann University.
Skills & Qualifications:Ms. Henwood’s strong background in clinical and product development and substantial knowledge of the pharmaceutical industry, her expertise in developing, financing and providing strong executive leadership to numerous biopharmaceutical companies, her corporate governance experience as a board member of multiple publicly-traded and privately-held companies, as well as her extensive knowledge of our business and history as a founder of our company, contributed to our Board’s conclusion that she should serve as a director of our company.
| | None | Bryan M. Reasons
| | Medicine & Science | | Dr. Michael Berelowitz has been a member of our Board since 2014. Since 2011, Dr. Berelowitz has served as our biopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz was Senior Vice President and Head of Clinical Development and Medical Affairs in the Specialty Care Business Unit at Pfizer, Inc., or Pfizer, a pharmaceutical company. From 1996 to 2009, he held various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes Clinical Research team and then assuming positions of increasing responsibility. Prior to that, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz previously served on the board of directors of Oramed Pharmaceuticals Inc. from June 2010 to August 2016, Kamada Ltd. and Cellect Biotherapeutics Ltd. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association and the Clinical Initiatives Committee of the Endocrine Society and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorial boards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes. Dr. Berelowitz has authored and co-authored more than 100 peer-reviewed journal articles and book chapters in the areas of pituitary growth hormone regulation, diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY — StonyBrook and Mt. Sinai School of Medicine in New York. Dr. Berelowitz holds a MBChB degree from University of Cape Town School of Medicine. | | | Life Sciences, Healthcare & Public Health | | | Academia | | | Government, Regulatory & Public Policy | | | Risk Management | | | | Skills & Qualifications: Dr. Berelowitz’s years of experience in management roles in the pharmaceutical industry, his experience in overseeing and reviewing clinical trials and drug development, as well as his vast medical skill and scientific expertise in the fields of endocrinology and diabetes, contributed to our Board’s conclusion that he should serve as a director of our Company. |
| | | | | | | | | LAURA L. PARKS, PH.D. | | | | Age:50 63 Director Since: 2021 | | Committee Memberships:Memberships:
Audit (Chair) | Director Since: 2017
and Compensation | | Other Public Directorships:Directorships: None |
| | Business Leadership & Operations | | Laura L. Parks, Ph.D. has been a member of our Board since 2021. Dr. Parks has most recently served on the executive leadership team at Patheon, a global biopharma CDMO, until its acquisition by Thermo Fischer Scientific in 2017. In this role, she led strategic commercial and operational initiatives including development and execution of an end-to-end pharmaceutical services offering, as well as global strategic enterprise accounts organization. Prior to her role with Patheon, she served as president of DSM Pharmaceuticals, the CDMO subsidiary of DSM focused on finished dose pharmaceuticals, including sterile injectables, orals and topicals, from June 2012 until its merger in March 2014 with Patheon. Dr. Parks also has extensive experience in the food ingredient industry, having served as vice president of sales for Solae, a division of DuPont. While at Solae, Dr. Parks also held the position of regional vice president, North America, leading the company’s $120 million food ingredients business. She currently serves on the advisory board of Lindy BioSciences, a Durham, NC-based development-stage protein therapeutic formulations company. Dr. Parks earned a Ph.D. in food science from the University of Georgia and bachelor’s degree from Ohio State University. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 6
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| | Government, Regulatory & Public Policy | | | Risk Management | | | Academia | | | Medicine & Science | | | | (continued)Skills & Qualifications: Dr. Parks’ extensive executive leadership experience as well as her many years of experience in the biopharma industry contributed to our Board’s conclusion that she should serve as a director of our Company.
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Bryan M. Reasonshas been a director of the Company since 2017. Mr. Reasons has served as the Senior Vice President, Finance and Chief Financial Officer of Impax Laboratories, Inc., or Impax, a specialty pharmaceutical company, since December 2012. He previously served as the Acting Chief Financial Officer of Impax from June 2012 to December 2012 and as the Vice President, Finance of Impax from January 2012 to June 2012. Prior to joining Impax, Mr. Reasons served as Vice President, Finance, from January 2010 to November 2011 and as Vice President, Risk Management and General Auditor, from October 2005 to January 2010 at Cephalon, Inc., or Cephalon, a biopharmaceutical company. Following the acquisition of Cephalon by Teva Pharmaceutical Industries Ltd., a generic pharmaceuticals company, he served as Vice President, Finance of Teva from November 2011 to January 2012. Prior to joining Cephalon, Mr. Reasons held various finance management positions at E.I. Du Pont De Nemours and Company from 2003 to 2005 and served as senior manager at PricewaterhouseCoopers LLP from 1992 to 2003. Mr. Reasons has a B.S. in accounting from Pennsylvania State University and an M.B.A. from Widener University and is a certified public accountant.
Skills & Qualifications:Mr. Reasons’s extensive experience in the pharmaceutical industry, including his experience in senior leadership positions at a number of large pharmaceutical companies, as well as his expertise in financial and accounting matters, contributed to our Board’s conclusion that he should serve as a director of our company.
CLASS IIII DIRECTORS — TERMS EXPIRING AT THE 20202024 ANNUAL MEETING OF SHAREHOLDERS | | | | | | | | WINSTON CHURCHILLAlfred Altomari | | | | Age:59 81 Director Since: 2008 | | Committee Memberships:
Audit and Compensation | | Other Public Directorships: Innovative Solutions and Support, Inc., Amkor Technology, Inc., Baudax Bio, Inc. | | | Business Leadership & Operations | | Winston J. Churchill has been a member of our Board since 2008. Since 2007, Mr. Churchill has been a director of the corporate general partner of the common general partner of SCP Vitalife Partners II, L.P. and SCP Vitalife Partners (Israel) II, L.P., collectively referred to herein as SCP Vitalife. He has also served as a managing member of SCP Vitalife Management Company, LLC, which by contract provides certain management services to the common general partner of SCP Vitalife. Mr. Churchill has also served since 1993 as the President of CIP Capital Management, Inc., the general partner of CIP Capital, L.P., a Small Business Administration-licensed private equity fund. Prior to that, Mr. Churchill was a managing partner of Bradford Associates, which managed private equity funds on behalf of Bessemer Securities Corporation and Bessemer Trust Company. From 1967 to 1983, Mr. Churchill practiced law at the Philadelphia firm of Saul Ewing, LLP, where he served as Chairman of the Banking and Financial Institutions Department, Chairman of the Finance Committee and was a member of the Executive Committee. Mr. Churchill is a director of Innovative Solutions and Support, Inc., Amkor Technology, Inc., Baudax Bio and various SCP Vitalife portfolio companies and he previously served as a director of Griffin Industrial Realty from April 1997 until May 2016. In addition, he serves as a director on the boards of a number of charities and as a trustee of educational institutions including the Gesu School and Young Scholars Charter School and is a Trustee Fellow of Fordham University. From 1989 to 1993, Mr. Churchill served as Chairman of the Finance Committee of the Pennsylvania Public School Employees’ Retirement System. He was awarded a B.S. in Physics, summa cum laude, from Fordham University followed by an M.A. in Economics from Oxford University, where he studied as a Rhodes Scholar, and a J.D. from Yale Law School. | | | Finance & Accounting | | | Medicine & Science | | | Risk Management | | | Life Sciences, Healthcare & Public Health | | | Technology | | | | | | | | | | Skills & Qualifications: Mr. Churchill’s insight into financial and investment matters from his experience in private equity investing in life sciences companies, his financial and corporate governance experience from serving on numerous public and private boards of directors, as well as his long service as a director on our Board, where he gained extensive knowledge of our business and history, contributed to our Board’s conclusion that he should serve as a director of our Company. |
| | | | | | | | | JAMES C. MILLER | | | | Age: 71 Director Since: 2021 | | Committee Memberships:
Audit and Compensation | | Other Public Directorships: None. |  | | Pharmaceutical Manufacturing & Supply | | James Miller has been a member of our Board since February 2021. Mr. Miller previously served as the founder and president of PharmSource Information Services, Inc., a market intelligence service, from 1996 to February 2018. Since February 2018, Mr. Miller has provided pharmaceutical manufacturing strategy consulting services to various pharmaceutical manufacturing companies. Mr. Miller previously served as a consultant in corporate strategy at the Boston Consulting Group and as an economist at The World Bank. Mr. Miller serves on the advisory boards of Ajinomoto Bio-Pharma Services, a contract development and manufacturing organization, and C-Squared Pharma, a generic active pharmaceutical ingredient supplier. Mr. Miller received a bachelors in International Study and Economics from American University, a Masters of Regional Planning at the University of North Carolina, Chapel Hill and an MBA from Stanford University Graduate School of Business. | | | Business Leadership & Operations | | | Financing & Accounting | | | Life Sciences, Healthcare & Public Health | | | Medicine & Science | Skills & Qualifications: Mr. Millers’ extensive experience with pharmaceutical and biological contract manufacturing and development, his deep industry knowledge and his experience as a pharmaceutical and biological manufacturing consultant contributed to our Board’s conclusion that he should serve as a director of our Company. |
| | | | | | | | | WAYNE B. WEISMAN | | | | Age: 66 Director Since: 2008 | | Committee Memberships:Audit; Compensation | Director Since: 2014
Governance | | Other Public Directorships: Agile Therapeutics,ReWalk Robotics Ltd., Baudax Bio, Inc.; Insmed Incorporated |
Alfred Altomari has been a member of our Board since 2014. Mr. Altomari has served as Chairman, President and Chief Executive Officer of Agile Therapeutics, Inc., or Agile, a specialty pharmaceutical company focused on the development and commercialization of new prescription contraceptive products, since October 2010. Mr. Altomari is also a member of the board of directors of Agile and prior to being named President and Chief Executive Officer, he served as Agile’s Executive Chairman from 2004 to 2010. From 2008 to September 2010, Mr. Altomari also served as a consultant. From 2003 to 2008, Mr. Altomari held multiple senior management positions, including Chief Commercial Officer, Chief Operating Officer, and Chief Executive Officer, at Barrier Therapeutics, Inc., a pharmaceutical company that developed and marketed dermatology products. In 2008, in his role as Chief Executive Officer and as a member of Barrier’s board of directors, Mr. Altomari completed the successful sale of Barrier to Stiefel Laboratories, which was subsequently acquired by GlaxoSmithKline plc. From 1982 to 2003, Mr. Altomari held numerous executive roles in general management, commercial operations, business development, product launch preparation, and finance with Johnson & Johnson. Mr. Altomari also serves on the board of directors of Insmed Incorporated. Mr. Altomari received an M.B.A. from Rider University and his B.S. from Drexel University.
Skills & Qualifications:Mr. Altomari’s extensive experience in the pharmaceutical industry, in senior leadership positions at both large and specialty pharmaceutical companies as well as his experience in the development, commercialization and launch of numerous pharmaceutical products, contributed to our Board’s conclusion that he should serve as a director of our company.
| | | William L. Ashton
| | Business Leadership & Operations | | Wayne B. Weisman has been a member and the chairman of our Board since 2008. Since 2007, Mr. Weisman has been a director of the corporate general partner of the common general partner of SCP Vitalife. He has also served as a managing member of SCP Vitalife Management Company, LLC, which by contract provides certain management services to the common general partner of SCP Vitalife. He has also led the activities of SCP Private Equity Partners II, L.P., a venture capital fund of which he and Mr. Churchill are principals, in the life sciences area; these activities include investments in the United States and Israel. He has also led several other technology investments for SCP Private Equity Partners II, L.P. He has been a member of the investment committee of the Vitalife Life Sciences funds since their inception in 2002 and has worked closely with these funds since then. Mr. Weisman was a member of the board of directors of CIP Capital, L.P., a small business investment company licensed by the U.S. Small Business Administration since its inception in 1991 until 2017. From 1992 to 1994, Mr. Weisman was executive vice president and member of the board of a public drug delivery technology company. In addition, he also operated a management and financial advisory firm focusing on the reorganization and turnaround of troubled companies and began his career practicing reorganization law at a large Philadelphia law firm. Mr. Weisman possesses extensive experience in venture capital investing, particularly in the life sciences area. In addition to being our Chairman, Mr. Weisman serves on the board of directors of ReWalk Robotics Ltd. and Baudax Bio and on the board of directors for a number of private companies. He is the Vice Chairman of the board of trustees of Young Scholars Charter School, and was chairman of that board from 2010 to 2017. He is also an advisory board member of the Philadelphia-Israel Chamber of Commerce and Mid-Atlantic Diamond Ventures, the venture forum of Temple University. Mr. Weisman holds a B.A. from the University of Pennsylvania, and a J.D. from the University of Michigan Law School. | | | Finance & Accounting | Age:67
| | Committee Memberships: CompensationMedicine & Science | Director Since: 2009
| | Other Life Sciences, Healthcare & Public Directorships:Health | | | International Business | | | Risk Management | | | Technology | Skills & Qualifications: Spectrum Pharmaceuticals, Inc.As a long time director of our company, Mr. Weisman’s extensive knowledge of our business and history, experience as a board member of multiple publicly-traded and privately-held companies and expertise in developing, financing and providing strong executive leadership to numerous growing life science companies contributed to our Board’s conclusion that he should serve as a director of our Company. |
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| BOARD OF DIRECTORS (continued)
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William L. Ashton has been a member of our Board since 2009. Since the beginning of 2013, Mr. Ashton has been a principal at Harrison Consulting Group, Inc., a privately-held biopharmaceutical consulting firm. From August 2009 to June 2013, Mr. Ashton was the senior vice president of external affairs reporting to the president and an assistant professor at the University of the Sciences in Philadelphia, Pennsylvania. From August 2005 to August 2009, Mr. Ashton was the founding Dean of the Mayes College of Healthcare Business and Policy. Mr. Ashton has 29 years’ experience in the biopharmaceutical industry. From 1989 to 2005, Mr. Ashton held a number of positions at Amgen Inc., a biotechnology company, including vice president of U.S. sales and vice president of commercial and government affairs. Mr. Ashton currently serves on the boards of directors of Spectrum Pharmaceuticals, Inc. since February 2018, and previously served on the board of directors of Galena Biopharma, Inc. from April 2013 until January 2018. He is also a member of the board of directors of the Academy of Notre Dame and Loyola University. Mr. Ashton holds a B.S., Education, from the California University of Pennsylvania and an M.A., Education, from the University of Pittsburgh.
Skills & Qualifications:Mr. Ashton’s extensive experience with pharmaceutical and biological product commercialization, including developing and leading a commercial sales force, as well as his governance experience as a board member of public and privately-held companies and his reimbursement expertise contributed to our Board’s conclusion that he should serve as a director of our company.
| | | Dr. Michael Berelowitz
| | | Age:71
| | Committee Memberships: Audit; Nominating and Corporate Governance | Director Since: 2014
| | Other Public Directorships: Kamada Ltd.; Cellect Biotherapeutics Ltd. |
Dr. Michael Berelowitz has been a member of our Board since 2014. Since 2011, Dr. Berelowitz has served as a biopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz was Senior Vice President and Head of Clinical Development and Medical Affairs in the Specialty Care Business Unit at Pfizer, Inc., a pharmaceutical company. From 1996 to 2009, he held various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes Clinical Research team and then assuming positions of increasing responsibility. Prior to that, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serves on the board of directors of Kamada Ltd. and Cellect Biotherapeutics Ltd., and he previously served on the board of directors of Oramed Pharmaceuticals Inc. from June 2010 to August 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association and the Clinical Initiatives Committee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorial boards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes. Dr. Berelowitz has authored andco-authored more than 100 peer-reviewed journal articles and book chapters in the areas of pituitary growth hormone regulation, diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY – StonyBrook and Mt. Sinai School of Medicine in New York. Dr. Berelowitz holds a MBChB degree from University of Cape Town-School of Medicine.
Skills & Qualifications:Dr. Berelowitz’s years of experience in management roles in the pharmaceuticals industry, his experience in overseeing and reviewing clinical trials and drug development, as well as his vast medical and scientific expertise, contributed to our Board’s conclusion that he should serve as a director of our company.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 8
| CORPORATE GOVERNANCE AND RISK MANAGEMENT MANAGEMENT
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We are committed to good corporate governance and integrity in our business dealings. Our governance practices are documented in our Second Amended and Restated Articles of Incorporation, as amended, or Articles of Incorporation, our Bylaws, our Code of Business Conduct and Ethics, or the Code of Conduct, our Corporate Governance Guidelines and the charters of the committees of theour Board, or collectively, the Committees. Aspects of our governance documents are summarized below. You can find our charters for each Committee of the board and our Code of Conduct on our website www.recropharma.com www.societalcdmo.com under “News & Investors—Corporate Governance—“Investors — Governance — Governance Documents.” BOARD INDEPENDENCE Our Board has determined allthat each individual that served as a director of our directors,the Company during the year ended December 31, 2021, except for Ms. Henwood areand Mr. Enloe, was an “independent” directors,director, as defined under the rules of the NASDAQNasdaq Capital Market, or NASDAQ. Nasdaq. Ms. Henwood resigned as a director on January 18, 2022. In making such determination, the Board considered the relationships that each suchnon-employee director has with the Company and all other facts and circumstances that the Board deemed relevant in determining their independence, including the beneficial ownership of our common stock by eachnon-employee director. Our independent directors generally meet in executive session at each regularly scheduled boardBoard meeting. BOARD LEADERSHIP STRUCTURE The Board does not have a formal policy with respect to the separation of the offices of chief executive officer,Chief Executive Officer, or CEO, and Chairman of the Board. It is the Board’s view that rather than having a rigid policy, the Board, with the advice and assistance of the Governance Committee, and upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether the two offices should be separate. Currently, our leadership structure separates the offices of CEO and Chairman of the Board with Ms. HenwoodMr. Enloe serving as our CEO and Mr. Weisman serving as Chairman of the Board. Our Board believes that the separation of the positions of CEO and Chairman of the Board reinforces the independence of the Board from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of our Board as a whole. BOARD COMMITTEES Our Board has established various Committees to assist in discharging its duties: the Audit Committee;Committee, the Compensation Committee;Committee and the Governance Committee. Each member of our Committees is an independent director as that term is defined by the SEC and NASDAQ.Nasdaq. The primary responsibilities of each of the Committees and the Committee memberships are provided below under the section entitled “Board Attendance, Committee Meetings and Committee Membership.” Each of the Committees has the authority, as its members deem appropriate, to engage legal counsel or other experts or consultants in order to assist the Committee in carrying out its responsibilities. RISK MANAGEMENT The Board’s role in risk oversight is consistent with our leadership structure, with management havingday-to-day responsibility for assessing and managing our risk exposure and the Board actively overseeing management of our risks—risks – both at the Board and Committee level. The risk oversight process includes receiving regular reports from Committees and our executive officers to enable our Board to understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations (including cyber-security)cybersecurity), finance, legal, regulatory, strategic and reputational risk. The Board focuses on the overall risks affectingwhich may affect us. Each Committee has been delegated the responsibility for the oversight of specific risks that fall within its areas of responsibility. For example: The Audit Committee oversees management of financial reporting, compliance and litigation risks, including risks related to our insurance, information technology, cybersecurity, human resources and regulatory matters, as well as the steps management has taken to monitor and control such exposures. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 9
| CORPORATE GOVERNANCE AND RISK
MANAGEMENT (continued)
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The Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation policies, plans and arrangements and the extent to which those policies or practices increase or decrease risk for the Company. The Governance Committee manages risks associated with the independence of the Board, potential conflicts of interest and the effectiveness of the Board. While each Committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through Committee reports about such risks. Matters of significant strategic risk are considered by our entire Board. EVALUATING BOARD EFFECTIVENESS The Board is committed to continuous improvement and annual self-evaluations are an important tool for evaluating effectiveness. The Board and each Committee conduct a rigorous annual self-evaluation of their performance and effectiveness. | | | | | | | | | | | | Process begins | | Evaluation | | Presentation of evaluation
results | | Follow-up | | | | | The Governance Committee initiates and oversees the Board evaluation process, which is conducted in the later part of the calendar year. Each Committee conducts an evaluation of its own effectiveness. | | During the evaluation, the Governance Committee assesses several factors, including: • Director independence and qualifications to serve on various Committees; and • Committee chair assignments and membership rotations. The Governance Committee also reviews the effectiveness of the overall evaluation process and considers whether to conduct the evaluation through an external third-party provider. In 2021, the Governance Committee determined that no modifications to the existing process were warranted and to maintain the evaluation process in its current form. | | The results of the Board and Committees’ evaluations are presented, in executive session, at a subsequent Board meeting. | | Any results requiring additional consideration are addressed at future Board and Committee meetings, as appropriate. |
CODE OF CONDUCT We have a written Code of Conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Conduct covers fundamental ethical and compliance-related principles and practices such as accurate accounting records and financial reporting, avoiding conflicts of interest, the protection and use of our property and information and compliance with legal and regulatory requirements. Any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website at www.societalcdmo.com. DIRECTOR ORIENTATION AND CONTINUING EDUCATION Our director orientation programs familiarize new directors with the Company’s businesses, strategies, and policies, and assist new directors in developing the skills and knowledge required for their service on the Board. All other directors are also invited to attend the orientation programs. From time to time, management advises, or invites outside experts to attend Board meetings to advise, the Board on its responsibilities, management’s responsibilities, developments relevant to corporate governance and best corporate practices. Additionally, Board members may attend, and are encouraged to attend, accredited director education programs at the Company’s expense. RESTRICTIONS ON THE HEDGING AND PLEDGING OF SOCIETAL SHARES Pursuant to the Company’s Insider Trading Policy, which applies to all officers, all directors and all employees of the Company and any of the Company’s subsidiaries, or the Covered Individuals, the Covered Individuals are prohibited from purchasing financial instruments or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of any equity security of Societal or any such subsidiary. Covered Individuals are also prohibited from selling “short” any securities of those companies.) Covered Individuals are further prohibited from holding any equity securities of Societal or any such subsidiary in a margin account or otherwise pledging such securities as collateral for a loan. Additionally, standing and limit orders create heightened risks for insider trading, with the possibility that such a transaction will be entered at a time when a director, officer, or other employee holds material, nonpublic information. Societal discourages these types of transactions. If placed, their timeframe should be short in duration and comply with the Additional Procedures of the Company’s Insider Trading Policy. These prohibitions also apply to family members living in the same household as Covered Individuals, as well as entities influenced or controlled by the Covered Individuals. CORPORATE GOVERNANCE GUIDELINES We have a written set of corporate governance guidelines that are designed to help ensure effective corporate governance of our Company. Our corporate governance guidelinesCorporate Governance Guidelines cover topics including, but not limited to, director qualification criteria, director responsibilities, director compensation, director orientation and continuing education, succession planning and the annual evaluations of our Board and its Committees.Committees and succession planning. Succession planning for the Board is critical to our success. Our corporate governance guidelinesgoal is to achieve a Board that provides effective oversight of the Company through the appropriate balance of diversity of perspectives, experience, expertise and skills. Our Corporate Governance Guidelines are reviewed at least annually by the Governance Committee and amended by our Board when appropriate. BOARD ATTENDANCE, COMMITTEE MEETINGS AND COMMITTEE MEMBERSHIP | | | | | | | | | | | Director (1) | | Independence | | Board | | AC | | CC | | NCGC | Alfred Altomari | | Yes | | M | | M | | M | | | William Ashton | | Yes | | M | | | | M | | | Michael Berelowitz | | Yes | | M | | M | | | | M | Winston Churchill | | Yes | | M | | | | M | | C | Karen Flynn | | Yes | | M | | M | | C | | | Gerri Henwood | | No | | M | | | | | | | Bryan M. Reasons | | Yes | | M | | C | | | | | Wayne Weisman | | Yes | | C | | | | | | M | 2017 Meetings | | N/A | | 7 | | 6 | | 7 | | 4 |
| | | | | | | | | | | | | | | | | | | Director | | Independent | | Board | | AC | | CC | | GC | | | | | | | | | William Ashton | | Yes | | M | | | | C | | M | | | | | | | | | Michael Berelowitz | | Yes | | M | | | | | | C | | | | | | | | | Winston Churchill | | Yes | | M | | M | | M | | | | | | | | | | | J. David Enloe, Jr. | | No | | M | | | | | | | | | | | | | | | Gerri Henwood* | | No | | M | | | | | | | | | | | | | | | James Miller | | Yes | | M | | M | | M | | | | | | | | | | | Laura L. Parks, Ph.D. | | Yes | | M | | M | | M | | | | | | | | | | | Bryan M. Reasons | | Yes | | M | | C | | | | | | | | | | | | | Wayne B. Weisman | | Yes | | C | | | | | | M | | | | | | | | | 2021 Meetings | | N/A | | 12 | | 4 | | 3 | | 3 |
| | | | | | AC = Audit Committee | | CC = Compensation Committee | | C = Chair | NCGCGC = Nominating and Corporate Governance Committee | | M = Member |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 10
| * | CORPORATE GOVERNANCE AND RISK
MANAGEMENT (continued)
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| (1) | Although we do not haveMs. Henwood resigned as a formal policy regarding attendance by members of our Board at our Annual Meeting, we encourage all of our directors to attend. All but one of our directors attended our 2017 Annual Meeting of Shareholders.director on January 18, 2022. |
During 2017,2021, each director attended at least 75% of the meetings of the Board and meetings of each Committee of the Board on which he or she served. Although we do not have a formal policy regarding attendance by members of our Board at our Annual Meeting, we encourage all of our directors to attend. All of our then-serving directors attended our 2021 Annual Meeting of Shareholders. Audit Committee The Audit Committee assists the Board by providing oversight of our financial management, independent auditor and financial reporting procedures, as well as such other matters as directed by the Board or the Audit Committee Charter. Among other things, the Audit Committee’s responsibilities include: appointing, retaining, compensating, overseeing, evaluating, and, when appropriate, terminating our independent registered public accounting firm; discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures; periodically reviewing policies and procedures with respect to data privacy and security we employ in conducting our business; reviewing with management its assessment of our internal control over financial reporting, disclosure controls and procedures; reviewing our codeCode of business conduct and ethicsConduct and recommending any changes to the Board; overseeing our risk assessment and risk management processes; reviewing and ratifying all related party transactions, based on the standards set forth in our Related Party Transactions Policy; and preparing and approving the Audit Committee report required to be included in our annual proxy statement. The members of our Audit Committee are Mr. Altomari,Reasons (chair), Messrs. Churchill and Miller, and Dr. Berelowitz, Ms. Flynn and Mr. Reasons (chair).Parks. All members of our Audit Committee are deemed “independent” and financially literate under the applicable rules and regulations of the SEC and NASDAQ. Each of Mr. Altomari andNasdaq. Mr. Reasons also qualifies as an “audit committee financial expert” within the meaning of SEC regulations. Compensation Committee The Compensation Committee reviews the performance and development of our management in achieving corporate goals and objectives and assures that our executive officers (including our CEO) are compensated effectively in a manner consistent with our strategy, competitive practice and shareholder interests, as well as Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 11
| CORPORATE GOVERNANCE AND RISK
MANAGEMENT (continued)
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such other matters as directed by the Board or the Compensation Committee Charter. Among other things, the Compensation Committee’s responsibilities include: annually reviewing and recommending to the Board for approval the corporate goals and objectives applicable to the compensation of our CEO and other executive officers and evaluating at least annually our CEO’s and other executive officers’ performance in light of those goals and objectives; annually reviewing and approving our peer group for compensation benchmarking; determining and approving our CEO’s and other executive officers’ compensation level (including salary, cash and equity-based incentive awards and any personal benefits); administering, or where appropriate, overseeing the administration of, executive and equity compensation plans and such other compensation and benefit plans that are adopted by us from time to time; determining stock ownership guidelines for our CEO and other executive officers and monitoring compliance with such guidelines, if deemed advisable by our Board or the Compensation Committee; and overseeing risks and exposures associated with executive compensation plans and arrangements. Our Compensation Committee has delegated authority to our CEO to grant options or other stock awards, in accordance with guidelines established by our compensation consultant, to ournon-executive officers. Our Compensation Committee also has the authority to form and delegate authority to one or more subcommittees as it deems appropriate from time to time under the circumstances. Our CEO annually reviews the performance of each of the other executive officers, including the other named executive officers. He then recommends annual merit salary adjustments and any changes in annual or long-term incentive opportunities for other executives. The Compensation Committee switchedconsiders our CEO’s recommendations in addition to data and recommendations presented by our executive compensation consultants in March 2017 from Radford, or Radford, an Aon Hewitt company, to consultant. Pay Governance, LLC, or Pay Governance. During their respective terms, each of Radford andGovernance, is our executive compensation consultant. Pay Governance reportedreports directly to the Compensation Committee. Each of RadfordCommittee and Pay Governance providedprovides various executive compensation services to the Compensation Committee, including advising the Compensation Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relation to performance. Upon request by the Compensation Committee, a representative of Radford or Pay Governance attended meetings of the Compensation Committee. Neither Radford norCommittee meetings. Pay Governance provides or provideddoes not provide services to us other than its advice to the Compensation Committee on executive and director compensation matters. The Compensation Committee determined each of Radford and Pay Governance to be independent under the NASDAQNasdaq and SEC regulations.
Our CEO annually reviews the performance of each of the other executive officers, including the other named executive officers. She then recommends annual merit salary adjustments and any changes in annual or long-term incentive opportunities for other executives. The Compensation Committee considers our CEO’s recommendations in addition to data and recommendations presented by our executive compensation consultant.
The members of our Compensation Committee are Mr. Altomari, Mr. Ashton Mr.(chair), Messrs. Churchill and Ms. Flynn (chair).Miller, and Dr. Parks. The Board has determined that all Compensation Committee members are independent under the listing standards of NASDAQ,Nasdaq, and that they are“non-employee directors”for purposes of Rule16b-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code, or the Code. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 12Act.
| CORPORATE GOVERNANCE AND RISK
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Nominating and Corporate Governance Committee
The Governance Committee identifies qualified individuals for membership on the Board;Board, recommends to the Board the director nominees to fill vacancies on the Board and to stand for election at the next annual meeting of shareholders;shareholders, develops and recommends to the Board a set of corporate governance guidelines for the Board;Board and provides oversight of the corporate governance affairs of the Board;Board, as well as such other matters as directed by the Board or the Nominating and Corporate Governance Committee Charter. Among other things, our Governance Committee’s responsibilities include: developing and submitting to the Board for its adoption a list of selection criteria for new directors to serve on the Board; identifying, reviewing and evaluating candidates, including candidates submitted by shareholders, for election to the Board and recommending to the Board (i) nominees to fill vacancies or new positions on the Board and (ii) the slate of nominees to stand for election by the Company’s shareholders at each annual meeting of shareholders; developing, recommending, and overseeing the implementation of and monitor compliance with, our corporate governance guidelines, and periodically reviewing and recommending any necessary or appropriate changes to our corporate governance guidelines; annually recommending to the Board (i) the assignment of directors to serve on each Committee; (ii) the chairperson of each Committee and (iii) the chairperson of the Board or lead independent director, as appropriate; periodically assessing the appropriate size and composition of the Board as a whole, the needs of the Board and the respective committees of the Board, and the qualification of director candidates in light of these needs; reviewing the adequacy of the Articles of Incorporation and Bylaws and recommending to the Board, as conditions dictate, amendments for consideration by the shareholders; reviewing any proposals submitted by shareholders for action at the annual meeting of shareholders and make recommendations to the Board regarding action to be taken in response to each proposal; and implementing policies with respect to governance risk oversight, assessment and management of risk associated with the independence of our Board and director nominees, potential conflicts of interest of members of our Board and our executive officers and the effectiveness of the Board and the committees thereof. The Governance Committee is responsible for identifying individuals that the Committee believes are qualified to become Board members, as described above in the section entitled “Board Structure and Composition.” The members of our Governance Committee are Dr.Mr. Berelowitz Mr. Churchill (chair), and Mr.Messrs. Ashton and Weisman. The Board has determined that all Governance Committee members are independent under the listing standards of NASDAQ.Nasdaq. FAMILY RELATIONSHIPS There are no family relationships among any of our directors or executive officers. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 13
| CORPORATE GOVERNANCE AND RISK
MANAGEMENT (continued)
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 20172021 and as of the date of this Proxy Statement, none of the members of the Compensation Committee was or is one of our officers or employees, and none of our executive officers has served or serves on the compensation committee or board of directors of any company that employed or employs any member of our Compensation Committee or Board of Directors.Board. POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONSSHAREHOLDER ENGAGEMENT
Connect Engaging with investors is fundamental to our commitment to good governance and essential to maintaining strong corporate governance practices. Throughout the year, we seek opportunities to connect with our investors to gain and share valuable insights into current and emerging global governance trends. Collaborate We strive for a collaborative approach to shareholder engagement and value the variety of investors’ perspectives received, which helps deepen our understanding of their interests and motivations. Communicate Our goal is to communicate with our shareholders through various platforms, including via our website, in print and in person at investor presentations or shareholder meetings. We view communication between our shareholders and the Board as a dialogue. | | | | | | How to Communicate with our Directors | | By mail: Corporate Secretary, Societal CDMO, Inc. 1 E. Uwchlan Ave., Suite 112, Exton, Pennsylvania 19341 |
OUR VALUES — ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE Societal CDMO “Bringing Science to Society”, it’s in our name and our DNA. Our new identity is intended to capture the company’s vision for establishing itself as a premier, trusted growth-focused CDMO that is expertly and actively facilitating its customers’ objectives of delivering impactful medicines to society. Our name has adopted a written related person transaction policy setting forthpurpose, one which exemplifies the policiescommitment our employees demonstrate every day to making a positive impact within communities across the country and proceduresaround the world. Our Nominating and Corporate Governance Committee oversees ESG matters and practices. Included below is a description of a few topics that we view as key to promoting our long-term sustainability. We are working with a third party to progress our ESG efforts further in 2022 by aligning with SASB pharmaceutical and biotech disclosure topics and metrics. Sustainability Environmental and Sustainability Mission At Societal, we are committed to environmental sustainability through the active support and investment in programs and initiatives which reduce the company’s environmental impact. Our mission is to direct the company’s efforts to efficiently utilize materials, water, and energy consumption while minimizing waste. Since 2019, we have implemented several initiatives to support three main goals: Actively pursue and implement programs to offset our carbon emissions and minimize the use of energy and water; Create a sustainable culture through employee engagement, community outreach, and continuous improvement; and Implement programs to minimize and responsibly manage our waste. Building a Sustainable Culture We recognize that building a sustainability mindset starts with our most important resource: our people. Creating a culture focused on sustainability and environmental governance must begin with how we operate in our everyday lives. Here are some of the ways we demonstrate our commitment to building a sustainable culture: Establishment of a dedicated Environmental Sustainability Team that is responsible for advising, overseeing, and implementing the company’s efforts in this area; Transition to digital communications, documentation, and marketing collateral; Implementation of a mass recycling program; Designated electric vehicle charging stations to reduce carbon environmental impact; Empowerment and encouragement of employees to implement environmental and process improvements; Cultivated an agile, diverse team by expanding the remote workforce to 10% in 2021; Advancement of employees’ well-being through numerous programs that focus on the whole employee (mental, emotional, financial, and physical); and Establishment of safety at the forefront of what we do – we empower everyone to have a zero injury mindset. Achieving Results Starts With Change We know that creating a sustainably focused company takes time. But it all starts with change. Since its inception, the Environmental Sustainability Team at Societal has dedicated its efforts to implementing changes across the organization to reduce energy use and streamline waste management. Below are some of the annual savings* realized to date by the incorporated changes: LED light replacement project — saving 300,000 kWh; Installation of office HVAC Smart Thermostat — saving 7,000 kWh; Upgrading of demand staging utility equipment — saving 352,000 kWh and 10,000 BTUs; and Other projects resulted in a savings of 1,344,509 pounds of CO2 and 306,000 gallons of water. Today and Beyond At Societal, the health and well-being of our community have always been at the forefront of our daily activities. However, as we move forward, environmental and sustainability initiatives will become even more critical. We continue to learn from industry experts and implement environmental and sustainability initiatives and best practices within our organization. With the dedication of our employee-run Environmental Sustainability Team and the support of Societal leadership, we continue to discover and apply learnings to the way we do business, not just for our benefit, but for the reviewbetterment of our customers and approval or ratificationpatients alike. At Societal, we believe the initiatives outlined above and others that we have already implemented will allow us to be better partners for our clients, patients, and community. By enacting these new programs, we believe we can achieve meaningful long-term results, including the following targets, by the end of related-person transactions. This policy covers any transaction, arrangement or relationship, or any series2023: Save 937,500 tons of similar transactions, arrangements or relationships,carbon dioxide emissions Reuse and save 200,000 gallons of water Recycle 30% of our bulk waste Reduce our hazardous waste generation by 4% Sequester 5,760 pounds of CO2 by maintaining our green space and forest | * | Estimated savings based on annual use according to www.epa.gov and other websites. |
Diversity, Equity & Inclusion At Societal, we believe that a diverse and engaged team contributes to greater business success. We strive to build a diverse community and foster a culture of belonging where we openly share our thoughts, ideas, and perspectives and encourage others to do the same. We are committed to putting resources and attention toward attracting diverse talent, improving engagement, and development of the amazing talent we have, including the goals set forth below. Recruiting for the Future Create a workforce broadly reflective of the larger communities in which we were oroperate Developing and Thriving Support employees in building the skills and capacity to work in an inclusive environment Promote internal development through multiple learning channels, special projects, and promotions A Belonging Culture Build a welcoming workplace where employees recognize that their unique characteristics, skills, and experiences are to be a participant, whererespected, valued, and celebrated Looking Forward We believe that the amount involved exceeds $120,000company’s investment in, and a related person had orstrong commitment to, diversity, equity & inclusion will havesolidify Societal as a direct or indirect material interest. Our management is responsible for determining whethergreat place to work and a transaction is a related party transaction subjectpremier, trusted CDMO that brings tailored solutions to our policy,clients while fostering engaging and upon subject determination, is responsiblerewarding careers for disclosing the material facts concerning the transaction and the related party’s interest in our transaction to our Audit Committee. In reviewing and approving any such transactions, our Audit Committee is tasked to consider all relevant facts and circumstances with respect to the transaction and shall evaluate all available options, including ratification, revision or termination of the transaction. All of the transactions described under “Certain Relationships and Related Party Transactions” in this Proxy Statement either were approved or ratified in compliance with this policy. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 14people.
We have designed and implemented our compensation program for ournon-employee directors to attract, motivate and retain individuals who are committed to our values and goals and who have the expertise and experience that we need to achieve those goals. COMPENSATION PROGRAM In December 2017, we reviewed the compensation program for ournon-employee directors with our independent compensation consultant, Pay Governance. In consultation with Pay Governance and a review of director compensation trends of our peer group, we modified the compensation program for ournon-employee directors. The changes included an increase in annual equity compensation and a shift to a mix of options and restricted stock units.
The table below depicts our 2017 compensation program for ournon-employee directors and the changes commencing on January 1, 2018, which will be reflected in next year’s proxy statement:directors: | | | | | Compensation Elements –Non-Employee Director Compensation Program | | | | | Cash | | 2017 | | 2018 | Annual Cash Retainer | | $40,000 | | $40,000 | Annual Committee Chair Retainer | | | | | Audit | | $20,000 | | $20,000 | Compensation | | $15,000 | | $15,000 | Nominating and Corporate Governance | | $9,000 | | $9,000 | Committee Member Retainer | | | | | Audit | | $10,000 | | $10,000 | Compensation | | $7,500 | | $7,500 | Nominating and Corporate Governance | | $5,000 | | $5,000 | AnnualNon-Executive Chairman of the Board Cash Retainer | | $30,000 | | $30,000 | | | | | Equity | | 2017 | | 2018 | Initial Equity Grant | | 20,000 options vesting in three equal annual installments | | 20,000 options vesting in three equal annual installments | | | | | Annual Equity Retainer(1) | | $70,000 in restricted stock units vesting on the first anniversary of the date of grant and granted following the annual meeting of shareholders | | $70,000 in restricted stock units and $65,000 in stock options, each vesting on the first anniversary of the date of grant and granted following the annual meeting of shareholders |
| (1) | In December 2016, | | Non-Employee Director Compensation Program | | | Cash | | | | | Annual Cash Retainer | | $40,000 | | | Annual Committee Chair Retainer: | | | | | Audit | | $20,000 | | | Compensation | | $15,000 | | | Governance | | $10,000 | | | Committee Member Retainer: | | | | | Audit | | $10,000 | | | Compensation | | $ 7,500 | | | Governance | | $ 5,000 | | | Annual Non-Executive Chairman of the Board determinedCash Retainer | | $40,000 | | | Equity | | | | | Initial Equity Grant | | A stock option to change the timingpurchase 20,000 shares of thenon-employee director equity grant from December to theour common stock vesting in three equal annual meeting date. To compensate for the extra time period between equity grants, the 2017 annual equity retainer tonon-employee directors consisted of $105,000 in restricted stock units. Due to the timing of his appointment, Mr. Reasons received $70,000installments | | | Annual Equity Retainer | | $70,000 in restricted stock units forand $65,000 in stock options, granted annually following our annual meeting of shareholders, and in each case vesting on the 2017 fiscal year.first anniversary of the date of grant |
Notice of Annual Meeting of ShareholdersCash fees are paid quarterly and 2018 Proxy Statement | 15are typically pro-rated
| DIRECTOR COMPENSATION(continued)
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for non-employee directors who cease to provide services mid-year.Ournon-employee directors are also reimbursed for their business-related expenses incurred in connection with attendance at Board and Committee meetings and related activities. Our only employee director, Ms. Henwood,Mr. Enloe, receives no separate compensation for herhis service in such capacity. SUMMARY 2017
DIRECTOR COMPENSATION 2021 The following table provides summary information regarding 20172021 compensation to ournon-employee directors. | | | | | | | | | | | | Name | | Fees Earned or Paid in
Cash ($) | | Option Awards ($)(1) | | Stock Awards ($)(1) | | Total ($) | | Fees Earned or Paid
in Cash ($) | | Option Awards
($)(1) | | Stock Awards
($)(1) | | Total ($) | Alfred Altomari | | 60,000 | | — | | 104,997 | | 164,997 | | | | | | | William L. Ashton | | 48,125 | | — | | 104,997 | | 153,122 | | | 65,000 | | | | 65,001 | | | | 70,000 | | | | 200,001 | | | | | | | Michael Berelowitz | | 55,000 | | — | | 104,997 | | 159,997 | | | 52,500 | | | | 65,001 | | | | 70,000 | | | | 187,501 | | | | | | | Winston Churchill | | 56,500 | | — | | 104,997 | | 161,497 | | | 57,250 | | | | 65,001 | | | | 70,000 | | | | 192,251 | | Karen Flynn | | 65,000 | | — | | 104,997 | | 169,997 | | | | | | | Gerri Henwood(2) | | | | 40,000 | | | | 65,001 | | | | 70,000 | | | | 175,001 | | | | | | | James C. Miller(3) | | | | 48,043 | | | | 120,287 | | | | 70,000 | | | | 238,330 | | | | | | | Laura L. Parks, Ph.D.(4) | | | | 30,489 | | | | 30,240 | | | | — | | | | 60,729 | | | | | | | Bryan M. Reasons | | 48,333 | | 109,800 | | 69,996 | | 228,129 | | | 60,000 | | | | 65,001 | | | | 70,000 | | | | 195,001 | | | | | | | Wayne B. Weisman | | 75,000 | | — | | 104,997 | | 179,997 | | | 82,500 | | | | 65,001 | | | | 70,000 | | | | 217,501 | |
| (1) | Reflects the grant date fair value determined in accordance with the Financial Accounting Standards Board Accounting Standards, Codification Topic 718, Compensation — Stock Compensation, or ASC 718. The assumptions made in these valuations are included in Note 16 of the Notesnote 14 to the Annual Financial Statements included in our 2021 Annual ReportReport. As of December 31, 2021, (i) Mr. Ashton had stock options to purchase 122,270 shares of common stock, (ii) Dr. Berelowitz had stock options to purchase 114,770 shares of common stock, (iii) Mr. Churchill had stock options to purchase 122,270 shares of common stock, (iv) Ms. Henwood had stock options to purchase 58,012 shares of common stock that were issued in connection with her service on Form10-K.the Board and 32,932 restricted stock units and stock options to purchase 789,500 shares of common stock that were issued in connection with her previous service as our Chief Executive Officer, (v) Mr. Miller had stock options to purchase 58,012 shares of common stock, (vi) Dr. Parks had stock options to purchase 20,000 shares of common stock, and (vii) Mr. Reasons had stock options to purchase 90,270 shares of common stock. In addition, as of December 31, 2021, Messrs. Ashton, Berelowitz, Churchill, Reasons and Weisman, and Ms. Henwood with respect to her service on the Board, each had 26,923 outstanding and unvested restricted stock units. |
As of December 31, 2017, (i) each of Messrs. Altomari, Churchill, Weisman and Dr. Berelowitz had stock options to purchase 52,000 shares of common stock, (ii) Mr. Ashton had stock options to purchase 64,000 shares of our common stock, (iii) Ms. Flynn had stock options to purchase 30,000 shares of our common stock, and (iv) Mr. Reasons had stock options to purchase 20,000 shares of our common stock. In addition, as of December 31, 2017, each of our directors had a restricted stock unit award to acquire 13,274 shares of our common stock, with the exception of Mr. Reasons, who had a restricted stock unit award to acquire 8,849 shares of our common stock.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 16
| (2) | Ms. Henwood resigned as a director on January 18, 2022. |
| (3) | Mr. Miller was appointed as a director on February 9, 2021. |
| (4) | Dr. Parks was appointed as a director on June 14, 2021. |
| INDEPENDENT REGISTERED
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES The Audit Committee works with our management in order to negotiate appropriate fees with KPMG LLP and is ultimately responsible for approving those fees. The following is a summary and description of audit fees paid or payable to KPMG for services providedeach of the years ended December 31, 2021 and 2020 and the fees billed by KPMG LLPfor other services in 2017 and 2016.each of those years: | | | | | | | | | Service | | 2017 | | | 2016 | | | Audit Fees | | $ | 546,000 | | | $521,000 | | | Audit-Related Fees | | $ | 35,000 | | | $245,000 | | | Tax Fees | | $ | 429,369 | | | $227,008 | | | All Other Fees | | | — | | | — | | | Total | | $ | 1,010,369 | | | $993,008 | | |
| | | | | | | | | | | | | | Service | | 2021 | | | 2020 | | Audit fees | | $ | 865,830 | | | $ | 665,600 | | Audit-related fees | | | 116,888 | | | | — | | Tax fees | | | 99,580 | | | | 167,908 | | All other fees | | | — | | | | — | | Total | | $ | 1,082,298 | | | $ | 833,508 | |
“Audit fees” represented the aggregate fees for professional services rendered for the audit of our annual consolidated financial statements on Forms 10-K, consents for the use of audit reports and reference to the auditor as an expert in our registration statements, and professional services rendered for the review of our quarterly consolidated financial statements on FormForms 10-Q that are customary under the standards of the Public Company Accounting Oversight Board (United States), and in connection with statutory audits.regulatory filings. “Audit-related feesfees”” primarily consisted of due diligence fees for our Registration Statements on FormS-3 and FormS-8.related to the acquisition of IriSys, LLC. “Tax fees” consisted of fees related to tax compliance, tax planning and tax advice. AUDIT COMMITTEEPRE-APPROVAL POLICIES AND PROCEDURES The Audit Committee is responsible for appointing, setting compensation for, and overseeing the work of the independent registered public accounting firm. The Audit Committee’s charter establishes a policy that all audit and permissiblenon-audit services provided by the independent registered public accounting firm will bepre-approved by the Audit Committee. All such audit and permissiblenon-audit services werepre-approved in accordance with this policy during the fiscal year ended December 31, 2017.2021. These services may include audit services, audit-related services, tax services and other services. The Audit Committee considers whether the provision of eachnon-audit service is compatible with maintaining the independence of our independent registered public accounting firm. The responsibility topre-approve audit andnon-audit services may be delegated by the Audit Committee to one or more members of the Audit Committee; provided that any decisions made by such member or members must be presented to the full Audit Committee at its next scheduled meeting. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 17
The primary purpose of the Audit Committee is to assist the Board in its general oversight of the Company’s financial reporting process. Management is primarily responsible for the preparation, presentation, and integrity of the Company’s consolidated financial statements, accounting and financial reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. The Company’s independent registered public accounting firm for the fiscal years 20172021, 2020 and 2016,2019, KPMG, LLP, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those consolidated financial statements with generally accepted accounting principles. The Audit Committee and the chairman of the Audit Committee have met with management during fiscal year 20172021 to consider the adequacy of the Company’s internal controls, and discussed these matters and the overall scope and plans for the audit of the Company with KPMG LLP.KPMG. The Audit Committee also discussed with management and KPMG LLP the Company’s disclosure controls and procedures. The Audit Committee has reviewed and discussed management’s assessment of the effectiveness of the Company’s internal controls and the audited consolidated financial statements contained in the Company’s 2021 Annual Report on Form10-K for the year ended December 31, 2017 with the management. The Audit Committee has discussed with KPMG LLP the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301, “Communication with Audit Committees.” In addition, KPMG LLP has provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’sKPMG’s communications with the audit committeeAudit Committee concerning independence, and the Audit Committee has discussed with KPMG LLP its independence. The Audit Committee also considered whether the independent registered public accounting firm’s provision ofnon-audit services to the Company is compatible with the auditor’s independence. The Audit Committee has concluded that the independent registered public accounting firm is independent from the Company and its management. Based on the considerations and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s 2021 Annual Report on Form10-K for the year ended December 31, 2017.Report. Audit Committee Bryan Reasons (Chairman) Alfred AltomariWinston J. Churchill
Michael Berelowitz, M.D.James C. Miller
Karen Flynn
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 18Laura L. Parks, Ph.D.
The following table sets forth the name, age and position of each of our executive officers as of the date of this Proxy Statement: | | | | | | | Name
| | Position
| | Age
| | | | Name | | Position | | Age | Gerri Henwood
J. David Enloe, Jr. | | President, Chief Executive Officer | | 65 | | | Michael Celano
| | Chief Operating Officer and Secretary
| | 59 | | 58 | Ryan D. Lake | | Chief Financial Officer | | 40 | | 44 |
Gerri Henwood – For biographicalJ. David Enloe, Jr. — See biography information for Gerri Henwood, see “Board of Directors – Continuing Directors.”
Michael Celano has served as our Chief Operating Officer since January 2018, where he will continue to lead our finance and administration and assume responsibility for the manufacturing division, and as our Secretary since March 2018. He previously served as our Chief Financial Officer from July 2016 to December 2017. Prior to that, from May 2015 until June 2016, he was self-employed providing consulting services to healthcare companies. From January 2013 to May 2015, Mr. Celano served as the Chief Financial Officer of DrugScan, Inc., a clinical laboratory services company. He also served as the Chief Financial Officer of Kensey Nash Corporation, a medical device company, from 2009 until 2012. Previously, Mr. Celano served as Chief Financial Officer for BioRexis Pharmaceutical Corporation, a biopharmaceutical company. Prior to entering the biopharmaceutical industry, Mr. Celano served as a partner with KPMG LLP, and wasco-leader of its National Life Science Practice. Mr. Celano also wasco-leader of the Life Science Practice for Arthur Andersen before he joined KPMG. Mr. Celano currently serves on the board of directors of Orasure Technologies, Inc., a diagnostic and medical device company, a position he has held since October 2006. Mr. Celano holds a B.S. degree in Accounting from St. Joseph’s University.above.
Ryan D. Lakehas served as our Chief Financial Officer since January 2018. He had previously served as our Senior Vice President of Finance and Chief Accounting Officer since June 2017. Mr. Lake also served as the Chief Financial Officer of Baudax Bio following the separation of Baudax Bio from the Company, or the Separation, from November 2019 to December 2020. Mr. Lake has over 20 years of senior financial and life sciences leadership experience. Prior to joining us, Mr. Lake served as Chief Financial Officer and Vice President of Finance of Aspire Bariatrics, Inc., a privately-held, commercial-stage, medical device company from July 2015 to May 2017. From 2012 to 2015, Mr. Lake held executive management and senior finance positions, including Director of the Natural Materials Division, Controller and Senior Director of Finance, at DSM Biomedical (successor to Kensey Nash Corporation after its acquisition in 2012), a division of Royal DSM (listed on Euronext Amsterdam), a global science-based company active in health, nutrition and materials. From 2002 to 2012, Mr. Lake held various senior financial positions of increasing responsibility, most notably Senior Director of Finance and Interim Chief Financial Officer, with Kensey Nash Corporation, a medical device company. Earlier in his career, Mr. Lake worked at Deloitte & Touche, LLP. Mr. Lake has a B.S. degree in accountingAccounting from West Chester University of Pennsylvania and is a certified public accountant and chartered global management accountant. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 19Chartered Global Management Accountant.
In 2021, our named executive officers were J. David Enloe, Jr., our President and CEO, and Ryan D. Lake, our Chief Financial Officer. In connection with the Separation, we entered into a Transition Services Agreement with Baudax Bio, whereby we agreed that Mr. Lake would be employed by Baudax Bio but continue to provide services to both companies for a twelve-month period following the Separation. Under this agreement, we reimbursed Baudax Bio approximately 50% of Mr. Lake’s 2020 salary, and approximately 50% of the bonus awarded to Mr. Lake by Baudax Bio for 2020. Accordingly, we have shown in the Summary Compensation Table below, in the “Salary” and “Bonus” columns, 2020 amounts for Mr. Lake that we funded, even though not directly paid by us. For more information about the compensation paid by Baudax Bio to Mr. Lake with respect to the services rendered to Baudax Bio after the Separation, see Baudax Bio’s proxy statement for its 2021 annual meeting of shareholders. This section discusses the material components of the executive compensation program for our executive officers named in the “Summary Compensation Table” below. In 2017, our named executive officers were Gerri Henwood, our President and CEO; Michael Celano, our Chief Operating Officer; and Stewart McCallum, our Chief Medical Officer.Dr. McCallum was one of our executive officers as of December 31, 2017. Following reevaluation of our executive officers as of March 2018, we determined that Dr. McCallum was no longer an executive officer.officers. SUMMARY COMPENSATION TABLE The following table sets forth information concerning the compensation of our named executive officers during the fiscal years ended December 31, 20172021 and December 31, 2016:2020: | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | Salary ($) | | Bonus
($)(1)(2) | | Non-Equity
Incentive
Plan
Compensation
($)(2) | | Stock
Awards
($)(3)(4) | | Option Awards
($)(3)(4) | | All Other
Compensation
($)(5) | | Total ($) | | | Gerri Henwood | | 2017 | | 530,153 | | 63,508 | | 318,092 | | 374,563 | | 762,569 | | 36,220 | | | 2,085,105 | | President and Chief Executive Officer | | 2016 | | 515,000 | | 77,250 | | 309,000 | | — | | — | | 32,129 | | | 933,379 | | | Michael Celano | | 2017 | | 362,124 | | 28,910 | | 144,850 | | 231,628 | | 188,666 | | 22,719 | | | 978,897 | | Chief Operating Officer(6) | | 2016 | | 164,538 | | 34,500 | | 138,000 | | — | | 823,200(7) | | 6,538 | | | 1,166,766 | | Stewart McCallum | | 2017 | | 442,652 | | 44,439 | | 177,061 | | 285,870 | | 189,720 | | 41,634 | | | 1,181,376 | | Chief Medical Officer | | 2016 | | 430,000 | | 43,000 | | 172,000 | | — | | — | | 36,034 | | | 681,034 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | Salary
($) | | Bonus
($)(1) | | Stock
Awards
($)(2)(3) | | Option
Awards
($)(2) | | Non-Equity
Incentive Plan
Compensation
($)(4) | | All Other
Compensation
($)(5) | | Total ($) | | J. David Enloe, Jr. | | | | 2021 | | | | | 550,000 | | | | | — | | | | | 120,793 | | | | | — | | | | | 377,190 | | | | | 49,062 | | | | | 1,097,045 | | President and Chief Executive Officer | | | | 2020 | | | | | 10,577 | | | | | — | | | | | 459,999 | (6) | | | | 400,544 | | | | | — | | | | | 1,678 | | | | | 872,798 | | | Ryan D. Lake | | | | 2021 | | | | | 425,385 | | | | | — | | | | | 867,815 | | | | | 744,327 | | | | | 242,887 | | | | | 49,062 | | | | | 2,329,476 | | Chief Financial Officer | | | | 2020 | | | | | 198,985 | | | | | 48,000 | (1) | | | | 439,440 | (6) | | | | 744,327 | | | | | 107,640 | | | | | 24,673 | | | | | 1,563,065 | |
| (1) | Reflects discretionary bonusBaudax Bio awarded 2020 annual incentives to Mr. Lake based on the achievement of performance metrics. Baudax Bio satisfied Mr. Lake’s award 100% in cash. Pursuant to the Transition Services Agreement, we reimbursed Baudax Bio for approximately 50% of the cost of such annual incentives, which amounts are reflected above. For more information about the compensation paid by Baudax Bio to Mr. Lake in respect to the services rendered to Baudax Bio after the Separation, see Baudax Bio’s proxy statement for performance in excessits 2021 annual meeting of corporate and individual objectives under our annual performance cash bonus plan.shareholders, filed with the SEC on or around March 11, 2021. |
| (2) | The amounts represent annual performance cash bonuses earned in 2017 and 2016 and paid in the following year. |
| (3) | Reflects the grant date fair value determined in accordance with the Financial Accounting Standards Board Accounting Standards, Codification Topic 718, Compensation — Stock Compensation, or ASC 718. The assumptions made in these valuations are included in Note 16 of the Notesnote 14 to the Annual Financial Statements included in our 2021 Annual Report on Form10-K.Report. |
| (3) | Compensation for 2021 reflects both time-based and performance-based restricted stock unit awards. The value of the performance-based restricted stock unit awards granted in 2021 is shown in the table in accordance with SEC rules based on the weighted average grant date fair value determined in accordance with U.S. GAAP. |
| (4) | PriorThe amounts represent annual performance cash bonuses earned in the year shown and paid in the following year. Mr. Lake’s amount for 2020, as described below, represents a 2020 annual performance cash bonus that was later decided to 2016, the Compensation Committeebe satisfied 100% in restricted stock during 2021 instead of the Board met in December of each year to evaluate executive officer performance and compensation and approve equity grants. Beginning in 2017, however, the Compensation Committee met to evaluate 2016 executive performance and compensation in January 2017; therefore, no stock awards or option awards were granted to named executive officers in 2016 other than those granted to Mr. Celano in connection with the commencement of his employment with us.cash. |
| (5) | These amounts consist of 401(k) matching contributions, the cost of medical benefits and life and disability insurance premiums. |
| (6) | Mr. Celano commenced employment (initially as our Chief Financial Officer)For the 2021 proxy statement, we disclosed the value of performance-based restricted stock awards in the summary compensation table based on July 5, 2016. |
| (7) | On June 21, 2016, the Compensation Committeelegal grant date, rather than the grant date for accounting purposes in accordance with ASC 718. We have revised the table to disclose the value of these performance-based restricted stock awards in the summary compensation table based on the grant date fair value determined in accordance with ASC 718. As a result, the value of the Board granted an option to purchase 140,000 shares of our common2020 stock toawards disclosed in the table above was reduced by $200,000 for Mr. Celano, upon his appointment as our Chief Financial Officer as an inducement to his acceptance of our offer of employment. The inducement grant was granted outside of our AmendedEnloe and Restated Equity Incentive Plan and without shareholder approval pursuant to NASDAQ Listing Rule 5635(c)(4) and is subject$498,600 for Mr. Lake, compared to the terms and conditionsamounts historically presented. These performance-based restricted stock awards have been included in the value of the Award Agreement2021 stock awards in the summary compensation table based on their grant date fair values of $120,793 for Inducement Awards between Mr. CelanoEnloe and us. |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 20
| EXECUTIVE COMPENSATION(continued)$162,175 for Mr. Lake.
|
Non-Equity Incentive Plan CompensationBase Salaries
Each ofOn December 15, 2020, we entered into employment agreements with Mr. Enloe and Mr. Lake pursuant to which Mr. Enloe’s and Mr. Lake’s base salaries were initially set at $550,000 and $425,000, respectively.
In January 2022, the Compensation Committee approved the following base salaries for our named executive officersofficers: $575,000 for Mr. Enloe and $440,000 for Mr. Lake. Following the Separation, we ceased to directly pay an annual salary to Mr. Lake with respect to the period prior to December 15, 2020. However, in 2020, we reimbursed Baudax Bio approximately 50% of Mr. Lake’s cash compensation earned before his resignation as Chief Financial Officer of Baudax Bio in December 2020. The amounts that we reimbursed to Baudax Bio are reflected in the “Salary” column to the Summary Compensation Table above. Annual Bonuses Mr. Enloe and Mr. Lake were each eligible in 2021 to receiveearn an annual performance cash bonus from Societal based on the achievement ofpre-established corporate and individual objectives as determined by our Board and our Compensation Committee, in consultation with our compensation consultantPay Governance, with respect to Mr. Lake, and upon review of the recommendations of our CEO for our other named executive officers. Each officer isCEO. Mr. Enloe and Mr. Lake were assigned a target bonus opportunity expressed as a percentage of his or hertheir respective base salary. Actualsalaries. Their actual bonus payments maycould be higher or lower than the target bonus amount, as determined by our Board or Compensation Committee based on the achievement of corporate and individual objectives. The Compensation Committee retains the discretion to make adjustments to the calculated bonus amount based on unexpected or unplanned events, our overall financial condition, extraordinary performance or underperformance or other factors deemed appropriate by the Compensation Committee. The target bonus amountsopportunity in 20162021 for Mr. Enloe and 2017 for Ms. Henwood, Mr. CelanoLake was 60% and Dr. McCallum were 60%, 40%, and 40%, respectively.50% of their respective base salaries. In determining the amount of the performance bonus awards,award actually paid, our Compensation Committee determinesdetermined the level of achievement of the corporate goals and individual goals for eachthe year. These goals primarily included meeting certain revenue and EBITDA levels, development of new business, maintaining high quality standards, managing cash to budget and delivering manufactured products on time in full. The Compensation Committee and the Board determined that the percentage attainment of our corporate goals for 2021 was 104.3%. In determining the level of achievement for our other named executive officers,Mr. Lake’s individual performance, our Compensation Committee reviewsreviewed and considersconsidered the recommendations of our CEO. These achievement levels are usedMr. Enloe. Our Compensation Committee approved a 2021 annual bonus payment to determine each named executive officer’s bonus. ActualMr. Enloe in an amount equal to 114.3% of his target bonus amounts paid areamount and Mr. Lake in an amount equal to 114.3% of his target bonus amount. This amount is reflected in the“Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. To the extent that our Board or Compensation Committee determined that our named executive officers exceeded their respective corporate and individual performance goals, such amounts awarded in excess of the target bonus amounts are reflected in the “Bonus” column of the Summary Compensation Table above.
Equity Compensation We awardIn 2020 and 2021, we awarded equity compensation under our 2018 Amended and Restated Equity Incentive Plan, or the 2018 Plan, to our named executive officers based on their performance in the form of time-vesting stock options and time- and performance-based
performance-vested restricted stock units. In addition, in 2020 we awarded time-vesting stock options and restricted stock units.units to Mr. Enloe as an inducement material to his acceptance of employment with the Company in accordance with NASDAQ Listing Rule 5635(c)(4). We determine our equity award guidelinesamounts based on the judgment of our Compensation Committee, taking into account information and recommendations provided by our compensation consultant. With respect to our named executive officers other than our CEO, weMr. Lake, the Compensation Committee also utilizeconsiders recommendations provided by our CEO. In determining the amount of awards, wethe Compensation Committee generally dodoes not consider an employee’s current equity ownership in our common stock or the prior awards that are fully vested. Rather, we evaluate each employee’s awards based on the recommendations received from our compensation consultants and CEO and reference to othervested, but may consider competitive market factors in our industry. Our stock option awards typically vest over a four-year period, in 48 equal monthly installments, subject to the continued service of the employee with us. Shares subject to the options typically vest in 48 equal monthly installments, beginning one month from the date of grant. Our time-based restricted stock unit awards typically vest in equal annual installments over a four-year period subject to the continued service of the employee with us. Our performance-based restricted stock units for 2017, the first year we offered suchunit awards includedinclude vesting criteria relating to the submissionachievement of certain development, commercialization and acceptance by the FDA of our NDA for IV meloxicam.financial goals. We believe these vesting arrangements encourage our named executive officers to continue service with us for a longer period of time and remain focused on our multi-year long-term drug development and commercialization programs. Qualified Plan We maintain a Noticetax-qualified savings plan under Section 401(k) of Annual Meetingthe Code. Employees who participate in the plan may make elective deferrals to the plan, subject to the limitations imposed by the Code. In addition, we currently match 100% of Shareholdersemployee deferrals under the plan, up to a limit of 5% of the employee’s eligible compensation. Mr. Enloe began participating in the Company’s plan in early 2021. Mr. Lake previously participated in the Baudax Bio plan and 2018 Proxy Statement | 21
| EXECUTIVE COMPENSATION(continued)
|
began participating in our plan upon entering his employment agreement on December 15, 2020. OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END FOR 20172021 The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2017:2021: | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number of shares or
units of stock that
have not vested (#)(1) | | Market value of shares of
units of stock that have
not vested ($)(2) | Gerri Henwood | | 56,250 | | 3,750(3) | | $8.00 | | 3/12/2024 | | | | | | | | 36,667 | | 3,333(3) | | $7.00 | | 4/8/2024 | | | | | | | | 92,625 | | 30,875(4) | | $2.47 | | 12/17/2024 | | | | | | | | 106,690 | | 16,810(5) | | $2.47 | | 12/17/2024 | | | | | | | | 52,650 | | 52,650(3) | | $8.41 | | 12/16/2025 | | | | | | | | 105,300 | | — | | $7.86 | | 12/02/2026 | | | | | | | | 33,160 | | 111,540(3) | | $7.33 | | 01/18/2027 | | | | | | | | | | | | | | | | 20,000 | | 185,000 | Michael Celano | | 49,583 | | 90,417(6) | | $8.22 | | 07/05/2026 | | | | | | | | 8,204 | | 27,596(3) | | $7.33 | | 01/18/2027 | | | | | | | | | | | | | | | | 25,600 | | 236,800 | Stewart McCallum | | 51,500 | | 51,500(6) | | $9.29 | | 12/01/2025 | | | | | | | | 8,250 | | 27,750(3) | | $7.33 | | 01/18/2027 | | 24,000 | | 222,000 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | OPTION AWARDS | | | STOCK AWARDS | | | | | | | | | | | | | | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number
of time-
based
vesting
shares or
units of
stock
that have
not
vested | | | Market
value of
time-
based
vesting
shares or
units of
stock
that have
not
vested
($)(1) | | | Number of
performance-
based
vesting
shares or
units of stock
that have not
vested (#) | | | Market value
of
performance-
based
vesting
shares or
units of stock
that have not
vested ($)(1) | | J. David Enloe, Jr. | | | 48,544 | | | | 145,631 | (2) | | | 3.03 | | | | 12/14/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 99,009 | (3) | | | 169,305 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 66,007 | (4) | | | 112,872 | | Ryan D. Lake | | | 65,000 | | | | — | (5) | | | 7.58 | | | | 6/4/2027 | | | | | | | | | | | | | | | | | | | | | | 22,521 | | | | 479 | (6) | | | 9.04 | | | | 1/1/2028 | | | | | | | | | | | | | | | | | | | | | | 43,750 | | | | 16,250 | (7) | | | 7.99 | | | | 1/17/2029 | | | | | | | | | | | | | | | | | | | | | | 20,625 | | | | 24,375 | (8) | | | 16.62 | | | | 2/2/2030 | | | | | | | | | | | | | | | | | | | | | | 29,126 | | | | 87,379 | (9) | | | 3.03 | | | | 12/14/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,875 | (10) | | | 4,916 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,428 | (11) | | | 10,992 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,000 | (12) | | | 15,390 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 59,406 | (13) | | | 101,584 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 100,000 | (14) | | | 171,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 39,604 | (4) | | | 67,723 | |
| (1) | The RSUs vest in four equal annual installments beginning on the date that is one year from the date of grant, subject to continued employment with us. |
| (2) | The market value is based on the closing stock price of $9.25$1.71 on December 29, 201731, 2021 (the last trading date in the 20172021 fiscal year). |
| (2) | (3) | The stock option is an inducement grant under Nasdaq listing rule 5635(c)(4). The stock option vests in equal monthly installments over 48 months, beginning on the date that is one month from the date of grant,January 15, 2021, subject to continued employmentservice with us. |
| (3) | The restricted stock units are an inducement grant under Nasdaq listing rule 5635(c)(4) | On June 24, 2015, 15,437 shares subject to such options vested upon receipt of shareholder approval of the Recro Pharma, Inc. Amended and Restated Equity Incentive Plan, and the remainder vests. The restricted stock units vest in four equal monthlyannual installments untilbeginning on December 17, 2018,15, 2021, subject to continued employmentservice with us. |
| (4) | (5) | On July 25, 2015, 30%The performance-based restricted stock units awarded to Mr. Enloe are an inducement grant under Nasdaq listing rule 5635(c)(4). Vesting of the shares subject to such option vestedthese performance-based restricted stock units were based upon the satisfaction ofmeeting certain 2021 performance conditions, and the remainder vests in equal monthly installments over the three-year period thereafter,criteria, subject to continued employmentservice with us.us through the date on which performance achievement is determined by the Board. These performance-based restricted stock units vested in the first quarter of 2022 when the performance criteria were deemed to have been fully met. |
| (5) | (6) | The stock option is an inducement grant under Nasdaq listing rule 5635(c)(4). The stock option vests in equal monthly installments over 48 months, beginning on the date that is one month from the date of grant,July 5, 2017, subject to continued employmentservice with us. |
| (6) | The stock option is an inducement grant under NASDAQ listing rule 5635(c)(4). vests in equal monthly installments over 48 months, beginning on February 2, 2018, subject to continued service with us. |
| (7) | The stock option shall become vestedvests in full upon a termination within twelveequal monthly installments over 48 months, of a Change of Control (as defined in our Amended and Restated Equity Incentive Plan). |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 22
| EXECUTIVE COMPENSATION(continued)beginning on February 18, 2019, subject to continued service with us.
|
| (8) | The stock option vests in equal monthly installments over 48 months, beginning on March 3, 2020, subject to continued service with us. |
| (9) | The stock option vests in equal monthly installments over 48 months, beginning on January 15, 2021, subject to continued service with us. |
| (10) | The restricted stock units vest in four equal annual installments beginning January 2, 2019, subject to continued service with us. |
| (11) | The restricted stock units vest in four equal annual installments beginning January 18, 2020, subject to continued service with us. |
| (12) | The restricted stock units vest in four equal annual installments beginning February 3, 2021, subject to continued service with us. |
| (13) | The restricted stock units vest in four equal annual installments beginning December 15, 2021, subject to continued service with us. |
| (14) | The restricted stock units vest as follows: 18,000 on April 8, 2021; 18,000 on July 8, 2021; 100,000 on December 31, 2021; and 100,000 in 24 equal monthly installments beginning January 31, 2022. Each of the vests are subject to continued service with us. |
EMPLOYMENT AGREEMENTS We have entered into employment agreements with each of our named executive officers.J. David Enloe, Jr. and Ryan D. Lake, or the Employment Agreements, on December 15, 2020. Compensation The employment agreements provideEmployment Agreements provided for initial annual base salaries for each of our named executive officers. PursuantMr. Enloe and Mr. Lake, or, together, the Company Executive Officers, subject to the employment agreements, our named executive officers received the following initial base salaries: $320,000 for Ms. Henwood, $345,000 for Mr. Celano, and $430,000 for Dr. McCallum. Such salaries have been reviewed and adjustedadjustment from time to time, in the discretion of our Board and Compensation Committee. In January 2018, the Board approved the following base salaries for our named executive officers: $600,000 for Ms. Henwood, $416,300 for Mr. Celano, and $458,500 for Dr. McCallum.time. In addition, to base salaries, the employment agreementsEmployment Agreements provide that each of our named executive officers isthe Company Executive Officers are eligible to participate in our company’s incentive bonus program. Our BoardThe base salaries and our Compensation Committee consider a cashtarget bonus opportunityopportunities that were in in effect for our named executive officers with respect to services to our company. The Board and the Compensation Committee consider potential target cash bonuses to Ms. Henwood, Mr. Celano, and Dr. McCallum, up to 60%, 40%, and 40%, respectively (which2021 are subject to increasedescribed in the Compensation Committee’s discretion),“Base Salaries” and “Annual Bonuses” sections above. Termination and Severance The Employment Agreements each provide the Company Executive Officers with certain severance rights if we terminate the employment of such respective named executive officer’s base salary dependent upon performance factors.Company Executive Officer without cause or such Company Executive Each
Officer resigns because of the employment agreements is for an initial term of one year and automatically renews forone-year periods, unless terminated by either party by delivery of 30 days written noticecertain material adverse changes to the other party. terms and conditions of his employment within 12 months of a change of control (in either case, an Involuntary Termination), or such Company Executive Officer died or became disabled. Pursuant to each of the employment agreements,Employment Agreements, if we terminate one of our named executive officer’sCompany Executive Officers’ employment without cause (as defined below) or such named executive officerCompany Executive Officer resigns for certain reasons described below within 12 months of a change of control (as defined below), such named executive officerCompany Executive Officer will generally be entitled to continue to receivereceive: | (i) | any accrued but unused vacation and paid time off and any earned but unpaid bonus in respect of the prior year (referred to as the Accrued Benefits); |
| (ii) | continuation of such executive officer’s base salary and health insurance benefits, at our expense, for a period of 12 months following the date of termination; with regard to each of Mr. Celano and Dr. McCallum, he would also be entitled to receive his base salary, any accrued but unused vacation and paid time off, any earned but unpaid bonus, reimbursement of any proper business expenses as of the date of termination (referred to as the Accrued Benefits), and outplacement services for a period of 12 months following the date of termination, which shall not exceed $25,000. If a named executive officer’s base salary and health insurance benefits (including for eligible dependents), at active employee rates, for a period of 12 months following the date of termination, with respect to Mr. Lake, and for a period of 18 months following the date of termination, with respect to Mr. Enloe; |
| (iii) | a pro-rata annual bonus in respect of the fiscal year in which the effective date of termination occurs, to the extent such bonus is earned based on the applicable criteria, paid at the same time it would have otherwise been paid absent the named executive officer’s termination of employment; and |
| (iv) | outplacement services for a period of 12 months following the date of termination, which shall not exceed $25,000. |
If a Company Executive Officer’s employment is terminated as a result of such named executive officer’sCompany Executive Officer’s disability or death, such named executive officer’sCompany Executive Officer or such Company Executive Officer’s estate will be entitled to continuereceive: | (ii) | continuation of such named executive officer’s base salary and health insurance benefits (including for eligible dependents) at active employee rates for a period of 18 months following the date of termination, with respect to Mr. Enloe, and a period of 12 months following the date of termination, with respect to Mr. Lake; and |
| (iii) | a pro-rata target bonus in respect of the fiscal year in which the effective date of termination occurs, paid within 30 days of termination. |
The severance benefits are subject to receive such executive’s base salary forthe Company Executive Officer’s execution of a periodrelease of 12 months following the date of termination; with regard to each of Mr. Celano and Dr. McCallum, he would be entitled to receive the Accrued Benefits, his base salary and health insurance benefits, at our expense, for a period of 6 months following the date of termination, and hispro-rated annual bonus asclaims in favor of the date of termination.Company. In addition, the agreements provide that if the severancepayments and other benefits provided in a named executive officer’s employment agreement or otherwise payable to a named executive officer would be subject to an excise tax under Section 280(G)280G of the Code, thenthey would be reduced to the maximum amount that would not trigger the excise tax unless the executive would be better off (on an after-tax basis) receiving all of the payments and benefits and paying all necessary applicable taxes. Restrictive Covenants Under the employment agreements, the named executive officer’s severance benefits will be either delivered in full or delivered as to such lesser extent that would result in no portionofficers are bound by a non-solicitation of employees and customers and a non-compete during their employment and the severance benefits being subject to such excise tax, whichever results in the receipt by the named executive officer on anafter-taxone-year basis of the greatest portion of such total severance and other benefits. For purposes of the employment agreements, “cause” generally means an named executive officer’s (1) commission of an act of fraud or dishonesty against us; (2) failure to substantially perform his or her duties or material violation of the employment agreement, which failure or violation continues for 30 days or more following written notice to such named executive officer; (3) loss of any permit, license, accreditation or other authorization necessary for such named executive officer to perform his or her duties; (4) conviction of a felony or a plea of “no contest” to a felony; or (5) conduct that is likely, in the judgment of our Board, to materially adversely affect our reputation; with regard to each of Mr. Celano and Dr. McCallum, his employment agreement requires his conduct under item (2) above to be willful, and for his conduct to continue for five days or more following written notice by us of the conduct under item (5) above.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 23period thereafter.
| EXECUTIVE COMPENSATION(continued)
|
For purposes of the employment agreements, a “change of control” shall be deemed to have occurred upon the happening of any of the following events: (1) the consummation by us of a plan of dissolution or liquidation; (2) the consummation of the sale or disposition of all or substantially all of our assets ; (3) the consummation by us of a merger, consolidation or other shareholder-approved fundamental business transaction in which we are a participant with another entity where our shareholders, immediately prior to the referenced transaction, will not beneficially own, immediately after the referenced transaction, shares or other equity interests entitling such shareholders to more than 50% of all votes to which all equity holders of the surviving entity would be entitled in the election of directors; (4) the date any entity, person or group, (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), (other than (A) we or any of its subsidiaries or any employee benefit plan (or related trust) sponsored or maintained by us or any of its subsidiaries or (B) any person who, on the date the Plan is effective, is the beneficial owner of our outstanding securities), shall have become the beneficial owner of, or shall have obtained voting control over, more than fifty percent (50%) of our outstanding shares of the Common Stock; or (5) the first day after the date hereof when directors are elected such that a majority of the Board shall have been members of the Board for less than twenty-four (24) months, unless the nomination for election of each new director who was not a director at the beginning of such twenty-four (24) month period was approved by a vote of at leasttwo-thirds of the directors then still in office who were directors at the beginning of such period. A named executive officer will receive the payments and benefits described above if they terminate within 12 months of a change of control and during such twelve-month period we and/or our successor: (1) materially and adversely changes such named executive officer’s status, responsibilities or perquisites or (2) require such officer to be principally based at any office or location more than 50 miles from such named executive officer’s principal office prior to the change of control; with regard to each of Mr. Celano and Dr. McCallum, his payments and benefits would also be triggered upon a change of control and a reduction in his base salary or target cash bonus.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 24
| CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS PARTY TRANSACTIONS
|
Since January 1, 2017,2020, we have engaged in the following transactions with our directors, executive officers, holders of more than 5% of our voting securities, and affiliates or immediate family members of our directors, executive officers, and holders of more than 5% of our voting securities. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties. EMPLOYMENT OF CERTAIN RELATED PERSONSRELATIONSHIP WITH BAUDAX BIO AND THE SEPARATION
Effective January 1, 2017, Ms. Suzanne Sharr and Mr. Chris Sharr, Ms. Henwood’ssister-in-law and brother, respectively, terminated their employment with MCG and were hired as employeesPrior to completion of the Company. Ms. SharrSeparation, we owned all of the outstanding shares of common stock of Baudax Bio. Following the Separation, we no longer own any shares of Baudax Bio common stock and each company now operates as a separate, independent public company.
In connection with the Separation, we and Baudax Bio entered into a Separation Agreement, Employee Matters Agreement, Tax Matters Agreement and Transition Services Agreement. These agreements govern the relationship Societal and Baudax Bio, including the allocation of various assets, liabilities, rights and obligations, as well as transition services to be provided by Societal to Baudax Bio and by Baudax Bio to Societal. For a more complete description of each of these agreements, see our Current Report on Form 8-K, filed November 26, 2019, as well as Exhibits 2.1, 10.1, 10.2, and 10.3 filed thereto. We also entered into an Assignment, Assumption and Bifurcation Agreement with Baudax Bio, Recro Gainesville LLC, or Recro Gainesville, and Alkermes Pharma Ireland Limited, pursuant to which Recro Gainesville assigned, conveyed and transferred to Baudax Bio the exclusive worldwide license, to certain nanotechnology intellectual property. For a more complete description of this agreement, see our Current Report on Form 8-K, filed November 26, 2019, as well as Exhibit 10.4 filed thereto. POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONS Our Board has been our Senior Director of Human Resources since January 2017 and Mr. Sharr has been our Vice President, Manufacturing since January 2017. Our Audit Committee approved Ms. Sharr’s and Mr. Sharr’s hiring consistent with ouradopted a written related person transaction policy.policy setting forth the policies and procedures for the review and approval or ratification of related-person transactions. This policy covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest. Our Board also approved their hiring,management is responsible for determining whether a transaction is a related party transaction subject to our policy, and upon subject determination, is responsible for disclosing the material facts concerning the transaction and the related party’s interest in our Compensationtransaction to our Audit Committee. In reviewing and approving any such transactions, our Audit Committee approved their 2017 cashis tasked to consider all relevant facts and equity compensation, after consideringcircumstances with respect to the recommendations of Radford, our then-current compensation consultant. In 2017, Ms. Sharr received a salary of $202,000transaction and Mr. Sharr received a salary of $243,100. Upon hire, Ms. Sharr and Mr. Sharr were awardedshall evaluate all available options, to purchase 15,000 and 43,600 shares of our common stock, respectively, under our Amended and Restated Equity Incentive Plan, with grant date fair values of $79,050 and $229,772, respectively, as determined in accordance with ASC 718. The assumptions made in these valuations are included in Note 16including ratification, revision or termination of the Notes to the Annual Financial Statements included in our Annual Report on Form10-K. Both Ms. Sharr and Mr. Sharr have been providing services to us in their same respective roles as consultants of MCG since 2008 and their knowledge of and performance for us were strong factors in our Board’s determination to hire them as employees. Ms. Myers, Ms. Henwood’s sister, has been our Senior Vice President, Regulatory and Quality since 2007. Ms. Myers earned $762,028 in total compensation in 2017, including base salary, bonus, equity compensation, which is determined in accordance with ASC 718, and any other compensation. The assumptions made in the valuation of Ms. Myers equity compensation are included in Note 16transaction. All of the Notes to the Annual Financial Statements includedtransactions described above either were approved or ratified in our Annual Report on Form10-K. Ms. Myers’ compensation was approved by our Compensation Committee.
Each of Ms. Myers, Ms. Sharr and Mr. Sharr participates in our general welfare and benefit plans. Ms. Henwood does not have a material interest in the employment of Ms. Myers, Ms. Sharr or Mr. Sharr, nor does she share a householdcompliance with any of them.
Our Compensation Committee and Audit Committee approve the compensation of all related persons.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 25this policy.
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
The following table sets forth certain information regarding the beneficial ownership of Common Stockcommon stock as of March 22, 201821, 2022 by (a) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of Common Stock,common stock, (b) each named executive officer identified in the Summary Compensation Table above, (c) each director and nominee for director, and (d) all executive officers and directors as a group. The percentage of Common Stockcommon stock outstanding is based on 19,498,66456,471,866 shares of our Common Stockcommon stock outstanding as of March 22, 2018.21, 2022. For purposes of the table below, and in accordance with the rules of the SEC, we deem shares of Common Stockcommon stock subject to options that are currently exercisable or exercisable within sixty days of March 22, 201821, 2022 to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise noted, each of the persons or entities in this table has sole voting and investing power with respect to all of the shares of Common Stockcommon stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise noted below, the street address of each beneficial owner is c/o Recro Pharma,Societal CDMO, Inc., 490 Lapp Road, Malvern, PA 19355.1 E. Uwchlan Ave., Suite 112, Exton, Pennsylvania 19341. | | | | | | | | | | | | | | | | Shares Beneficially Owned | | | | | Name of Beneficial Owner | | Number of Shares | | | Percentage | | | | | 5% or Greater Shareholders | | | | | | | | | | | | | SCP Vitalife Partners II, L.P.(1) 1200 Liberty Ridge Drive Suite 300 Wayne, PA 19087 | | | 2,172,900 | | | | 11.1% | | | | | | SCP Vitalife Partners (Israel) II, L.P.(1) 32B Habarzel St. Ramat Hachayal Tel Aviv 69710 Israel | | | 726,055 | | | | 3.7% | | | | | | Broadfin Capital, LLC(2) 300 Park Avenue New York, NY 10022 | | | 2,236,025 | | | | 11.5% | | | | | | Deerfield Mgmt, L.P.(3) 780 Third Avenue, 37th Floor New York, NY 10017 | | | 1,901,685 | | | | 9.8% | | | | | | Alyeska Investment Group, L.P.(4) 77 West Wacker Drive, 7th Floor Chicago, IL 60601 | | | 1,007,853 | | | | 5.2% | | | | | |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 26
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT(continued)
|
| | | | | | | | | | Shares Beneficially Owned | | | Name of Beneficial Owner | | Number of Shares | | Percentage | | | Named Executive Officers and Directors | | | | | | | Gerri Henwood(5) | | 678,903 | | 3.4% | | | Michael Celano(6) | | 87,908 | | * | | | Stewart McCallum(7) | | 92,653 | | * | | | Alfred Altomari(8) | | 66,774 | | * | | | William L. Ashton(9) | | 77,274 | | * | | | Michael Berelowitz(10) | | 57,774 | | * | | | Winston J. Churchill(11)(12) | | 2,964,229 | | 15.2% | | | Karen Flynn(13) | | 37,406 | | * | | | Bryan M. Reasons(14) | | 15,515 | | * | | | Wayne Weisman(15) | | 2,971,229 | | 15.2% | | | All executive officers and directors as a group (10 persons)(16) | | 4,074,870 | | 20.9% | | |
| | | | | | | | | | | | Shares Beneficially Owned | | | Name of Beneficial Owner | | Number of
Shares | | | Percentage | | | | | | 5% or Greater Shareholders | | | | | | | | | | | | | Entities and persons affiliated with Samjo Capital, LLC(1)
99 Lexington Avenue, 27th Floor
New York, NY 10022 | | | 3,200,000 | | | | 5.7 | % | | | | | Entities affiliated with AWM Investment Company, Inc.(2)
c/o Special Situations Funds,
527 Madison Avenue, Suite 2600,
New York, NY 10022 | | | 5,081,901 | | | | 9.0 | % | | | | | Gerald J. Yakatan and Una Yakatan Co-Trustees, The Yakatan Family Trust dated April 4, 1989, as amended and fully restated on May 3, 2017 (3)
13813 Boquita Drive
Del Mar, CA 92014 | | | 5,000,000 | | | | 8.9 | % | Named Executive Officers and Directors | | | | | | | | % | | | | | J. David Enloe, Jr.(4) | | | 205,893 | | | | * | % | | | | | Ryan D. Lake(5) | | | 433,824 | | | | * | % | | | | | William L. Ashton(6) | | | 202,548 | | | | * | % | | | | | Michael Berelowitz(7) | | | 191,314 | | | | * | % | | | | | Winston J. Churchill(8) | | | 2,999,205 | | | | 5.3 | % | | | | | James Miller(9) | | | 73,602 | | | | * | % | | | | | Laura L. Parks, Ph.D. | | | — | | | | — | % | | | | | Bryan M. Reasons(10) | | | 157,697 | | | | * | % | | | | | Wayne B. Weisman (11) | | | 3,006,205 | | | | 5.3 | % | | | | | All executive officers and directors as a group (9 persons) | | | 4,471,333 | | | | 7.8 | % |
| (1) | Based upon information set forth in the Schedule 13D filed on March 21, 2014 and information set forth in Form 4’s filed through March 22, 2018 by SCP Vitalife Partners II, L.P., or SCP Vitalife Partners, SCP Vitalife Partners (Israel) II, L.P., or SCP Vitalife Israel, SCP Vitalife II Associates, L.P., or SCP Vitalife Associates, SCP Vitalife II GP, LTD (SCP Vitalife GP), Winston J. Churchill, Jeffrey Dykan, and Wayne B. Weisman. SCP Vitalife Partners beneficially owns 2,172,900 shares of common stock and SCP Vitalife Israel beneficially owns 726,055 shares of common stock. As the general partner of SCP Vitalife Partners and SCP Vitalife Israel, SCP Vitalife Associates may be deemed to beneficially own 2,898,955 shares of common stock. As the general partner of SCP Vitalife Associates, SCP Vitalife GP may be deemed to beneficially own 2,898,955 shares of common stock. As directors of SCP Vitalife GP, Messrs. Churchill, Dykan and Weisman may be deemed to beneficially own 2,898,955 shares of common stock. SCP Vitalife Partners shares dispositive and voting power with respect to the 2,172,900 shares of common stock owned. SCP Vitalife Israel shares dispositive and voting power with respect to the 726,055 shares of common stock owned. SCP Vitalife Associates, SCP Vitalife GP, Messrs. Churchill, Dykan and Weisman have shared dispositive and voting power with respect to the aggregate 2,898,955 shares of common stock owned by SCP Vitalife Partners and SCP Vitalife Israel. |
(2) | Based upon information set forth in the Schedule 13D/A filed on March 15, 2018 by Broadfin, Broadfin Healthcare Master Fund, Ltd., or Master Fund, and Kevin Kotler. Broadfin, Master Fund and Mr. Kotler have shared voting and dispositive power over 2,236,025 shares of common stock. Broadfin and Mr. Kotler each disclaim beneficial ownership of the shares reported herein except to the extent of its or his pecuniary interest therein. |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 27
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT(continued)
|
(3) | Basedsolely upon information set forth in the Schedule 13G/A filed on February 13, 2018,8, 2022 by James E. Flynn, Deerfield Mgmt, L.P., DeerfieldSamjo Capital, LLC, Samjo Management, Company, L.P., Deerfield Special Situations Fund, L.P., Deerfield Partners, L.P.,LLC, and Deerfield International Master Fund, L.P. Deerfield Mgmt., L.P. servesAndrew N. Wiener. In addition to his role as the general partnersole Managing Member of DeerfieldSamjo Capital LLC and Samjo Management Company, L.P., Deerfield Special Situations Fund, L.P., Deerfield Partners, L.P.LLC, Mr. Wiener is also one of the portfolio managers of the CPA Samjo Investment Program, or SI, employed by Cowen Prime Advisors LLC, or CPA. The clients of Samjo Management and Deerfield International Master Fund, L.P. Deerfield Mgmt, L.P., DeerfieldSamjo Capital employ investment strategies that are similar to those employed in the CPA SI program. Samjo Capital, Samjo Management Company, L.P. and James E. Flynn share votingtheir clients are not affiliated with CPA and dispositive powerMr. Wiener does not have beneficial ownership over 1,901,685the shares held in the CPA SI program except for shares held in accounts owned by Mr. Wiener and his immediate family members. As a result, Samjo Capital and Samjo Management do not make joint filings with respect to any shares of common stock. Deerfield Special Situations Fund, L.P., Deerfield Partners, L.P.the issuer held by any CPA clients except with respect to shares held in accounts owned by Mr. Wiener and Deerfield International Master Fund, L.P. have votinghis immediate family members. To the best of Samjo Capital’s, Samjo Management’s and dispositive power over 1,176,685, 378,450Mr. Wiener’s knowledge and 346,550belief, CPA reports the ownership of shares of common stock, respectively.by such CPA clients separately to the extent required and is identified as the reporting person. |
(4)(2) | Based solely upon information set forth in the Schedule 13G13G/A filed on February 4, 2018,11, 2022 by AlyeskaAWM Investment Group,Company, Inc., a Delaware Corporation, or AWM. AWM is the investment adviser to Special Situations Cayman Fund, L.P., or Alyeska, AlyeskaCayman, Special Situations Fund GP, LLC, AlyeskaIII QP, L.P. , or SSFQP, and Special Situations Private Equity Fund, 2 GP, LLC,L.P., or SSPE. Cayman, SSFQP and Anand Parekh. Anand Parekh isSSPE are collectively referred to as the Chief Executive Officer and control person of Alyeska, which is“AWM Funds.” As the investment advisoradviser to Alyeska Fund GP, LLCthe AWM Funds, AWM holds sole voting and Alyeska Fund 2 GP, LLC. Alyeska Fund GP, LLC isinvestment power over 1,103,377 shares of our common stock held by Cayman, 3,153,693 shares of our common stock held by SSFQP, and 824,831 shares of our common stock held by SSPE. Austin W. Marxe, or Marxe, David M. Greenhouse, or Greenhouse, and Adam C. Stettner, or Stettner, are members of: SSCayman, L.L.C., a Delaware limited liability company, the general partner of Alyeska Master Fund, L.P.Cayman. Greenhouse and Alyeska Fund 2 GP, LLC isStettner are members of MGP Advisers Limited Partnership, a Delaware limited partnership, the general partner of Alyeska Master Fund 2, L.P.s,SSFQP; and therefore is deemed to indirectly beneficially own such shares. EachMG Advisers, L.L.C., a New York limited liability company, the general partner of SSPE. Marxe, Greenhouse and Stettner are also controlling principals of AWM. |
| (3) | Based solely upon information set forth in a Schedule 13G filed on March 24, 2022. Consists of 5,000,000 shares of common stock directly owned by Gerald J. Yakatan and Una Yakatan Co-Trustees, The Yakatan Family Trust dated April 4, 1989, as amended and fully restated on May 3, 2017, or the reporting persons has sharedYakatan Family Trust. Mr. Yakatan and his spouse share voting and dispositive power with respect to these shares.over the shares held by the Yakatan Family Trust and each of Mr. Yakatan and his spouse is a trustee of the Yakatan Family Trust. |
(5)(4) | Ms. HenwoodMr. Enloe holds 129,231100,250 shares of our common stock and stock options to purchase 549,672105,643 shares of our common stock that may be exercised within 60 days of March 22, 2018. Ms. Henwood’s husband, Thomas Henwood, holds 50,000 shares of our common stock. As spouses, Mr. and Ms. Henwood may be deemed to beneficially own21, 2022. Of the shares of our common stock that are held by the other spouse. Mr. and Ms. Henwood disclaim beneficial ownership of the shares of our common stock that are held by the other spouse. |
(6) | Mr. Celano holds 8,475 shares of our common stock and stock options to purchase 79,433 shares of our common stock that may be exercised within 60 days of March 22, 2018. Of these options, stock options to purchase 64,16768,770 shares of our common stock were not granted pursuant to any of our equity compensation plans and were granted as an inducement grant pursuant to NASDAQNasdaq listing rule 5635(c)(4). |
(7)(5) | Dr. McCallumMr. Lake holds 15,741200,266 shares of our common stock, and stock options to purchase 76,912225,224 shares of our common stock that may be exercised within 60 days of March 22, 2018.21, 2022 and restricted stock units covering 8,334 shares of our common stock that may vest and be settled within 60 days of March 21, 2022. Of thesethe options, stock options to purchase 62,22965,000 shares of our common stock were not granted pursuant to any of our equity compensation plans and were granted as an inducement grant pursuant to NASDAQNasdaq listing rule 5635(c)(4). |
(8)(6) | Mr. AltomariAshton holds (i) 1,50053,355 shares of our common stock, (ii) stock options to purchase 52,000122,270 shares of our common stock that may be exercised within 60 days of March 22, 201821, 2022 and (iii) restricted stock units covering 13,27426,923 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.21, 2022. |
(9)(7) | Mr. AshtonDr. Berelowitz holds (i)49,621 shares of our common stock, stock options to purchase 64,000114,770 shares of our common stock that may be exercised within 60 days of March 22, 201821, 2022 and (ii) restricted stock units covering 13,27426,923 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.21, 2022. |
(10)(8) | Dr. BerelowitzMr. Churchill holds (i)51,057 shares of our common stock, stock options to purchase 44,500122,270 shares of our common stock that may be exercised within 60 days of March 22, 2018,21, 2022 and (ii) restricted stock units covering 13,27426,923 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.21, 2022. Also includes 2,097,938 shares of our common stock beneficially held by SCP Vitalife Partners II, L.P., or SCP Vitalife Partners, and 701,017 shares of common stock beneficially held by SCP Vitalife Partners (Israel) II, L.P., or SCP Vitalife Israel (and together with SCP Vitalife Partners, referred to herein as the SCP Vitalife |
(11) | Entities). Mr. Churchill is a director of the corporate general partner of the common general partner of SCP Vitalife Partners and SCP Vitalife Israel. As a result, Mr. Churchill has shared voting and investment power with respect to the shares of common stock that are held beneficially by the SCP Vitalife Entities. |
| (9) | Mr. Miller holds (i)2,000 shares of our common stock, stock options to purchase 52,00044,679 shares of our common stock that may be exercised within 60 days of March 22, 201821, 2022 and (ii) restricted stock units covering 13,27426,923 shares of our common stock that may vest and be settled within 60 days of March 22, 2018. 21, 2022. |
| (10) | Mr. Churchill has shared voting and investment power with respect to 2,898,955Reasons holds 40,504 shares of our common stock, that are held by SCP Vitalife, of which he is a partner. |
(12) | Mr. Churchill disclaims beneficial ownership of 50,000 shares of our common stock that are held by the Churchill Trust for the benefit of his son and stock options to purchase 33,200 shares of our common stock held by his son. |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 28
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT(continued)
|
(13) | Ms. Flynn holds (i) 800 shares of our common stock, (ii) stock options to purchase 23,33290,270 shares of our common stock that may be exercised within 60 days of March 22, 201821, 2022 and (iii) restricted stock units covering 13,27426,923 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.21, 2022. |
(14)(11) | Mr. ReasonsWeisman holds (i)58,057 shares of our common stock, stock options to purchase 6,666122,270 shares of our common stock that may be exercised within 60 days of March 22, 201821, 2022 and (ii) restricted stock units covering 8,84926,923 shares of our common stock that may vest and be settled within 60 days of March 22, 2018. |
(15) | Mr. Weisman holds (i) 7,00021, 2022. Also includes 2,798,955 shares of our common stock (ii) stock options to purchase 52,000 sharesbeneficially held by the SCP Vitalife Entities. Mr. Weisman is a director of ourthe corporate general partner of the common stock that may be exercised within 60 daysgeneral partner of March 22, 2018SCP Vitalife Partners and (iii) restricted stock units covering 13,274 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.SCP Vitalife Israel. As a result, Mr. Weisman has shared voting and investment power with respect to 2,898,955the shares of our common stock that are held beneficially by the SCP Vitalife of which he is a partner.Entities. |
(16) | Includes (i) stock options to purchase 940,416 shares of our common stock that may be exercised within 60 days of March 22, 2018 and (ii) restricted stock units covering 88,493 shares of our common stock that may vest and be settled within 60 days of March 22, 2018. |
DELINQUENT SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE16(a) REPORTS Section 16(a)16 of the Exchange Act requires ourthe Company’s directors, certain officers, and directors, and persons who ownbeneficial owners of more than ten percent of a registered class of our equity securities,the Common Stock to file reports of securities ownership and changes in such ownership with the SEC. Officers, directorsSEC indicating their holdings of and greater than ten percent shareholders are also required by SEC rulestransactions in the Company’s equity securities and to furnish us withprovide copies of all Section 16(a) forms they file. such reports to the Company. Based solely on a review of the Company’s recordssuch copies and written representations byfrom the Company’s reporting persons, required to file such reports,the Company believes that all Section 16 filing requirements of Section 16(a) were satisfied with respect to the 2017 fiscal year,fulfilled on a timely basis except that the following individuals who failed to timely file certain Section 16 reports due to administrative delays: (i) Mr. Lake failed to timely file a Form 4 of SCP Vitalife Partners II LP was filed late in connection with the sale of shares of our common stock on February 14, 2017 and thetwo occasions; (ii) Mr. Miller failed to timely file a Form 4 of SCP Vitalife Partners (Israel) II, L.P. was filed late in connection with the sale of shares of our common stock on February 14, 2017. Notice of Annual Meeting of Shareholdersone occasion; and 2018 Proxy Statement | 29(iii) Dr. Parks failed to timely file a Form 4 on one occasion.
| EQUITY COMPENSATION PLAN INFORMATION |
The following table presents information about equity compensation plans and individual compensation arrangements as of December 31, 2021: | | | | | | | | | | | | | | | | | | | | | Number of securities
to be issued upon
exercise of
outstanding options
and other rights (a) | | | Weighted average
exercise price of
outstanding options
and other rights (1) (b) | | | Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a)) (c) | | Equity compensation plans approved by security holders | | | 5,111,851 | (2) | | $ | 6.79 | | | | 4,964,705 | | Equity compensation plans not approved by security holders | | | 1,125,781 | (3) | | | 5.00 | | | | — | (4) | Total | | | 6,257,632 | | | $ | 6.47 | | | | 4,964,705 | |
| (1) | Represents the weighted-average exercise price of outstanding stock options and does not include restricted stock units. |
| (2) | Consists of outstanding options to purchase 4,301,802 shares of common stock and restricted stock units covering an aggregate of 810,049 shares of common stock. Shares of common stock in settlement of vested restricted stock units are deliverable within 30 days of the vesting date. |
| (3) | Consists of outstanding options to purchase 945,765 shares of common stock and restricted stock units covering an aggregate of 180,016 shares of common stock. that were “inducement grants” as defined under Nasdaq Listing Rule 5635(c)(4). |
| (4) | Our board of directors has not established any specific number of shares that could be issued without shareholder approval. Inducement grants to new key employees are determined on a case-by-case basis. Other than possible inducement grants, we expect that all equity awards will be made under shareholder-approved plans. |
Our inducement grants typically contain terms and conditions that are materially the same as standard grants made under our 2018 Plan. Our inducement option grants typically have a ten-year term and vest in equal monthly installments over 48 months, subject generally to the continued service of the employee with us. Our inducement time-based restricted stock unit awards typically vest in equal annual installments over a four-year period, subject generally to the continued service of the employee with us. Other information with respect to this item is set forth in this Proxy Statement under the headings “Security Ownership of Directors, Certain Beneficial Owners and Management,” “Executive Compensation,” and “Director Compensation,” and is incorporated herein by reference. ITEM 1: ELECTION OF CLASS III DIRECTORS FOR A THREE-YEAR TERM EXPIRING IN 20212025 At the Annual Meeting, our shareholders will vote on the election of threetwo Class III director nominees named in this Proxy Statement as directors, each to serve until our 20212025 Annual Meeting of Shareholders and until their respective successors are elected and qualified. Our Board has unanimously nominated Winston J. ChurchillDavid Enloe, Jr. and Wayne B. WeismanBryan M. Reasons for election to our Board at the Annual Meeting. Each of the nominees has agreed to be named and to serve, and we expect each nominee to be able to serve if elected. If any nominee is unable to serve, the Governance Committee will recommend to our Board a replacement nominee. The Board may then designate the other nominee to stand for election. If you voted for the unavailable nominee, your vote will be cast for his or her replacement. OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE “FOR” THE ELECTION OF WINSTON J. CHURCHILL AND WAYNE B. WEISMAN.
| | | | | OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE FOR THE ELECTION OF J. DAVID ENLOE, JR. AND BRYAN M. REASONS. | | ✓ |
ITEM 2: APPROVAL OF A ONE-TIME STOCK OPTION EXCHANGE FOR NON-EXECUTIVE EMPLOYEES Overview We are seeking shareholder approval of a one-time stock option exchange program, or the Exchange Program, for current non-executive employees, whom we refer to as the Eligible Participants. If implemented, the Exchange Program would permit Eligible Participants to surrender certain “out-of-the-money” stock options (meaning outstanding stock options that have an exercise price that is greater than the current market price for our common stock, also known as “underwater” stock options), or Eligible Options, issued and outstanding in exchange for a grant of restricted stock units, or RSUs, that may be settled for shares of our common stock under our 2018 Plan. Shareholder-Friendly Design In discussing strategies to address our out-of-the-money stock options, we were particularly focused on creating a strategy that is compatible with the interests of our shareholders. We believe that the Exchange Program that is being proposed meets that objective by providing a more cost-effective and shareholder-friendly retention and incentive tool than simply issuing additional equity awards or paying cash compensation in order to effectively retain and motivate our non-executive employees. We believe that the benefits of the proposed exchange program, including reducing our overhang (meaning potential shares committed but unissued), and approximate value-neutrality (i.e., keeping the aggregate value of the old versus replacement awards approximately consistent), contribute to an alignment of the program with the interests of our shareholders. In particular (and as discussed in more detail below): We believe that the Exchange Program would result in a net reduction of the overhang from our equity compensation program (up to 5% of our overhang on account of stock options, depending upon the level of participation in the Exchange Program). Exchange ratios for the Exchange Program are intended to result in a “value for value” exchange, meaning that the accounting fair value of replacement RSUs granted is expected to be less than or equal to the fair value of the stock options that are surrendered, so that from that perspective the exchange does not result in a windfall to participants. Shares from exchanged options that are in excess of the shares needed to issue replacement grants of RSUs will not be returned to the 2018 Plan pool, limiting the future dilution that could otherwise have resulted from the program. Our executive officers, directors, consultants and former employees are excluded from the program, to keep the focus on the retention of our non-executive workforce. Only options granted before July 1, 2020 and that have an exercise price above our 52-week high stock price (determined immediately before the exchange offer commences) will be eligible for exchange, to make clear that the program is not designed to address merely immaterial or fleeting changes in our stock price. We believe that these design features, among others, mean that the proposed Exchange Program is aligned with the interests of our shareholders. The Exchange Program is subject to the approval of our shareholders under applicable Nasdaq Listing Rules. Our Board believes that the Exchange Program is in the best interests of our Company and our shareholders for the reasons described below. Reasons for the Exchange Program In late 2019, we became a dedicated CDMO business following the spin-off of our acute care research and development business. This resulted in a bifurcation of our company’s total value between the spun-off business and our dedicated CDMO business, although no adjustment was then made to the exercise prices of our outstanding stock options. Our stock closed at $18.78 on February 13, 2020. Since then, our stock price has declined significantly. We believe that this was the result of the bifurcation of value as previously discussed as well as a series of negative events that were outside of the control of our employees. These events included: the onset of the COVID-19 pandemic, which resulted in a decrease in prescriptions filled for a number of the commercial products we manufacture for our customers; the return to the market of a competitor to one of our commercial partners, which reduced our commercial partner’s market share of certain product strengths by approximately 50%; and notification from two of our commercial partners of the discontinuation of two commercial product lines that would result in a year-over-year reduction of approximately $6 million in our revenue. The resulting declines in our stock price have steadily eroded the retentive and incentive value of stock options granted. For example, on November 4, 2020, our stock closed at $1.60. In December 2020, the Company announced the start of our CEO and CFO, and through the first half of 2021, the Company also announced new members of the Board that have significant CDMO experience. Together, our new executive management and the Board began to design and implement a turnaround strategy for the company over the remainder of 2021. Meanwhile, employee turnover had been steadily increasing across the U.S. due to various factors primarily related to the COVID-19 pandemic. We experienced a record 21% employee turnover in 2021. As part of this effort, the Compensation Committee began considering, with input from Pay Governance, who serves as the Compensation Committee’s independent compensation consultant, whether conducting an option exchange program would assist with our retention efforts. These discussions were undertaken in the context of the sustained decline in the trading price of the Company’s shares, which at the time had resulted in a situation where, as of early October 2021, the Company had issued approximately 4.7 million outstanding stock options, 100% of which were underwater. Excluding executive officers, directors, consultants and former employees, non-executive active employees held approximately 1.4 million of the underwater stock options. Approximately half of those awards, equivalent to 15% of the 4.7 million underwater stock options, would ultimately be eligible for the proposed Exchange Program (see below). Our turnaround strategy includes the establishment of an industry-leading employee experience and corporate culture. We believe that our strategy will allow us to strengthen recruitment, employee engagement and retention, leading to a better workplace, better performance and better outcomes for our clients and for our company’s financial performance. Taking this into account in addition to the advice of Pay Governance and other relevant considerations, the Compensation Committee determined that a program under which current non-executive employees could exchange Eligible Options for RSUs was most attractive for a number of reasons, summarized below. | • | | The Exchange Program will have a positive impact on our employee experience and culture. Our non-executive employees will see our internal and external public announcements about the Exchange Program, which will increase confidence that we are working to reasonably address the perceived lack of value in our equity incentive program. |
| • | | The Exchange Program will have a positive impact on employee engagement and retention. The RSUs issued in the Exchange Program will replace underwater stock options. If the vesting conditions are |
| met, these RSUs may be settled for shares of our common stock under our 2018 Plan, thus providing an incentive for non-executive employees to stay with the company, unlike Eligible Options which are substantially underwater even though they may be vested. |
| • | | The Exchange Program will allow us to obtain value for previous compensation expense. We have incurred compensation expense in respect of our current stock option awards, even though those awards no longer have any meaningful retention or incentive effects. The RSUs that will be issued in exchange for the cancelled stock options in the Exchange Program are not expected to result in significant additional compensation expense and therefore will not have a material adverse impact on our reported earnings. |
| • | | The Exchange Program will reduce our “equity award overhang.” Outstanding stock options cannot be removed from our equity award overhang until they are exercised, expire or are terminated. Under the proposed Exchange Program, Eligible Participants will receive fewer replacement RSUs in exchange for their surrendered stock options, which will reduce overall the number of shares underlying outstanding equity awards. Based on the assumptions described below, if all Eligible Options are exchanged, stock options to purchase approximately 750,000 shares will be surrendered and canceled, while only approximately 310,000 RSUs will be granted. Accordingly, the Exchange Program could result in a significant reduction in our outstanding equity awards. All Eligible Options that are not exchanged will remain outstanding and in effect in accordance with their existing terms. |
As a result, we determined that a program under which Eligible Participants could exchange out-of-the-money stock options for a lesser number of RSUs was the most attractive means available to us to restore incentives for our non-executive employees. Other Alternatives Considered When considering how best to continue to incentivize and reward our employees who have out-of-the-money stock options, the Compensation Committee engaged Pay Governance to review and evaluate strategies to address this issue. These strategies included the stock option exchange program, as well as other alternatives, including the following: | • | | Increase cash compensation. To replace equity incentives, we considered whether we could substantially increase bonus cash compensation. However, significant increases in cash compensation would substantially increase our compensation expenses and reduce the cash available for other initiatives, which could adversely affect our business and operating results. |
| • | | Grant additional equity awards. We also considered special grants of additional stock options at current market price. However, these additional grants could substantially increase our overhang and the dilution to our shareholders and may not eliminate the employee retention, motivation and morale issues associated with these prior awards. |
| • | | Exchange options for cash. We also considered implementing a program to exchange underwater options for cash payments. However, an exchange program for cash would also increase our compensation expenses and reduce our cash flow from operations, which could adversely affect our business and operating results. In addition, we do not believe that such a program would have significant long-term retention value. |
| • | | Exchange options for options. We also considered implementing a program to exchange underwater options for new stock options. However, we believe such a program would not achieve the Compensation Committee’s desired effect of reducing the amount of overhang from outstanding underwater options to the same extent, as an option-for-option exchange would require options with respect to more shares than the proposed option-for-RSU exchange. |
Summary of the Exchange Program Features An overview of the key features of the proposed Exchange Program is provided below. | | | | Eligible Participants | | Approximately 150 current employees, excluding executive officers, directors, consultants, and former employees | | | | Type of Exchange | | Options for RSUs | | | | Eligible Options | | Options with exercise prices above the 52-week high for Company stock (which was $3.94 as of March 10, 2022) Options are excluded from participating in the offer that are scheduled to expire before the exchange closes Options that were granted after June 30, 2020 are excluded from participating in the offer | |
|
| | | Elections | | Employees may elect to exchange individual grants; however, if an employee elects to exchange a specific grant, all options granted on the same date must be exchanged | | | | Vesting of Replacement Grant | | Replacement awards will vest 50% on the first anniversary of the replacement grant and 50% on the second anniversary of the replacement grant, subject in each case to continued employment | | | | Plan to Be Issued Under | | Replacement awards will be issued under the 2018 Plan; excess shares resulting from exchange will not be returned to the plan pool | | | | Illustrative Exchange Ratios | | Exchange ratios depend on the value of the underwater options, which are grouped to simplify administration; exchange ratios are expected to range from 2.1-to-1 to 3.0-to-1 (described in more detail below) | | | | Total Grants Eligible for Exchange, Price, and Term | | Options to purchase approximately 750,000 shares with a weighted average exercise price of approximately $10 per share and a weighted average remaining term of approximately six years are expected to be eligible for the Exchange Program | | | | Total Replacement Grants | | Assuming 100% participation, approximately 310,000 RSUs are expected to be granted as replacement for Eligible Options with an aggregate fair value of approximately $650,000. The RSUs expected to be granted would have an average fair value of just over $4,000 per employee, or approximately 10% of the approximately $37,000 average grant-date fair value of Eligible Options exchanged. |
Eligible Options. Only stock options with exercise prices above the 52-week high for Company stock as of a date shortly prior to the Exchange Commencement Date will be eligible to be exchanged for RSUs. Options that are scheduled to expire before the Exchange Program closes or options that were granted after June 30, 2020 are excluded from participating in the Exchange Program. As of March 10, 2022, approximately 750,000 shares were subject to Eligible Options. Eligible Participants. We intend to make the Exchange Program available to all of our non-executive employees. To be eligible, an employee must be employed by us or one of our subsidiaries both on the Exchange Commencement Date and on the date on which the surrendered stock options are canceled and the RSUs are granted to replace them. As of March 10, 2022, there were 153 Eligible Participants. Because the Exchange Program is designed to improve the retentive element of our equity-based awards, former employees are excluded. Establishment of a New Vesting Period. New RSUs will be subject to new vesting conditions, such that the RSUs will vest 50% on the first anniversary of the replacement grant and 50% on the second anniversary of the replacement grant, subject in each case to continued employment. These vesting conditions support the retentive value of the new awards, acknowledge that employees may be surrendering fully-vested but significantly underwater awards, and further align the interests of our shareholders with those of our non-executive employees. Exchange Ratio. Exchange ratios utilized will result in grants of new RSUs with a fair value, for accounting purposes, that will be less than or equal to the fair value of the Eligible Options that are surrendered in the exchange. Shortly before the start of the Exchange Program, our Compensation Committee will determine exchange ratios by assigning an average exchange ratio to each of the pools of Eligible Options based on the closing price of our common stock on that date. The exchange ratios will be determined with reference to the fair value of the eligible options (calculated using the Black-Scholes option valuation model) within the relevant grouping. In determining fair value, the Black-Scholes model takes into account many variables and estimates, such as our current stock price, the volatility of the price of our common stock, and the remaining term of an eligible stock option. Setting the exchange ratios in this manner is intended to result in the issuance of replacement RSUs that have an aggregate fair value less than or equal to the aggregate fair value of the surrendered options they replace. This will avoid any additional compensation cost that we must recognize on the new RSUs, other than compensation expense resulting from fluctuations in our stock price after the exchange ratios have been set but before the exchange actually occurs. Sample Exchange Ratios for Eligible Options The table below illustrates for Eligible Options, the applicable exercise price range, the approximate number of options in each such range (along with the weighted average exercise price and remaining term for options in that category), the applicable exchange ratio and the approximate number of new RSUs issuable with respect to exchanged options, assuming 100% participation in the offer, had the offer been commenced as of March 10, 2022. The exercise price ranges and exchange ratios will be determined immediately prior to the commencement of the Exchange Program in a manner consistent with that used to formulate the illustration below. | | | | | | | | | | | | | | | | | Exercise Price | | Option Shares
Outstanding | | | Weighted Average
Remaining Life
(in Years) | | | Exchange Ratio | | | New RSUs | | $4.06 to $7.90 | | | 210,000 | | | | 5.9 | | | | 2.1 to 1 | | | | 100,000 | | $7.99 to $9.64 | | | 270,000 | | | | 6.5 | | | | 2.2 to 1 | | | | 120,000 | | $10.17 to $16.62 | | | 270,000 | | | | 6.1 | | | | 3.0 to 1 | | | | 90,000 | | | | | | | | | | | | | | | | | | | Total (weighted average exercise price of $9.77 per option) | | | 750,000 | | | | 6.2 | | | | 2.4 to 1 | | | | 310,000 | | | | | | | | | | | | | | | | | | |
The foregoing exchange ratios are provided solely as examples. We will apply a substantially similar methodology closer to the commencement of the Exchange Program. Participation in the Exchange Program. Participation in the Exchange Program is voluntary. Eligible Participants will have an election period of at least 20 business days following the Exchange Commencement Date in which to determine whether to participate. Upon the commencement of the Exchange Program, eligible employees holding Eligible Options will receive printed exchange offer materials explaining the precise terms and timing of the Exchange Program. If an Eligible Participant does not elect to participate in the Exchange Program, then his or her eligible stock options will remain outstanding in accordance with their current terms. Implementation of the Exchange Program Following Shareholder Approval. If we receive the required shareholder approval, the Exchange Program will commence within six months after the date of shareholder approval. The actual implementation date within that 6-month period will be determined by our Compensation Committee. If the Exchange Program does not commence within this time frame, we will not conduct the Exchange Program without again seeking shareholder approval. Our Board reserves the right to amend, postpone, or under certain circumstances cancel the Exchange Program once it has commenced. Effect on Shareholders. The Exchange Program is designed to provide renewed incentives and motivate the Eligible Participants to continue to create shareholder value and is also designed to reduce the number of shares currently subject to outstanding stock options, thereby avoiding the dilution in ownership that normally results from supplemental grants of new stock options or other awards that would be required to be granted if these options remained outstanding. We are unable to predict the precise impact of the Exchange Program on our shareholders because we cannot predict which or how many employees will elect to participate in the Exchange Program, nor can we predict which or how many Eligible Options such employees will elect to exchange. Effect on our 2018 Plan. Shares from exchanged options that are in excess of the shares needed to issue replacement grants of RSUs will not be returned to the 2018 Plan pool, limiting the future dilution that could otherwise have resulted from the Exchange Program. If all of the Eligible Options are exchanged for RSUs in accordance with the assumed exchange ratios, eligible stock options for approximately 750,000 shares would be surrendered and canceled, and approximately 310,000 RSUs would be issued. Effect of a Change of Control. As with all other equity awards granted under the 2018 Plan, in the event of a “change of control” (as defined in the 2018 Plan), unless otherwise provided in a recipient’s employment or service agreement, our Board may take whatever action with respect to awards under the 2018 Plan it deems necessary or desirable, including, without limitation, accelerating the vesting of an award, terminating an award or redeeming an award. Summary of U.S. Federal Income Tax Consequences of Exchange Program for Participating Employees The following is a summary of the anticipated material U.S. federal income tax consequences of participating in the Exchange Program. A more detailed summary of the applicable tax considerations for participants will be provided in the exchange offer materials that will be made available to employees upon the commencement of the Exchange Program. The law and regulations themselves are subject to change, and the U.S. Internal Revenue Service is not precluded from adopting a contrary position. The exchange of Eligible Options for RSUs pursuant to the Exchange Program should be treated as a non-taxable exchange and we and participating employees generally should recognize no income for U.S. federal income tax purposes upon the surrender of eligible stock options and the grant of RSUs. Overall Effect of Exchange Program Because the decision whether to participate in the Exchange Program is completely voluntary, we are not able to predict how many employees will elect to participate, how many stock options will be surrendered for exchange, or the number of RSUs that may be granted in exchange for stock options under the program. Implementation of the Exchange Program We have not commenced the Exchange Program and we will not do so unless our shareholders approve this proposal. If our shareholders approve this proposal, and our Board determines to proceed, we expect the Exchange Program to commence within six months after the date of shareholder approval of the proposal. If the Exchange Program does not commence within this time frame, we would not conduct another stock option exchange program without first seeking shareholder approval. Even if the Exchange Program is approved by our shareholders, our Board will retain the authority, in its discretion, to terminate, amend or postpone the Exchange Program at any time prior to expiration of the election period under the Exchange Program. Upon the commencement of the Exchange Program, Eligible Participants holding Eligible Options will receive written materials in the form of an “Offer to Exchange” explaining the precise terms and timing of the Exchange Program. At or before the commencement of the Exchange Program, we will file an Offer to Exchange with the SEC as part of a tender offer statement on Schedule TO. Eligible Participants, as well as shareholders and members of the public, will be able to obtain the Offer to Exchange and other documents filed by us with the SEC free of charge from the SEC’s website at www.sec.gov. The tender offer that we will commence in connection with the Exchange Program is referred to herein as the “Exchange Offer.” Eligible Participants will be given at least 20 business days to elect to surrender their Eligible Options in exchange for RSUs, which period may be extended by us subject to our compliance with applicable law. Once the offer to exchange is closed, Eligible Options that were surrendered for exchange will be canceled, and our board of directors will approve grants of RSUs to participating Eligible Participants in accordance with the established exchange ratios. All such RSUs will be granted under our 2018 Plan and will be subject to the terms of such plan and a RSU agreement to be entered into between us and each participant. We may decide not to implement the Exchange Program even if shareholder approval of the Exchange Program is obtained, or we may amend or terminate the Exchange Program once it is in progress. Although we do not anticipate that the staff of the SEC will require us to materially modify the terms of the Exchange Program, it is possible that we may need to alter the terms of the Exchange Program to comply with comments from the SEC. It is also possible that we may need to make modifications to the Exchange Program for other legal, tax or accounting reasons. Our Compensation Committee will retain the discretion to make any such changes to the terms of the Exchange Program. Financial Statements Our financial statements are incorporated by reference from our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022. IF YOU ARE BOTH A SHAREHOLDER AND AN EMPLOYEE HOLDING ELIGIBLE OPTIONS, PLEASE NOTE THAT VOTING TO APPROVE THE EXCHANGE PROGRAM DOES NOT CONSTITUTE AN ELECTION TO PARTICIPATE IN THE EXCHANGE PROGRAM. | | | | | | OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTEFORTHE APPROVAL OF A ONE-TIME STOCK OPTION EXCHANGE FOR NON-EXECUTIVE EMPLOYEES | | ✓ |
ITEM 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Section 14A of the Exchange Act, we are conducting a shareholder advisory vote on the compensation paid to our named executive officers. This proposal, commonly known as “say-on-pay,” gives our shareholders the opportunity to express their views on our named executive officers’ compensation. The vote is advisory, and, therefore, it is not binding on the Board, the Compensation Committee, or the Company. Nevertheless, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. We currently intend to conduct this advisory vote annually. Our executive compensation program is designed to attract, motivate and retain our named executive officers who are critical to our success. Our Board believes that our executive compensation program is well tailored to retain and motivate key executives while recognizing the need to align our executive compensation program with the interests of our shareholders and our “pay-for-performance” philosophy. Our Compensation Committee 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 shareholders’ interests and current market practices. We encourage our shareholders to read the “Summary Compensation Table” table and other related compensation tables and narrative disclosures, which describe the 2021 compensation of our named executive officers. We are asking our shareholders to indicate their support for the compensation of our named executive officers as described herein. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and our executive compensation philosophy, programs, and practices as described in this Proxy Statement. | | | | | OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE FOR THE APPROVAL OF, ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AT THE ANNUAL MEETING | | ✓ |
ITEM 4: RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20182022 The Audit Committee of the Board has appointed and engaged KPMG LLP to serve as our independent registered public accounting firm to audit the consolidated financial statements of the Company and its subsidiaries for the 20182022 fiscal year, and to perform audit-related services. KPMG LLP has served as our independent registered public accounting firm since 2009. Shareholders are hereby asked to ratify the Audit Committee’s appointment of KPMG LLP as our independent registered public accounting firm for the 20182022 fiscal year. The Audit Committee is solely responsible for selecting our independent auditors. Although shareholder ratification of the appointment of KPMG LLP to serve as our independent registered public accounting firm is not required by law or our organizational documents, the Board has determined that it is desirable to seek shareholders ratification as a matter of good corporate governance in view of the critical role played by independent registered public accounting firms in maintaining the integrity of financial controls and reporting. If the shareholders do not ratify the appointment of KPMG, LLP, the Audit Committee will reconsider its selection and whether to engage an alternative independent registered public accounting firm. Representatives of KPMG LLP are expected to virtually attend the Annual Meeting where they will be available to respond to appropriate questions and, if they desire, to make a statement. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF KPMG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018.
ITEM 3: APPROVAL OF THE RECRO PHARMA, INC. 2018 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
Introduction
The Recro Pharma, Inc. Amended Equity Incentive Plan, or the A&R Plan, was initially approved by our Board on April 1, 2015 and by our shareholders on June 24, 2015, and is designed to attract and retain talented employees, directors and consultants necessary for our continued growth and success. When the A&R Plan was
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first effective, the Board authorized, and shareholders approved, an aggregate of 2,000,000 shares of our common stock for issuance under the plan, which was subsequently increased to 4,036,737 as of March 22, 2018, by operation of the “evergreen” provision in the A&R Plan.
As more fully described below under the section titled “Background of 2018 Plan,” as of March 22, 2018, only 500,554 shares of our common stock remain available for future issuance under the A&R Plan. Our Board has determined that this amount is insufficient to meet our needs for future equity incentive awards. In light of such determination, the Compensation Committee and our Board, in consultation with our compensation consultant Pay Governance, undertook a comprehensive review of the A&R Plan in order to propose amendments to increase the number of shares authorized for issuance under the A&R Plan and any other changes our Board determined were advisable.
Based on such review, on March 22, 2018, our Board unanimously approved the 2018 Amended and Restated Plan, or the 2018 Plan, and directed that the 2018 Plan be submitted for shareholder adoption at the Annual Meeting with the following principal changes:
an increase in the aggregate amount of shares available for issuance under the A&R Plan to 7,036,737 shares; and
certain other changes described below that our Board determined to be advisable.
Our Board believes that approval of the 2018 Plan is critical to our ability to attract, retain and motivate employees, including our executive officers, consultants and directors, and to align their interests with those of our shareholders. The Board has recommended that shareholders approve the 2018 Plan because it believes, after consulting with Pay Governance, that it would be in the best interests of us and its shareholders to have a plan with a sufficient number of shares available for new awards.
If the shareholders vote to approve the 2018 Plan at the Annual Meeting, the 2018 Plan will be immediately effective on May 4, 2018. If the 2018 Plan is not approved by our shareholders, then the A&R Plan will remain in effect with any shares previously authorized under the A&R Plan remaining available for future awards under the A&R Plan, together with shares added by operation of the “evergreen” provision of the A&R Plan.
Background of 2018 Plan
At the time our Board and shareholders approved the A&R Plan in April 2015, we believed that the shares of our common stock available for issuance under the A&R Plan would allow us to provide adequate equity compensation to current and future employees based on internal forecasts for the foreseeable future. The A&R Plan initially provided for the issuance of up to an aggregate of 2,000,000 shares of our common stock, which was subsequently increased to 4,036,737 pursuant to the “evergreen” provision in the A&R Plan.
In connection with our commercialization and launch plans for IV meloxicam, if approved by the FDA, the Compensation Committee and our Board, in consultation with Pay Governance, conducted an extensive analysis and assessment of our compensation arrangements. As a result of such analysis and assessment, the Compensation Committee and the Board determined that additional shares of our common stock are needed under the A&R Plan in order to make future grants of long-term equity incentive compensation to our current and future employees, including those employees recruited to expand our sales and marketing capabilities, and to our executives, consultants and directors in connection with performance incentives related to our anticipated commercial launch of IV meloxicam, if approved. In light of such determination, the Compensation Committee and Board undertook a comprehensive review of the A&R Plan in order to consider and propose additional amendments providing for an appropriate increase to the aggregate number of shares authorized for issuance under the A&R Plan as well as to propose any other appropriate amendments.
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Based on such review, our Board approved, subject to shareholder approval, the 2018 Plan. The 2018 Plan provides for an increase of 3,000,000 shares to the aggregate number of shares available for issuance under the A&R Plan. Accordingly, an aggregate number of 7,036,737 shares will be available for issuance under the 2018 Plan, inclusive of shares subject to awards issued under the A&R Plan that remain outstanding as of March 22, 2018. While retained in the 2018 Plan, it was determined that the “evergreen provision” under the A&R Plan would not provide sufficient additional shares on a yearly basis in order to allow us flexibility to make future awards.
In determining the amount of the increase to our share reserve under the 2018 Plan, the Board and Compensation Committee, in consultation with Pay Governance, our compensation consultant, considered a number of factors, including the following:
| • | | Shares Available for Grant. Currently, a maximum of 4,036,737 shares of our common stock may be granted under the A&R Plan. As of March 22, 2018, 500,554 shares remained available for grant under the A&R Plan, which is the sole equity compensation plan under which we currently grant equity awards. The proposed 2018 Plan would increase the number of shares available for grant under the A&R Plan by 3,000,000 shares, bringing the total that will remain available to be granted under the 2018 Plan to 3,500,554 shares. As of March 22, 2018, no benefits or amounts relating to the additional 3,000,000 shares have been received by, or allocated to, any individuals. |
| • | | Shares Outstanding. As of March 22, 2018, under the A&R Plan there were: (i) 2,911,585 shares subject to outstanding options, with a weighted average exercise price of $7.34 and a weighted average remaining term of 7.7 years and (ii) 444,598 shares subject to outstanding restricted stock units. As of the same date, under the A&R Plan and our 2008 Stock Incentive Plan, or the 2008 Plan, collectively, there were a total of (i) 3,313,811 shares subject to outstanding options, with a weighted average exercise price of $7.24 and a weighted average remaining term of 6.9 years and (ii) 444,598 shares subject to outstanding restricted stock units. In addition, as of March 22, 2018, there were 913,031 shares subject to outstanding stock options and restricted stock units granted as inducement awards outside our A&R Plan and 2008 Plan. |
| • | | Overhang. As of March 22, 2018, our overhang is 19%. For this purpose we calculated overhang as (i) 2,911,585 shares subject to outstanding options under the A&R Plan, plus (ii) 444,598 shares subject to outstanding restricted stock units under the A&R Plan, plus (iii) 402,226 shares subject to outstanding options under the 2008 Plan, plus (iv) 913,031 stock option and restricted stock unit granted as inducement awards outside our A&R Plan and 2008 Plan, divided by (a) 19,498,664, which is the total outstanding shares of our Common Stock as of March 22, 2018, plus (b) 3,758,409 shares underlying outstanding options and restricted stock units under the 2008 Plan and the A&R Plan, plus (c) 913,031 stock option and restricted stock unit granted as inducement awards outside our A&R Plan and 2008 Plan. Our 2008 Plan has 174 shares reserved for issuance and does not allow for the issuance of any awards after December 8, 2018, and therefore, no additional equity awards will be granted under the 2008 Plan in the future. |
| • | | Burn Rate. Burn rate measures our usage of shares for the A&R Plan as a percentage of the total outstanding shares of our Common Stock. For 2017 and 2016, our burn rates were 5.1% and 3.1%, respectively. The rates were calculated by dividing the number of options and restricted stock units that were granted during the year, excluding stock option and restricted stock unit grants that were granted as inducement awards outside the A&R plan, by the weighted average number of shares outstanding during
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| the year. Our adjusted burn rate, including stock options and restricted stock units granted as inducement awards outside the A&R plan, for 2017 and 2016 would be 7.7% and 3.1%, respectively. Our average annual burn rate of 4.1%, excluding inducement awards, or 5.4%, accounting for such inducement awards, over this period were each within Institutional Shareholder Services Inc., or ISS, guidelines for the Pharmaceuticals and Biotechnology Industry for Russell 3000 andNon-Russell 3000 companies.
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| • | | Forecasted Grants. Our Board anticipates that the proposed share increase under the 2018 Plan, based on currently projected share use, will be sufficient for the granting of equity awards under the 2018 Plan for approximately two years. The forecasted projected share use assumes we will grant options and restricted stock units (less cancellations and forfeitures) based on our historical averages, adjusted for the expected growth in our Acute Care business including adding approximately 100 hospital sales professionals over the next twelve months to commercialize IV meloxicam, if approved, as well as the growth of our CDMO business. Despite the projected share use described above, future circumstances and business needs, such as higher than expected headcount increases to commercialize IV meloxicam, if approved, and the development efforts for our other product candidates, changes in the growth of our CDMO business, and any activities relatingin-licensing of product candidates or acquisitions, may result in a significant increase in projected options or restricted stock unit grants. |
It is also imperative that we continue to make additional long-term equity incentive awards to our employees, including our executive officers, consultants and directors. If the 2018 Plan is not approved, we will be limited in our ability to issue future equity awards and thereby incentivize employees, consultants and directors or attract new employees, consultants and directors to accomplish our proposed commercial objectives.
In addition to the foregoing changes, based on the review of the A&R Plan by the Compensation Committee and our Board, the 2018 Plan includes certain other amendments to the A&R Plan. In particular, the additional substantive amendments to the A&R Plan include changes to: (i) remove certain exceptions to annual individual grant limits, and (ii) adjust our ability to terminate or redeem options and stock appreciation rights in connection with a change of control, as defined in the 2018 Plan.
A summary of the essential features of the 2018 Plan is set forth below. This summary is subject to and qualified in its entirety by the full text of the 2018 Plan, which is attached to this Proxy Statement as Appendix A.
Description of the 2018 Plan
Purpose. The 2018 Plan is intended as an additional incentive to current and prospective employees, consultants and directors to enter into or remain in the service or employ with us or any Affiliate, to devote themselves to our success, and to encourage the creation of shareholder value. Under the 2018 Plan, we may provide such persons with opportunities to acquire or increase their interests in us through options to purchase our common stock, grants of stock appreciation rights and awards of our common stock. Under the 2018 Plan, we may grant (i) incentive stock options, (ii) nonqualified stock options, (iii) stock appreciation rights, (iv) stock awards, (v) restricted stock awards, and (vi) restricted stock units.
Authorized Shares. A total of 7,036,737 shares of our common stock will be reserved for issuance under the 2018 Plan. In addition, on January 1 of each year, the number of shares of common stock reserved for issuance under the 2018 Plan may be increased by our Board, without the necessity of further approval from our shareholders, by an amount equal to no greater than five percent (5%) of our issued and outstanding common stock on such date. If any award under the 2018 Plan expires, lapses, terminates unexercised, becomes unexercisable or is forfeited, or if shares underlying an award are tendered or withheld in payment of the exercise price of an award
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or the taxes payable with respect to the exercise, then such unpurchased, forfeited, tendered or withheld shares shall thereafter be available for further awards under the 2018 Plan unless, in the case of stock options granted under the 2018 Plan, related stock appreciation rights are exercised. With respect to stock appreciation rights that are settled with shares, upon settlement, only the number of shares delivered to a participant upon the exercise of the stock appreciation right shall count against the number of shares issued under the 2018 Plan. Awards under the 2018 Plan that are settled in cash shall not be counted against the foregoing maximum share limitations.
In the event that any reorganization, recapitalization, stock split, reverse stock split, stock dividend, combination of shares, merger, consolidation, distribution of assets, or any other change in our corporate structure or our shares affects shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of participants under the 2018 Plan, the Board shall make such equitable adjustments in any or all of the following in order to prevent such dilution or enlargement of rights: the number and kind of shares or other property available for issuance under the 2018 Plan (including, without limitation, the total number of shares available for issuance under the 2018 Plan), the number and kind of awards or other property covered by awards, and the exercise price of outstanding options and stock appreciation rights.
Eligibility. Awards under the 2018 Plan may be granted to our employees or employees of any parent or subsidiary affiliate. Awards may also be made to our consultants and members of our Board. Only employees may be granted incentive stock options. As of March 22, 2018, approximately 256 employees, including our named executive officers, and sevennon-employee directors would be eligible to participate in the 2018 Plan.
Administration. The Compensation Committee will administer the 2018 Plan (except with respect to any award granted tonon-employee directors, which is administered by our full Board). Subject to the terms and conditions of the 2018 Plan, our Compensation Committee will have the authority to select the persons to whom awards are to be made, to determine the type or types of awards to be granted to each person, determine the number of awards to grant, determine the number of shares to be subject to such awards, and the terms and conditions of such awards, and to interpret the 2018 Plan.
Awards. The 2018 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, restricted stock awards and restricted stock units. Each award is set forth in a separate award agreement with the person receiving the grant, which agreement indicates the type, terms, restrictions and conditions of the award. A recipient may receive more than one award of stock options, stock appreciation rights, stock awards, restricted stock or restricted stock units.
Award Limits. To the extent required by Section 162(m) of the Code for awards under the Plan to qualify as “performance-based compensation,” the maximum number of shares which may be granted under the 2018 Plan during any fiscal year of the Company to each participant, and which are subject to an award for which the grant of such award is subject to the attainment of performance goals, shall be 400,000 shares per type of award, provided that the maximum number of shares for all types of awards does not exceed 1,000,000 during any fiscal year of the Company.
Stock Options. Stock options entitle the holder to purchase from us a stated number of shares of common stock. The 2018 Plan permits the grant of stock options that are intended to qualify as incentive stock options, or ISOs, and nonstatutory stock options, or NSOs.
The exercise price of a stock option granted under the 2018 Plan may not be less than 100% of the fair market value of the common stock subject to the stock option on the date of grant and, in some cases (see “Limitations on Incentive Stock Options” below), may not be less than 110% of such fair market value.
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The term of stock options granted under the 2018 Plan may not exceed ten years and, in some cases (see “Limitations on Incentive Stock Options” below), may not exceed five years. Acceptable forms of consideration for the purchase of our common stock pursuant to the exercise of a stock option under the 2018 Plan will be determined by the Board and may include payment: (1) by cash, (2) by certified check payable to us, (3) by payment through a broker in accordance with the procedures permitted by Regulation T of the Federal Reserve Board; (4) by deliever of shares of common stock, as permitted in the discretion of the Board; (5) by a net exercise arrangement (for NSOs only); (6) in other legal consideration approved by the Board and permitted for the issuance of shares under the Pennsylvania Business Corporation Law, as amended; or (7) any combination of the foregoing.
Stock options granted under the 2018 Plan may become exercisable in cumulative increments, or “vest,” as determined by the Board or at the rate specified in the stock option agreement.
Unless otherwise provided in an award agreement or determined by the Compensation Committee, if a participant terminates employment with us due to death or disability, the participant’s unexercised options may be exercised, to the extent they were exercisable on the termination date, for a period of twelve months from the termination date or until the expiration of the original award term, whichever period is shorter. If the participant terminates employment with us (or our affiliates) for cause, (i) all unexercised options (whether vested or unvested) shall terminate and be forfeited on the termination date, and (ii) any shares in respect of exercised options for which we have not yet delivered share certificates will be forfeited. If the participant’s employment terminates for any other reason, any vested but unexercised options may be exercised by the participant, to the extent exercisable at the time of termination, for a period of three months from the termination date or until the expiration of the original option term, whichever period is shorter. Unless otherwise provided by the Compensation Committee, any options that are not exercisable at the time of termination of employment shall terminate and be forfeited on the termination date.
Limitations on Incentive Stock Options
The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to ISOs that are exercisable for the first time by a participant during any calendar year under all of our stock plans may not exceed $100,000. The stock options or portions of stock options that exceed this limit or otherwise fail to qualify as ISOs are treated as NSOs. No ISO may be granted to any person who, at the time of grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any affiliate unless the following conditions are satisfied:
the exercise price of the ISO must be at least 110% of the fair market value of the common stock subject to the ISO on the date of grant; and
the term of the ISO must not exceed five years from the date of grant.
Stock Appreciation RightsStock appreciation rights represent the right to receive, upon exercise, any appreciation in a share of common stock over a particular time period and may be granted in connection with options or on a standalone basis pursuant to stock appreciation right agreements. The appreciation amount may be settled in shares of our common stock, cash or a combination thereof. The strike price of each stock appreciation right will be determined by the Board. The Board may also impose restrictions or conditions upon the vesting of stock appreciation rights that it deems appropriate. Stock appreciation rights will be subject to the same conditions upon termination of continuous service and restrictions on transfer as stock options under the 2018 Plan.
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Stock Awards. Stock awards consist of transferred shares of our common stock without payment or any other consideration. Stock awards shall be subject to the terms and conditions as the Board determines, including restrictions on sale or other disposition and our rights to reacquire such shares subject to a stock award upon termination of continuous services with us.
Restricted Stock Awards. Restricted stock awards are grants of our common stock pursuant to restricted stock award agreements, which may impose limitations on such shares, including any limitation on the right to vote shares or receive any dividend, other rights or property. Shares of our common stock acquired under a restricted stock award may be subject to forfeiture conditions to be determined by the Board. If the specified conditions are not attained, the participant will forfeit the portion of the restricted stock award with respect to which those conditions are not attained, and the underlying common stock will be forfeited. If the conditions, if any, have been satisfied, the restrictions imposed will lapse with respect to the applicable number of shares.
Restricted Stock Unit Awards. Restricted stock unit awards, or RSUs, may be granted pursuant to restricted stock unit award agreements. RSUs are granted in reference to a specified number of shares of common stock and entitle the holder to receive, subject to satisfaction of forfeiture conditions, if any, one share (or the value of one share) of common stock (at the time of distribution) for each such share of common stock covered by the RSU. Unless otherwise provided in an award agreement or determined by the Compensation Committee, upon termination of service a participant will forfeit all RSUs that then remain subject to forfeiture, subject to pro rata vesting upon a termination due to retirement, death or disability.
Extension of Time to Exercise Options. Our Board may extend the period of time that anon-qualified stock option may be exercised by a person whose employment with the Company and its affiliates has terminated, provided that the time to exercise an option may not be extended beyond the original term of such option.
Change of Control. Unless otherwise provided in a recipient’s employment or service agreement, in the event of a Change of Control (as defined in the 2018 Plan), our Board may take whatever action with respect to outstanding awards it deems necessary or desirable, including, without limitation, accelerating the vesting of an award or terminating or redeeming an award. If options or stock appreciation rights granted pursuant to the 2018 Plan are accelerated, such awards shall become immediately exercisable in full.
Amendment and Termination. The 2018 Plan will automatically terminate ten years from the date of its adoption by the Board, unless terminated at an earlier time by the Board. Our Board may also amend the 2018 Plan from time to time and in such manner as it deems advisable. Notwithstanding the foregoing, any amendment that would change the individuals eligible to receive awards under the 2018 Plan, extend the expiration date of the 2018 Plan, reduce the exercise price of an option or stock appreciation rights award, exchange an option or stock appreciation rights award which has an exercise price that is greater than the fair market value of a share for cash or shares, cancel an option or stock appreciation rights award in exchange for a replacement option or another award with a lower exercise price or increase the maximum number of shares of common stock available for issuance under the 2018 Plan (other than as a result of a yearly increase not in excess of five percent (5%) of our issued and outstanding common stock, which may be effected by the Board) will only be effective if approved by a majority of our outstanding voting stock then outstanding.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax consequences that generally will arise with respect to awards granted under the 2018 Plan. This summary is based on the federal tax laws in effect as of the date of this Proxy Statement. In addition, this summary assumes that all awards are exempt from, or comply with, the rules under Section 409A of the Code regarding nonqualified deferred compensation. Changes to these laws could alter the tax consequences described below.
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Incentive Stock Options. A participant in the 2018 Plan will not have income upon the grant of an incentive stock option. Also, except as described below, a participant will not have income upon exercise of an incentive stock option if the participant has been employed by us at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under “Nonqualified Stock Options.” The exercise of an incentive stock option may subject the participant to the alternative minimum tax.
A participant will have income upon the sale of the shares acquired under an incentive stock option at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the shares. If a participant sells the shares more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the shares prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and, if the sales proceeds exceed the value of the shares on the date of exercise, all or a portion of the profit will be ordinary income and the portion (if any) by which the sales proceeds exceed the exercise date value will be capital gain. This capital gain will be long-term if the participant has held the shares for more than one year and otherwise will be short-term. If a participant sells the shares at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the shares for more than one year and otherwise will be short-term.
Nonqualified Stock Options. A participant will not have income upon the grant of a nonqualified stock option. A participant will have compensation income upon the exercise of a nonqualified stock option equal to the value of the shares on the day the participant exercised the option less the exercise price. Upon sale of the shares, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the shares on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the shares for more than one year and otherwise will be short-term.
Stock Appreciation Rights. A participant will not have income upon the grant of a stock appreciation right. A participant generally will recognize compensation income upon the exercise of a stock appreciation right equal to the amount of the cash and the fair market value of any shares received. Upon the sale of the shares, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the shares on the day the stock appreciation right was exercised. This capital gain or loss will be long-term if the participant held the shares for more than one year and otherwise will be short-term.
Restricted Stock Awards. A participant will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Code is made within 30 days of the date of grant. If a timely 83(b) election is made, then a participant will have compensation income equal to the value of the shares less the purchase price. When the shares are sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the shares on the date of grant. If the participant does not make an 83(b) election, then when the shares vest the participant will have compensation income equal to the value of the shares on the vesting date less the purchase price. When the shares are sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the shares on the vesting date. In each case, any capital gain or loss will be long-term if the participant held the shares for more than one year and otherwise will be short-term.
Restricted Stock Units. A participant will not have income upon the grant of a restricted stock unit. When the restricted stock unit vests, the participant will have income on the vesting date in an amount equal to the fair market value of the shares on such date less the purchase price, if any. When the shares are sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the shares on the vesting date. Any capital gain or loss will be long-term if the participant held the shares for more than one year and otherwise will be short-term.
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Other Stock-Based Awards. The tax consequences associated with any other stock-based award granted under the 2018 Plan will vary depending on the specific terms of such award. Among the relevant factors are whether or not the award has a readily ascertainable fair market value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the award and the participant’s holding period and tax basis for the award or underlying common stock.
Tax Consequences to us. There will be no tax consequences to us with respect to awards made under the 2018 Plan, except that we will be entitled to a deduction when a participant has compensation income (or upon a disqualifying disposition of an incentive stock option). Any such deduction will be subject to the limitations of Section 162(m) of the Code.
Outstanding Awards
The following table shows, as of December 31, 2017, the Company’s equity compensation plans under which the Company’s equity securities are authorized for issuance:
Equity Compensation Plan Information
| | | | | | | | | | | Plan Category | | Number of
securities to
be issued
upon exercise
of
outstanding
options and
other rights | | Weighted-
average
exercise
price of
outstanding
options and
other
rights(1) | | Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a)) | | | | Equity compensation plans approved by security holders | | 3,024,156(2) | | $6.89 | | 1,282,550 | | | | | Equity compensation plans not approved by security
holders | | 841,312(3) | | $8.15 | | —(4) | | | | | Total | | 3,865,468 | | $7.17 | | 1,282,550 | | | | |
| (1) | Represents the weighted-average exercise price of outstanding stock options and does not include restricted stock units. |
| (2) | Consists of outstanding (i) options to purchase 2,795,563 shares of common stock and (ii) restricted stock units covering an aggregate of 270,593 shares of common stock. Shares in settlement of vested restricted stock units are deliverable within 30 days of the vesting date. |
| (3) | Reflects grants of stock options and restricted stock units that were “inducement grants” as defined under NASDAQ Listing Rule 5635(c)(4). The terms and conditions of each inducement grant are subject to the terms and conditions of the Form of Award Agreement for Option Inducement Awards filed in the Company’s registration statement on FormS-8 with the SEC on December 23, 2015 and the Form of Award Agreement for Restricted Stock Unit Inducement Awards filed in the Company’s annual report onForm 10-K with the SEC on March 2, 2018. |
| (4) | Our board of directors has not established any specific number of shares that could be issued without shareholder approval. Inducement grants to new key employees are determined on acase-by-case basis. Other than possible inducement grants, we expect that all equity awards will be made under shareholder-approved plans. |
As of March 22, 2018, our named executive officers had the following number of options outstanding under the A&R Plan: Ms. Henwood had stock options to purchase 802,300 shares of common stock under the A&R Plan,
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 38
| ITEMS TO BE VOTED ON(continued)
|
Mr. Celano had stock options to purchase 75,800 shares of common stock outstanding under the A&R Plan and Dr. McCallum had stock options to purchase 68,200 shares of common stock outstanding under the A&R Plan. All current executive officers as a group had stock options to purchase 901,100 shares of common stock outstanding under the A&R Plan. All current directors who are not executive officers as a group had stock options to purchase 302,500 shares of common stock outstanding under the A&R Plan. Each of Messrs. Churchill and Weisman, our current director nominees, had stock options to purchase 52,000 shares of common stock outstanding. Allnon-executive officer employees as a group had stock options to purchase 1,655,985 outstanding under the A&R Plan. No associates of our directors or executive officers have received options under the A&R Plan. No other person has received five percent or more of the outstanding awards issued under the A&R Plan. On March 22, 2018, the closing sales price of the common stock as reported on the NASDAQ Capital Market was $11.07 per share.
New Plan Benefits
We cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to participants under the 2018 Plan because awards under the 2018 Plan are discretionary. Whether future awards will be made will depend on Compensation Committee action, and the value of any future equity awards will ultimately depend on the future price of our stock, among other factors, and will be subject to such vesting
conditions as the Compensation Committee determines from time to time. The following table sets forth information with respect to awards made in twelve months ended December 31, 2017 under the A&R Plan to our named executive officers, our executive officers as a group and our directors:
| | | | | | | Name and Position | | Number of
Stock Options | | Number of
Restricted Stock
Units | | Dollar value ($)(1) | Gerri Henwood President and CEO | | 144,700 | | 51,100 | | 1,137,132 | Michael Celano Chief Operating Officer | | 35,800 | | 31,600 | | 420,294 | Stewart McCallum Chief Medical Officer | | 36,000 | | 39,000 | | 475,590 | All Executive Officers as a group (3 persons) | | 180,500 | | 82,700 | | 1,557,426 | AllNon-Employee Directors as a group (7 persons) | | 20,000 | | 88,493 | | 809,780 | All Employees, excluding our Executive Officers, as a group (55 persons) | | 450,920 | | 155,850 | | 3,605,729 |
| (1) | Reflects the grant date fair value determined in accordance with ASC 718. The assumptions made in these valuations are included in Note 16 of the Notes to the Annual Financial Statements included in our Annual Report on Form10-K. |
Vote Required
The approval of the 2018 Plan requires the affirmative vote of a majority of the votes cast by all shareholders of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal.
Recommendation of the Board
OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE RECRO PHARMA, INC. 2018 AMENDED AND RESTATED EQUITY INCENTIVE PLAN.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 39
OTHER MATTERS The Annual Meeting is called for the purposes set forth in the Notice. Our Board does not know of any other matters to be considered by the shareholders at the Annual Meeting other than the matters described in the Notice. However, the enclosed proxy confers discretionary authority on the persons named in the proxy card with respect to matters that may properly come before the Annual Meeting and that are not known to our Board at the date this proxy statementProxy Statement was printed. It is the intention of the persons named in the proxy card to vote in accordance with their best judgment on any such matter. REQUIREMENTS FOR SUBMISSION OF SHAREHOLDER PROPOSALS FOR NEXT YEAR’S ANNUAL MEETING In orderProposals to be considered for inclusion in theour proxy statement for our 2019the 2023 Annual Meeting of Shareholders shareholder proposals must be received by us no later than November 23, 2018.December 2, 2022. If we change the date of the 20192023 Annual Meeting of Shareholders by more than 30 days from the anniversary of this year’s Annual Meeting, shareholder proposals must be received a reasonable time before we begin to make available the proxy materials for the 20192023 Annual Meeting in order to be considered for inclusion in our Proxy Statement.proxy statement. Proposals must be sent via registered, certified, or express mail (or other means that allows the shareholder to determine when the proposal was received by the Corporate Secretary) to the Corporate Secretary, Recro Pharma,Societal CDMO, Inc., 490 Lapp Road, Malvern, PA 19355.1 E. Uwchlan Ave., Suite 112, Exton, Pennsylvania 19341. Proposals must contain the information required under our Bylaws, a copy of which is available upon request to our Corporate Secretary, and also must comply with the SEC’s regulations regarding the inclusion of shareholder proposals in Company-sponsored proxy materials.
Alternatively, shareholdersShareholders intending to present a proposal or nominate a director for election at next year’sour 2023 Annual Meeting of Shareholders without having the proposal or nomination included in our Proxy Statementproxy statement must comply with the requirements set forth in our Bylaws. Our Bylaws require, among other things, that our Corporate Secretary receive the proposal or nomination no earlier than the close of business on the 150th150th day, and no later than the close of business on the 120th120th day, prior to the first anniversary of the preceding year’s Annual Meeting. Accordingly, for our 20192023 Annual Meeting of Shareholders, our Corporate Secretary must receive the proposal or nomination no earlier than December 5, 2018January 18, 2023 and no later than the close of business on January 4, 2019.February 17, 2023. The proposal or nomination must contain the information required by the Bylaws, a copy of which is available upon request to our Corporate Secretary. If the shareholder does not meet the applicable deadlines or comply with the requirements of SEC Rule14a-4, we may exercise discretionary voting authority under proxies we solicit to vote, in accordance with our best judgment, on any such proposal.
SHAREHOLDER COMMUNICATIONS TO THE BOARD Shareholders and other interested parties may communicate with the Board by writing to the Corporate Secretary, Recro Pharma,Societal CDMO, Inc., 490 Lapp Road, Malvern, PA 19355.1 E. Uwchlan Ave., Suite 112, Exton, Pennsylvania 19341. Communications intended for a specific director or directors should be addressed to their attention to the Corporate Secretary at the address provided above. Communications received from shareholders are forwarded directly to Board members as part of the materials mailed in advance of the next scheduled Board meeting following receipt of the communications. The Board has authorized the Corporate Secretary, in hisher discretion, to forward communications on a more expedited basis if circumstances warrant or to exclude a communication if it is illegal, unduly hostile or threatening, or similarly inappropriate. Advertisements, solicitations for periodical or other subscriptions, and other similar communications generally will not be forwarded to the directors. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 40
| OTHER INFORMATION(continued)
|
AVAILABILITY OF MATERIALS Our 2021 Annual Report, on Form10-K for the fiscal year ended December 31, 2017, including the financial statements and financial statement schedules, has been filed with the SEC and provides additional information about us, which is incorporated by reference herein. It is available on the internet at www.recropharma.comwww.societalcdmo.com and is available in paper form (other than exhibits thereto) by first class mail or other equally prompt means to beneficial owners of our common stock without charge upon written request to Chief Financial Officer, Recro Pharma,Societal CDMO, Inc., 490 Lapp Road, Malvern, PA 19355.1 E. Uwchlan Ave., Suite 112, Exton, Pennsylvania 19341. In addition, it is available to beneficial and record holders of our common stock at www.proxyvote.com. Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 41
APPENDIX A
RECRO PHARMA, INC.
2018 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
1.Purpose. The Recro Pharma, Inc. 2018 Amended and Restated Equity Incentive Plan1 is intended as an additional incentive to current and prospective employees, consultants and directors of the Company to enter into or remain in the service or employ of the Company or any Affiliate and to devote themselves to the Company’s success, and to encourage the creation of shareholder value. Under the Plan, the Company may provide such persons with opportunities to acquire or increase their interests in the Company through options to purchase the Company’s Common Stock, grants of stock appreciation rights and awards of the Company’s Common Stock. Under the Plan, the Company may grant (i) ISOs, (ii) Nonqualified Options, (iii) Stock Appreciation Rights, (iv) Stock Awards, (v) Restricted Stock Awards and (vi) Restricted Stock Units.
2.Term of Plan. The Plan was originally adopted by the Board of Directors on October 8, 2013, and is amended and restated as of March 22, 2018.
3.Definitions. Capitalized terms not otherwise defined in the Plan shall have the following meanings:
“Affiliate” means a corporation which is a parent corporation or a subsidiary corporation with respect to the Company within the meaning of section 424(e) or (f) of the Code.
“Award” means any Option, SAR, Restricted Stock or Restricted Stock Unit granted pursuant to the terms of this Plan.
“Board” means the Board of Directors of the Company.
“Cause” for termination of employment or service shall have the meaning ascribed thereto in the Recipient’s employment or service agreement or, in the absence of such a definition, shall mean:
(i) Conviction of, or agreement to a plea of nolo contendere to, a felony, or any crime or offense lesser than a felony involving the property of the Company or an Affiliate;
(ii) Conduct that has caused demonstrable and serious injury to the Company or an Affiliate, monetary or otherwise;
(iii) Willful refusal to perform or substantial disregard of duties properly assigned, as determined by the Board;
(iv) Breach of duty of loyalty to the Company or an Affiliate or other act of fraud or dishonesty with respect to the Company or an Affiliate; or
(v) Violation of the Company’s code of conduct.
The definition of Cause set forth in the Recipient’s employment or service agreement with the Company or any of its Affiliates shall control if such definition is different from the definition of Cause set forth herein.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any particular section of the Code shall include any successor section.
“Common Stock” means the Common Stock, par value $0.01, of the Company.
1 | The Recro Pharma, Inc. 2018 Amended and Restated Equity Incentive Plan amends and restates the Plan that was originally adopted by the Board of Directors on October 8, 2013, and amended and restated as of April 1, 2015. |
“Company” means Recro Pharma, Inc., a Pennsylvania corporation.
“Covered Employee” means a Recipient who is a Covered Employee as defined in Section 162(m) of the Code for the tax year of the Company with regard to which a deduction in respect of such person’s Award would be allowed.
“Disability” means, as determined by the Board, (a) the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months or (b) Recipient’s becoming disabled within the meaning of section 22(e)(3) of the Code.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” of a share of Common Stock on any day means the officially-quoted closing selling price of the stock on the principal securities exchange on which the Common Stock is then listed for trading (including for this purpose the NASDAQ Capital Market) for the applicable trading day.
“Grant Date” means the effective date on which an Option is granted to an Optionee under the Plan.
“ISO” means an Option granted under the Plan that is intended to qualify as an incentive stock option within the meaning of section 422(b) of the Code.
“Nonqualified Option” means an Option granted under the Plan that is not intended to qualify as an ISO.
“Option” means an option to purchase Common Stock granted under the Plan, which may be designated as either an ISO or a Nonqualified Option.
“Option Documents” means written documents in such form as approved from time to time by the Board, which shall be given to Optionees and shall set forth the terms and conditions of Options granted to Optionees under the Plan.
“Optionee” means an employee, consultant or director to whom an Option is granted under the Plan.
“Option Price” means the price at which Option Shares may be purchased under the terms of an Option.
“Option Shares” means the shares of Common Stock that may be purchased by an Optionee upon exercise of an Option.
“Performance Goals” means goals and objectives established by the Board, in its sole discretion, as contingencies for Awards to vest and/or become exercisable or distributable based on such criteria and objectives as the Board may select from time to time, subject to the limitations of Section 162(m) of the Code, including, without limitation, the performance of the Recipient, the Company, one or more of its Affiliates or divisions or any combination of the foregoing.
“Plan” means the Recro Pharma, Inc. 2018 Amended and Restated Equity Incentive Plan.
“Recipient” means an employee, consultant or director to whom an Option, Stock Award, Stock Appreciation Right, Restricted Stock or Restricted Stock Unit is granted under the Plan.
“Restricted Stock Award” means a grant of shares under this Plan that is subject to the restrictions under Section 8.
“Restricted Stock Unit” means a contractual right underlying an Award granted under Section 8 that is denominated in shares, which unit represents a right to receive a share (or the value of a share) upon the terms and conditions set forth in the Plan and the applicable Agreement.
“Retirement” means the date that the Recipient reaches age seventy (70).
“SAR Shares” means the shares of Common Stock that may be issued in connection with the Company’s payment upon the exercise of a Stock Appreciation Right.
“Separation from Service” means, with respect to a Recipient who is an employee of the Company or an Affiliate, the termination of employment with the Company and all Affiliates that constitutes a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h)(1), (ii) with respect to a Recipient who is a consultant of the Company or an Affiliate, the expiration of his contract or contracts under which services are performed that constitutes a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h)(2), or (iii) with respect to a Recipient who is anon-employee director of the Company or an Affiliate, the date on which suchnon-employee director ceases to be a member of the Board (or other applicable board of directors) for any reason.
“Stock Appreciation Right” means a Recipient’s right to receive from the Company, in SAR Shares, cash or a combination thereof, an amount in excess, if any, of (i) if the Stock Appreciation Right is granted in connection with an Option, the Fair Market Value of such Option Shares on the date of surrender of such Option Shares over the Option Price of such surrendered Option Shares, or (ii) if the Stock Appreciation Right is granted on a stand-alone basis, the Fair Market Value of the Common Stock on the date of exercise over the initial basis of the Stock Appreciation Right as determined under the Stock Appreciation Right Agreement provided the initial basis shall be at least the Fair Market Value of the Common Stock on the date of grant.
“Stock Appreciation Right Agreement” means the agreement between the Company and Recipient pursuant to which a Stock Appreciation Right is granted.
“Stock Award” means the award of Common Stock granted to a Recipient under the Plan.
“Stock Award Shares” means shares of Common Stock which are issued pursuant to a Stock Award under the Plan.
4.Administration. The Plan shall be administered by a committee of Board members, which may consist of “outside directors” as defined under section 162(m) of the Code, and related Treasury regulations, and“non-employee directors” as defined under Rule16b-3 under the Exchange Act. However, the Board may ratify or approve any grants as it deems appropriate, and the Board shall approve and administer all grants made tonon-employee directors. To the extent that a committee or subcommittee administers the Plan, references in the Plan to the “Board” shall be deemed to refer to the committee or subcommittee.
The Board shall from time to time at its discretion grant Awards pursuant to the terms of the Plan. The Board shall have plenary authority to determine the Recipients to whom and the times at which Awards shall be granted, and the form and substance of Awards made under the Plan to each Recipient, and the conditions and restrictions, if any, subject to which such Awards will be made (which need not be identical for all Recipients) thereof, subject, however, to the express provisions of the Plan. In making such determinations the Board may take into account the nature of the Recipient’s services and responsibilities, the Recipient’s present and potential contribution to the Company’s success and such other factors as it may deem relevant. The interpretation and construction by the Board of any provision of the Plan or of any Award granted under it shall be final, binding and conclusive. Notwithstanding the foregoing, the Board shall not take any of the following actions without shareholder approval, except as provided in Section 12: (i) reduce the exercise price following the grant of an Option or SAR; (ii) exchange an Option or SAR which has an exercise price that is greater than the Fair Market Value of a Share for cash or Shares; or (iii) cancel an Option or SAR in exchange for a replacement option or another Award with a lower exercise price.
No member of the Board shall be personally liable for any action or determination made in good faith with respect to the Plan or any Award granted under it. No member of the Board shall be liable for any act or omission
of any other member of the Board or for any act or omission on his own part, including but not limited to the exercise of any power and discretion given to him under the Plan, except those resulting from (i) any breach of such member’s duty of loyalty to the Company or its shareholders, (ii) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, and (iii) any transaction from which the member derived an improper personal benefit.
In addition to such other rights of indemnification as he may have as a member of the Board, and with respect to the administration of the Plan and the granting of Awards under it, each member of the Board shall be entitled without further action on his part to indemnification from the Company for all expenses (including the amount of any judgment and the amount of any approved settlement made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan or the granting of Awards under it in which he may be involved by reason of his being or having been a member of the Board, whether or not he continues to be such member of the Board at the time of the incurring of such expenses; provided, however, that such indemnification shall not include any expenses incurred by such member of the Board: (i) in respect of matters as to which he shall be finally adjudged in such action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duties as a member of the Board; or (ii) in respect of any matter in which any settlement is effected in an amount in excess of the amount approved by the Company on the advice of its legal counsel; and provided further that no right of indemnification under the provisions set forth herein shall be available to or accessible by any such member of the Board unless within five days after institution of any such action, suit or proceeding he shall have offered the Company in writing the opportunity to handle and defend such action, suit or proceeding at its own expense. The foregoing right of indemnification shall inure to the benefit of the heirs, executors or administrators of each such member of the Board and shall be in addition to all other rights to which such member of the Board would be entitled to as a matter of law, contract or otherwise.
5.Eligibility. All employees of the Company or its subsidiary Affiliates (who may also be officers or directors of the Company or its Affiliates) shall be eligible to receive Stock Awards, Stock Appreciation Rights, Restricted Stock Awards or Restricted Stock Units and Options hereunder, and such Options may be either ISOs or Nonqualified Options. Allnon-employee directors of the Company and all consultants or advisory board members providing services to the Company shall be eligible to receive Nonqualified Options, Stock Appreciation Rights, Stock Awards, Restricted Stock Awards and Restricted Stock Units hereunder. All employees of the Company’s parent Affiliates (who may also be officers of the parent Affiliate) shall be eligible to receive grants of Stock Awards.) The Board, in its sole discretion, shall determine whether an individual qualifies as an employee, consultant or Recipient. A Recipient may receive more than one Award of Options, Stock Appreciation Rights, Stock Awards, Restricted Stock or Restricted Stock Units. No member of the Board shall vote as a member of the Board with respect to the grant of any Award to himself or herself, except in the case when grants are being made to all similarly situated Board members on the same terms and conditions. In cases in which abstention is required by the foregoing sentence, the affirmative vote of a majority of the remaining members of the Board (or of the sole remaining member of the Board) shall constitute the action of the Board.
6.Shares Available for Awards. Except as provided in Section 12, the aggregate maximum number of shares of Common Stock (the “Shares”) that may be issued pursuant to the Plan is Seven MillionThirty-Six Thousand Seven Hundred Thirty-Seven (7,036,737), inclusive of Shares subject to Awards issued under prior versions of the Plan that remain outstanding as of the effective date of the Plan (the “Reserved Shares”). On the 1st of December of each year, the number of Reserved Shares may be increased by the Board, without the necessity of further approval from the Shareholders, by an amount not greater than five percent (5%) of the Company’s issued and outstanding capital stock, or such lower amount as determined by the Board in its sole discretion. Such Shares may be in whole or in part authorized and unissued or held by the Company as treasury shares. If any grant under the Plan expires, lapses, terminates unexercised, becomes unexercisable or is forfeited as to any Shares, or is tendered or withheld as to any Shares in payment of the exercise price of the grant or the
taxes payable with respect to the exercise, then such unpurchased, forfeited, tendered or withheld Shares shall thereafter be available for further grants under the Plan unless, in the case of Options granted under the Plan, related SARs are exercised.
With respect to SARs that are settled in Common Stock, upon settlement, only the number of shares of Common Stock delivered to a Recipient upon the exercise of the SARs shall count against the number of Shares issued under the Plan. Any Award under the Plan settled in cash shall not be counted against the foregoing maximum share limitations.
Shares issued under Awards granted in assumption, substitution or exchange for previously granted awards of a company acquired by the Company (“Substitute Awards”) shall not reduce Shares available under Plan. Available shares under a shareholder approved plan of an acquired company (as appropriately adjusted to reflect such acquisition) may be used for Awards under this Plan and shall not reduce the number of Shares available under this Plan, except as required by the rules of any applicable stock exchange.
To the extent required by Section 162(m) of the Code for Awards under the Plan to qualify as “performance-based compensation,” the following individual Recipient limitations shall apply: the maximum number of shares of Common Stock subject to any Award for which the grant of such Award is subject to the attainment of Performance Goals in accordance with Section 8, which may be granted under this Plan during any fiscal year of the Company to each Recipient shall be 400,000 shares per type of Award (which shall be subject to increase or decrease pursuant to Section 12), provided that the maximum number of shares of Common Stock for all types of Awards does not exceed 1,000,000 (which shall be subject to increase or decrease pursuant to Section 12) during any fiscal year of the Company.
7.Option Shares, SAR Shares and Stock Award Shares. Options granted pursuant to the Plan shall be evidenced by Option Documents in such form as the Board shall from time to time approve, which Option Documents shall specify whether the Option is intended to be an ISO or a Nonqualified Option for federal income tax purposes. An Option shall only be an ISO to the extent it does not exceed the limitation set forth in subsection 7(c) below, is described as an ISO in the Option Document, and is granted to a person who is an employee of the Company or an Affiliate on the Grant Date. All Option Documents shall comply with and be subject to the following terms and conditions and with any other terms and conditions (including vesting schedules for the exercisability of Options) the Board shall from time to time provide that are not inconsistent with the terms of the Plan.
(a)Option Price. Each Option Document shall state the “Option Price” at which Option Shares may be purchased, which in no event shall be less than the Fair Market Value of the Common Stock on the Grant Date, provided, however, that if an ISO is granted to an Optionee who then owns, directly or by attribution under section 424(b) of the Code, shares possessing more than ten percent of the total combined voting power of all classes of stock of the Company or an Affiliate, then the Option Price shall be at least 110% of the Fair Market Value of the Option Shares on the Grant Date.
(b)Medium of Payment. An Option shall be exercised by written notice to the Company upon such terms and conditions as the Option Document may provide and in accordance with such other procedures for the exercise of Options as the Board may establish from time to time. The method or methods of payment of the Option Price to be paid upon exercise of an Option shall be determined by the Board and set forth in the Option Document, and may consist of (i) cash, (ii) certified check payable to the order of the Company, (iii) payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, (iv) shares of Common Stock previously acquired by the Optionee, as permitted in the discretion of the Board, (v) reduction in the number of shares of Common Stock otherwise deliverable upon exercise of the Option with a Fair Market Value equal to the aggregate Option Price at the time of exercise (aso-called “cashless exercise”), or (vi) such other mode of payment as permitted for the issuance of shares under the Pennsylvania Business Corporation Law, as amended, and approved by the Board, or any combination of the foregoing methods of
payment. Payment of the Option Price by a method other than cash shall be subject to such restrictions and limitations as set forth in the Option Document.
(c)Number of Option Shares. Each Option Document shall state the number of Option Shares to which it pertains. In no event shall the aggregate Fair Market Value of the Option Shares (determined on the Grant Date) with respect to which an ISO is exercisable for the first time by the Optionee during any calendar year (under all incentive equity plans of the Company or its Affiliates) exceed $100,000.
(d)Issuance of Option Shares. Subject to the provisions of this Section 7, the Company shall effect the issuance of Option Shares purchased under an Option as soon as practicable after the exercise thereof, payment of the Option Price thereof and compliance with any requirements for the withholding of income taxes. No Recipient or other person exercising an Option shall have any of the rights of a shareholder of the Company with respect to Option Shares purchased as a result of such exercise until due exercise and full payment has been made and the requirements of Section 7 have been satisfied. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment. No Option shall be deemed to have been exercised prior to the receipt by the Company of written notice of such exercise and of payment in full of the Option Price for the Option Shares to be purchased. Each such notice shall specify the number of Option Shares to be purchased.
(e)Termination of Options. No Option shall be exercisable after the first to occur of the following:
(i) Expiration of the Option term specified in the Option Document, which shall not exceed ten years from the date of grant (or, in the case of an ISO, five years from the date of grant if, on such date the Optionee owns, directly or by attribution under section 424(b) of the Code, shares possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or an Affiliate).
(ii) Expiration of one year from the date the Optionee’s employment with the Company or its Affiliates terminates by reason of the Optionee’s Disability or death.
(iii) Expiration of three months (or such shorter period as the Board may select) from the date the Optionee’s employment with the Company or its Affiliates terminates, unless such termination was due to Disability, death or termination for Cause.
(iv) Immediately upon the date the Optionee’s employment or service with the Company or its Affiliates terminates, if the Board finds, after full consideration of the facts presented on behalf of both the Company and the Optionee, that the Optionee has been discharged from employment or service with the Company or an Affiliate for Cause. In the event of a finding that the Optionee has been discharged for Cause, in addition to immediate termination of the Option, the Optionee shall automatically forfeit all Option Shares for which the Company has not yet delivered the share certificates upon refund of the Option Price.
(v) The date, if any, set by the Board under terms specified in an Option Document to be an accelerated expiration date in the event of a “Change in Control” (as defined in Section 9 below), provided an Optionee who holds an Option is given advance written notice.
(f)Extension of Time to Exercise. The Board may, if it determines that to do so would be in the Company’s best interests, provide in a specific case or cases to extend the period of time that a Nonqualified Option may be exercised by Optionee whose employment with the Company and its Affiliates has terminated, provided that the time to exercise an Option shall in no event be extended beyond the original term of the Option as set forth in subsection 7(e)(i).
(g)Sale or Reorganization. If the Company is merged or consolidated with another corporation, or if the property or stock of the Company is acquired by another corporation, and if the Options are not accelerated as
provided in subsection 7(e) above, the Board shall be authorized to substitute the Options issued under the Plan with options to acquire stock of the merged, consolidated or acquiring corporation, which substitution of options shall comply with the requirements of sections 424(a) and 409A of the Code.
(h)Transfers. No ISO granted under the Plan may be transferred, except by will or by the laws of descent and distribution. During the lifetime of the Optionee, such ISO may be exercised only by him.
(i)Other Provisions. The Option Documents shall contain such other provisions including, without limitation, additional restrictions upon the exercise of the Option or additional limitations upon the term of the Option, as the Board shall deem advisable.
(j)Amendment. Subject to the provisions of the Plan, the Board shall have the right to amend Option Documents issued to Optionee, subject to the Optionee’s consent if such amendment is adverse to the Optionee, except that the consent of the Optionee shall not be required for any amendment made under Section 12.
8.Restricted Stock and Restricted Stock Units. The Awards granted under this Section 8 are subject to such restrictions as the Board may impose (including, without limitation, any limitation on the right to vote shares underlying Restricted Stock Units or the right to receive any dividend, other right or property), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Board may deem appropriate. Such Awards will be evidenced by an agreement containing the terms of the Awards, including, but not limited to: (i) the number of shares of Restricted Stock or Restricted Stock Units subject to such Award; (ii) the purchase price, if any, of the shares of Restricted Stock or Restricted Stock Units and the means of payment for the shares of Restricted Stock or Restricted Stock Units; (iii) the Performance Goals, if any, and level of achievement in relation to the Performance Goals that shall determine the number of shares of Restricted Stock or Restricted Stock Units granted, issued, retainable and/or vested; provided, however, that any such Performance Goals shall comply with Section 162(m) of the Code; (iv) such terms and conditions of the grant, issuance, vesting and/or forfeiture of the Restricted Stock or Restricted Stock Units as may be determined from time to time by the Board; (v) restrictions on transferability of the Restricted Stock or Restricted Stock Units; and (vi) such further terms and conditions, in each case, not inconsistent with this Plan as may be determined from time to time by the Board. Such Performance Goals may incorporate, if and only to the extent permitted under Section 162(m) of the Code, provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. To the extent any such provision would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect.
(a) Without limiting the foregoing, and except as otherwise revised in the Award agreement documenting a service-based Restricted Stock Unit Award (“RSUs”), the following general rules will apply to outstanding RSUs at the time of Separation from Service:
(i) In the event of Separation from Service for Cause, all outstanding RSUs will immediately terminate and be forfeited.
(ii) In the event of Separation from Service due to death or Retirement of the Recipient while employed by the Company or any of its Affiliates, or the termination of service of the Recipient due to Disability (whether or not a Separation from Service), then an amount of unvested RSUs shall vest equal to a percentage, the numerator of which equals the number of days that has elapsed as of the date of death or Retirement or the date on which such Disability commenced (such date to be determined by the Board in its sole discretion) in the vesting restriction period for each applicable vesting tranche, and the denominator of which equals the total number of days in each such vesting restriction period, rounded down to the nearest whole Share. All vested RSUs will be paid in accordance with the payment provisions set forth in this Plan.
(iii) In all other events of Separation from Service, to the extent not previously paid, the Recipient shall be paid any vested RSUs in accordance with the payment provisions of Section 8(c), and all unvested RSUs shall immediately terminate and be forfeited.
(b) Any Award of Restricted Stock or Restricted Stock Units may be evidenced in such manner as the Board may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares underlying a Restricted Stock Award, such certificate will be registered in the name of the Recipient and bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such shares.
(c) Restricted Stock and Restricted Stock Unit Awards shall (subject to satisfaction of any purchase price requirement) be transferred or paid to the Recipient as soon as practicable following the Award date or the termination of the vesting or other restrictions set forth in the Plan or the Award and the satisfaction of any and all other conditions of the Award applicable to such Restricted Stock or Restricted Stock Unit Award (the “Restriction End Date”), but in no event later than two andone-half (2 1/2) months following the end of the calendar year that includes the later of the Award date or the Restriction End Date, as the case may be. In the event a Recipient terminates service with the Company due to a Disability, then the Recipient’s vested Restricted Stock Units shall be paid to the Recipient within thirty (30) days of the Board’s determination of Disability. Notwithstanding any of the foregoing, to the extent that the provisions of any Award for Restricted Stock Units require, distributions of stock under circumstances that constitute a “deferral of compensation” shall conform to the applicable requirements of Section 409A of the Code, including, without limitation, the requirement that a distribution to a Recipient who is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) which is made on account of the specified employee’s Separation from Service shall not be made before the date which is six (6) months after the date of Separation from Service.
9.Change of Control. Unless otherwise provided in a Recipient’s employment or service agreement, in the event of a Change in Control (as defined below), the Board may take whatever action with respect to Awards it deems necessary or desirable, including, without limitation, accelerating the vesting of an Award, terminating an Award or redeeming an Award. If Options or Stock Appreciation Rights granted pursuant to the Plan are accelerated, such Options and Stock Appreciation Rights shall become immediately exercisable in full.
(a) Unless otherwise defined in a Recipient’s employment agreement, a “Change of Control” shall be deemed to have occurred upon the happening of any of the following events:
(i) Any “person” (as that term is used in Sections 13 and 14(d)(2) of the Exchange Act or any successors thereto) becomes the “beneficial owner” (as that term is used in Section 13(d) of the Exchange Act or any successor thereto), directly or indirectly, of 50% or more of the Company’s capital stock entitled to vote in the election of directors, excluding any “person” who becomes a “beneficial owner” in connection with a Business Combination (as defined in paragraph (iii) below) which does not constitute a Change in Control under said paragraph (iii);
(ii) Persons who on the effective date of the plan of reorganization of the Company (the “Commencement Date”) constitute the Board (the “Incumbent Directors”) cease for any reason, including without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority thereof; provided that, any person becoming a director of the Company subsequent to the Commencement Date shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at leasttwo-thirds (2/3) of the Incumbent Directors; but provided further that, any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director;
(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding voting securities of the Company; or
(iv) the liquidation or dissolution of the Company.
In addition, with respect to any Award that is characterized as “nonqualified deferred compensation” within the meaning of Section 409A of the Code, an event shall not be considered to be a Change in Control under the Plan for purposes of payment of such Award unless such event is also a “change in ownership,” a “change in effective control” or a change in ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.
10.Grant of Stock Appreciation Rights.
(a) General. The Board shall have authority to grant Stock Appreciation Rights under the Plan. Subject to the satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or any Stock Appreciation Right Agreement, a Stock Appreciation Right shall entitle the Recipient to surrender to the Company the Stock Appreciation Right in exchange for SAR Shares, cash or a combination thereof as herein provided, in the amount described in Section 10(c)(ii) hereof.
(b)Grant. Stock Appreciation Rights may be granted in conjunction with all or part of any Option granted under the Plan (“Tandem SARs”), in which case the exercise of the Stock Appreciation Right shall require the cancellation of a corresponding portion of the Option, and the exercise of an Option shall result in the cancellation of a corresponding portion of the Stock Appreciation Right. In the case of an Nonqualified Stock Option, Tandem SARs may be granted either at or after the time of grant of such Option and provided the SAR satisfies conditions under Treas. Reg. §1.422-5(d)(3). In the case of an ISO, Tandem SARs may be granted only at the time of grant of such Option. A Stock Appreciation Right may also be granted on a stand-alone basis. The grant of a Stock Appreciation Right shall occur as of the date the Board determines. Each Stock Appreciation Right granted under this Plan shall be evidenced by a Stock Appreciation Right Agreement, which shall embody the terms and conditions of such Stock Appreciation Right and which shall be subject to the terms and conditions set forth in this Plan.
(c)Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined by the Board, including the following:
(i)Period and Exercise. The term of a Stock Appreciation Right shall be established by the Board. If granted in conjunction with an Option, such Tandem SAR shall have a term which is the same as the term for the Option and shall be exercisable only at such time or times and to the extent the related Options would be exercisable in accordance with the provisions of Section 7 of the Plan. A Stock Appreciation Right which is granted on a stand-alone basis shall be for such period and shall be exercisable at such times and to the extent provided in the Stock Appreciation Right Agreement. Stock Appreciation Rights shall be exercised by the Recipient’s giving written notice of exercise in form satisfactory to the Company specifying the portion of the Stock Appreciation Right to be exercised.
(ii)Amount. Upon the exercise of a Tandem SAR, a Recipient shall be entitled to receive an amount in cash, SAR Shares or both as determined by the Board or as otherwise permitted in the Stock Appreciation Right Agreement, equal in value to the excess of the Fair Market Value per share of an Option Share at the exercise date over the Option Price of such Option Shares multiplied by the number of Option Shares in respect of which the Stock Appreciation Right is exercised. In the case of a Stock Appreciation Right granted on a stand-alone basis, the Recipient shall be entitled to receive an amount in cash, SAR Shares or both as determined by the Board or as otherwise permitted in the Stock Appreciation Right Agreement, equal to the value in excess of the Fair Market Value of the Common Stock on the date of exercise of the Stock Appreciation Right over the initial basis of the Stock Appreciation Right as set forth in the Stock Appreciation Agreement which shall be at least the Fair Market Value of the Common Stock on the date of grant.
(iii)Non-transferability of Stock Appreciation Rights. Tandem SARs shall be transferable only when and to the extent that the related Option would be transferable under the Plan unless otherwise provided in an Agreement. No other Stock Appreciation Rights granted hereunder may be other than by will, the laws of descent and distribution, or pursuant to a qualified domestic relations order.
(iv) Termination. Tandem SARs shall terminate at such time as the related Option would terminate under the Plan, unless otherwise provided in an Agreement as to a Nonqualified Option. All other Stock Appreciation Rights shall terminate as provided in the Stock Appreciation Right Agreement. No Stock Appreciation Right shall terminate more than ten years from the Grant Date.
(v)Incentive Stock Option. A Stock Appreciation Right granted in tandem with an ISO shall not be exercisable unless the Fair Market Value of the Common Stock on the date of exercise exceeds the Option Price. In no event shall any amount paid pursuant to the Stock Appreciation Right exceed the difference between the Fair Market Value on the date of exercise and the Option Price.
11.Grant of Stock Awards. Stock Awards will consist of shares of Common Stock transferred to Recipients, without payment or other consideration therefor. Stock Awards shall be subject to such terms and conditions as the Board determines appropriate, including without limitation, restrictions on sale or other disposition of such Stock Award Shares, and the rights of the Company to reacquire such Stock Award Shares upon termination of Recipients employment with the Company within specified periods, whether for Cause or otherwise.
12.Adjustments on Changes in Common Stock. In the event that any reorganization, recapitalization, stock split, reverse stock split, stock dividend, combination of shares, merger, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company affects Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Recipients under the Plan, the Board shall make such equitable adjustments in any or all of the following in order to prevent such dilution or enlargement of rights: the number and kind of Shares or other property available for issuance under the Plan (including, without limitation, the total number of Shares available for issuance under the Plan pursuant to Section 6), the number and kind of Awards or other property covered by Awards previously made under the Plan, and the exercise price of outstanding Options and SARs. Any such adjustment shall be final, conclusive and binding for all purposes of the Plan provided that no adjustment shall be made which will cause an ISO to lose its status as such or will cause any Option or Stock Appreciation Right to lose its status as exempt from Code Section 409A. Any adjustments made under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule16b-3 under the Exchange Act. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation or in which a Change in Control is to occur, all of the Company’s obligations regarding any Awards that were granted hereunder and that are outstanding on the date of such event shall, on such terms as may be approved by the Committee prior to such event, be assumed by the surviving or continuing corporation or canceled in exchange for property (including cash) www.proxyvote.com.
13.Amendment and Termination of the Plan. The Board may terminate the Plan at any time, or amend the Plan from time to time in such manner as it may deem advisable. Notwithstanding the foregoing, any amendment which would change the class of individuals eligible to receive an Award, extend the expiration date of the Plan, or increase the maximum aggregate number of shares of Common Stock available for issuance under the Plan will only be effective if such action is approved by a majority of the outstanding voting stock of the Company within twelve months before or after such action.
14.Continued Employment. The grant of an Award pursuant to the Plan shall not be construed to imply or to constitute evidence of any agreement, express or implied, on the part of the Company or any Affiliate to retain the Recipient in the employ of the Company or an Affiliate, as a member of the Board, as an independent contractor or in any other capacity, whichever the case may be.
15.Withholding of Taxes. Whenever the Company proposes or is required to issue or transfer an Award, the Company shall have the right to (a) require the recipient or transferee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Award or (b) take whatever action it deems necessary to protect its interests, including the right to deduct the amount required to be withheld from any payment of any kind otherwise due to the Recipient. If and to the extent permitted by the Board, a Recipient may satisfy applicable withholding requirements by the delivery to the Company of previously held shares of Common Stock or the withholding of Awards otherwise issuable to the Recipient.
16.General.
(a)Effective Date.The Plan will become effective upon its approval by the Company’s stockholders. It will continue in effect for a term of ten (10) years from the date of the initial Board action to adopt the Plan unless terminated earlier.
(b)Other Plans. The adoption of the Plan shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation the awarding of equity incentives otherwise than under the Plan. Unless otherwise provided by the Board in a written agreement between the Recipient and the Company or an Affiliate, except as may otherwise be provided for under a pension or welfare benefit plan subject to ERISA, the amounts deemed paid to a Recipient under the Plan shall not be taken into account, in any manner, as salary, compensation or bonus in determining the amount of any payment under any pension, retirement, or other employee benefit plan, program or policy of the Company or any Affiliate.
(d)Governing Law. The validity, construction, interpretation and effect of the Plan and Award agreements issued pursuant to the Plan shall be governed and construed by and determined in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to the conflict of laws provisions thereof.
17.Compliance with 409A and ISO Requirements.
(a)Exemption from and Compliance with 409A. The Board shall administer, construe, and interpret the Plan, and exercise its authority and discretion, so that all Options, Stock Appreciation Rights, Stock Awards, Restricted Stock or Restricted Stock Units granted under the Plan satisfy the requirements for an exemption from or comply with Code Section 409A and that Options intended to be ISOs are eligible for that tax treatment. Notwithstanding any provision of this Plan to the contrary, all rights under this Plan shall be designed and administered to be exempt from Section 409A of the Code. To the extent that the Board or any governmental agency determines that any rights hereunder are subject to Section 409A of the Code, this Plan shall incorporate (or shall be amended to incorporate) the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code.
(b)Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan, any Option Document, any Stock Appreciation Right Agreement, or terms of any Stock Award or Restricted Stock Unit in any respect the Board deems necessary or advisable to provide the Recipient with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to ISOs or to avoid additional income taxes and other consequences arising from nonqualified deferred compensation that is not exempt from or that does not comply with Code Section 409A and/or to bring the Plan and/or the Option, Stock Appreciation Right, Stock Award or Restricted Stock Unit granted under it into compliance with or qualification for exemption from Code Section 409A or, as to ISOs, eligibility for ISO tax treatment.
(c)No Obligation. Notwithstanding any other provision of the Plan, any Option Document, any Stock Appreciation Right Agreement, or terms of any Stock Award or Restricted Stock Unit the Company, any Affiliate, the Board, or any of their employees or agents, (i) shall have no obligation to take any action to prevent the assessment of any additional income tax, excise tax or penalty on any Recipient because of Code Section 409A and (ii) shall have no such liability to any Recipient for any such taxes or penalty.
 
C/O Broadridge
P.O. Box 1342
Brentwood, NY 11717
1
Investor Address Line 1
Investor Address Line 2
Investor Address Line 3 1 1 OF
Investor Address Line 4
Investor Address Line 5
John Sample
1234 ANYWHERE STREET 2
ANY CITY, ON A1A 1A1
SCAN TO VIEW MATERIALS & VOTE w SOCIETAL CDMO, INC. VOTE BY INTERNET—INTERNET C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC. Before The Meeting - Go to www.proxyvote.com
or scan the QR Barcode above PO BOX 1342 BRENTWOOD, NY 11717 Use the Internet to transmit your voting instructions and for electronic delivery of information up untilinformation. Vote by 11:59 P.M. Eastern Time the day before thecut-off date or meeting date.on May 17, 2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like During The Meeting - Go to reducewww.virtualshareholdermeeting.com/SCTL2022 You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years.
the box marked by the arrow available and follow the instructions. VOTE BYPHONE— PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up untilinstructions. Vote by 11:59 P.M. Eastern Time the day before thecut-off date or meeting date.on May 17, 2022. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
CCONTROL # → NAME
THE COMPANY NAME INC. – COMMON SHARES 123,456,789,012.12345
THE COMPANY NAME INC.—CLASS A 123,456,789,012.12345
THE COMPANY NAME INC.—CLASS B 123,456,789,012.12345
THE COMPANY NAME INC.—CLASS C 123,456,789,012.12345
THE COMPANY NAME INC.—CLASS D 123,456,789,012.12345
THE COMPANY NAME INC.—CLASS E 123,456,789,012.12345
THE COMPANY NAME INC.—CLASS F 123,456,789,012.12345
THE COMPANY NAME INC.—401 K 123,456,789,012.12345
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
D75757-P70523 KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PROXY CARD IS VALIDPORTION ONLY WHEN SIGNED AND DATED.
SOCIETAL CDMO, INC. For Withhold For All All All Except To withhold authority to vote for any individual All All Except nominee(s), mark “For All Except”
and write the number(s) of the
The Board of Directors recommends you vote FOR the following:number(s) of the nominee(s) on the line below.
following: 1. Election of Directors
Nominees
01 WinstonClass II directors for a three-year term expiring in 2025 Nominees: 01) J. Churchill 02 Wayne B. Weisman
David Enloe, Jr. 02) Bryan M. Reasons The Board of Directors recommends you vote FOR proposals 2, 3 and 3:
4. For Against Abstain
2 2. Approval of a one-time option exchange for non-executive employees. 3. Approval, on an advisory basis, of the compensation of our named executive officers. 4. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the 2018 fiscal year.
3 Approval of Recro Pharma, Inc’s. 2018 Amended and Restated Equity Incentive Plan.
2022. NOTE: Such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
SHARES CUSIP # JOB # SEQUENCE #
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
0000367837_1 R1.0.1.17
 
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice &and Proxy Statement and Form10-K is/are available at www.proxyvote.com .
RECRO PHARMA,www.proxyvote.com. D75758-P70523 SOCIETAL CDMO, INC.
2018 2022 Annual Meeting of Shareholders
May 4, 2018—9:18, 2022 - 10:00 AM
EDT This proxy is solicited by the Board of Directors
The undersigned hereby appoints Gerri HenwoodJ. David Enloe, Jr. and Michael Celano,Ryan D. Lake, or either of them, as proxies, each with the power to appoint their substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of RECRO PHARMA,SOCIETAL CDMO, INC. that the undersigned is entitled to vote at the 20182022 Annual Meeting of shareholdersShareholders to be held virtually at 09:10:00 AM, EDT, on May 4, 2018 at Pepper Hamilton LLP, 400 Berwyn Park, 899 Cassatt Road, Berwyn, PA 19312,18, 2022 via www.virtualshareholdermeeting.com/SCTL2022, and any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.
Continued and to be signed on reverse side
0000367837_2 R1.0.1.17 | |