| (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 1615 of the Notes to the Annual Financial Statements included in our Annual Report on Form10-K. |
| (4) | PriorReport. For Mr. Celano, the amounts in this column include the incremental accounting charge to 2016, the Compensation Committeeus for our acceleration of vesting and extension of the Board met in December of each year to evaluate executive officer performanceexercisability period for Mr. Celano’s options 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, norestricted stock awards or option awards were granted to named executive officers in 2016 other than those granted to Mr. Celanounits in connection with the commencementhis termination of his employment with us.employment. |
| (4) | The 2019 amounts reflect both time-based and performance-based restricted stock unit awards, of which certain performance-based awards were forfeited and canceled as the performance criteria was based on acute care segment goals. Refer to the Outstanding Equity Awards at Fiscal Year-End for 2019 table for more information. The value of the performance-based restricted stock unit awards at the grant date reported in the table assuming the maximum achievement of the performance conditions was $761,847 for Ms. Henwood, $269,663 for Mr. Celano and $239,700 for Mr. Lake. This amount also includes make-whole equity grants of $1,520,188 and $280,849 for Ms. Henwood and Mr. Lake, respectively, which were awarded in lieu of any adjustments to outstanding restricted stock unit and option awards held by Ms. Henwood and Mr. Lake upon the Separation. |
| (5) | These amounts consist of 401(k) matching contributions, the cost of medical benefits and life and disability insurance premiums. |
| (6) | For Mr. Celano, commencedthis amount represents severance payments, pro-rata bonus and health benefits pre- and post-termination. |
| (6) | Mr. Celano’s employment (initially as our Chief Financial Officer)with us terminated on July 5, 2016.May 9, 2019. |
| (7) | On June 21, 2016, the Compensation Committee of the Board granted an option to purchase 140,000 shares of our common stock to 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 Amended and Restated Equity Incentive Plan and without shareholder approval pursuant to NASDAQ Listing Rule 5635(c)(4) and is subject to the terms and conditions of the Award Agreement for Inducement Awards between Mr. Celano and us. |
NoticeBase Salaries
In January 2019, the Compensation Committee approved the following base salaries for our named executive officers: $600,000 for Ms. Henwood, $347,200 for Mr. Lake, and $437,115 for Mr. Celano. Following the Separation, we ceased to pay an annual salary to our named executive officers directly. However, in 2019, we reimbursed Baudax Bio 50% in respect of Ms. Henwood’s services and 50% in respect of Mr. Lake’s services for the period after the Separation. The amounts that we reimbursed to Baudax Bio are reflected in the “Salary” column to the Summary Compensation Table above. Annual Meeting of Shareholdersand 2018 Proxy Statement | 20 Bonuses
| EXECUTIVE COMPENSATION(continued)
|
Non-Equity Incentive Plan Compensation
EachIn 2019, each of our named executive officers arewas eligible to receive an annual performance cash bonus based on the achievement ofpre-established corporate and individual objectives as determined by our Board and our Compensation Committee, in consultation
Notice of Annual Meeting of Shareholders and 2020 Proxy Statement | 22
with our compensation consultantPay Governance and upon review of the recommendations of our CEO for our other named executive officers. Each officer iswas assigned a target bonus opportunity expressed as a percentage of his or her base salary. 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 target bonus amountsopportunities in 2016 and 20172019 for Ms. Henwood, Mr. CelanoLake and Dr. McCallumMr. Celano were 60%, 40%, and 40%, of their base salaries, respectively. In determining the amount of performance bonus awards actually paid, our Compensation Committee determinesdetermined the level of achievement of the corporate goals and individual goals for eachthe year. In determining the level of achievement for our other named executive officers, our Compensation Committee reviewsreviewed and considersconsidered the recommendations of our CEO. These achievement levels arewere used to determine each named executive officer’s bonus. Actual bonus amounts paid are reflected in the“Non-Equity “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, suchcertain discretionary amounts were awarded in excess of the target bonusnon-equity incentive plan compensation. These discretionary amounts are reflected in the “Bonus” column of the Summary Compensation Table above. Equity Compensation We awardIn 2019, we awarded equity compensation under our 2018 amended and restated equity plan to our named executive officers based on their performance in the form of time- and performance-basedvesting stock options and time- and performance-vested restricted stock units. 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, wethe 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. Impact of the Separation on Equity Awards NoticeOn December 5, 2019, we granted Ms. Henwood and Mr. Lake “make-whole grants” under our equity plan. The make-whole grants were awarded in lieu of Annual Meetingany adjustments to outstanding restricted stock unit and option awards held by these named executive officers upon the Separation. Ms. Henwood received 93,550 make-whole restricted stock units and Mr. Lake received 17,283 make-whole restricted stock units, which will vest on December 5, 2020 (or if earlier, a change in control of Shareholdersand 2018 Proxy Statement | 21
| EXECUTIVE COMPENSATION(continued)QUALIFIED AND NON-QUALIFIED PLANS
The Company maintains a tax-qualified savings plan under Section 401(k) of the Internal Revenue Code. Employees who participate in the plan may make elective deferrals to the plan, subject to the limitations imposed by the Internal Revenue Code. In addition, the Company currently matches 100% of employee deferrals under the plan, up to a limit of 5% of the employee’s eligible compensation.
|
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END FOR 20172019 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, 2017:2019: Notice of Annual Meeting of Shareholders and 2020 Proxy Statement | 23 | | | | | | | | | | | | | | | | 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) | | $7.33 | | 01/18/2027 | | 24,000 | | 222,000 |
EXECUTIVE COMPENSATION (continued) | | | | | | | | | | | | | | | | | | | OPTION AWARDS | STOCK AWARDS | | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | 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) | Gerri Henwood | 60,000 | — | 8.00 | 03/11/2024 | | | | | | 40,000 | — | 7.00 | 04/07/2024 | | | | | | 123,500 | — | 2.47 | 12/16/2024 | | | | | | 105,300 | | 8.41 | 12/15/2025 | | | | | | 105,300 | — | 7.86 | 12/01/2026 | | | | | | 105,510 | 39,190 (2) | 7.33 | 01/17/2027 | | | | | | 47,917 | 52,083 (3) | 9.04 | 01/01/2028 | | | | | | 43,702 | 146,998 (4) | 7.99 | 01/17/2029 | | | | | | | | | | 10,000(5) | $183,300 | | | | | | | | 37,500(6) | $687,375 | | | | | | | | 40,864(7) | $749,037 | | | | | | | | 93,550(8) | $1,714,772 | | | | | | | | | | 95,350 (9) | $1,747,766 | Ryan D. Lake | 40,625 | 24,375 (10) | 7.58 | 06/04/2027 | | | | | | 11,021 | 11,979 (3) | 9.04 | 01/01/2028 | | | | | | 13,750 | 46,250 (4) | 7.99 | 01/17/2029 | | | | | | | | | | 5,000(11) | $91,650 | | | | | | | | 8,625(6) | $158,096 | | | | | | | | 12,857(7) | $235,669 | | | | | | | | 17,283(8) | $316,797 | | | | | | | | | | 30,000 (9) | $549,900 |
| (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$18.33 on December 29, 201731, 2019 (the last trading date in the 20172019 fiscal year). |
| (3)(2) | The stock option vests in equal monthly installments over 48 months, beginning on the date that is one month from the date of grant,February 18, 2017, subject to continued employment with us. |
| (4)(3) | 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 in equal monthly installments until December 17, 2018, subject to continued employment with us. |
| (5) | On July 25, 2015, 30% of the shares subject to such option vested upon the satisfaction of certain performance conditions, and the remainder vests in equal monthly installments over the three-year period thereafter, subject to continued employment with us. |
| (6) | The stock option vests in equal monthly installments over 48 months, beginning on the date that is one month from the date of grant,February 2, 2018, subject to continued employment with us. |
| (4) | The stock option vests in equal monthly installments over 48 months, beginning on February 18, 2019, subject to continued employment with us. |
| (5) | The restricted stock units vest in four equal annual installments beginning January 18, 2018, subject to continued employment with us. |
| (6) | The restricted stock units vest in four equal annual installments beginning January 2, 2019, subject to continued employment with us. |
| (7) | The restricted stock units vest in four equal annual installments beginning January 18, 2020, subject to continued employment with us. |
| (8) | The restricted stock units vest in full on the earlier (i) a change of control of the Company or (ii) December 5, 2020, subject to continued employment with us. |
| (9) | The performance-based restricted stock units would have vested based upon meeting certain 2019 performance criteria, subject to continued employment with us. All of such performance-based restricted stock units were forfeited and canceled in the first quarter of 2020 as the performance criteria was based on acute care segment goals. The performance-based restricted stock units are shown here at the target level of performance. |
| (10) | The stock option is an inducement grant under NASDAQNasdaq listing rule 5635(c)(4). 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).beginning on July 5, 2017, subject to continued employment with us. |
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 22
| EXECUTIVE COMPENSATION(continued)(11)
| The restricted stock units vest in four equal annual installments beginning June 5, 2018, subject to continued employment with us. |
EMPLOYMENT AGREEMENTS We have entered intotraditionally had employment agreements with each of our named executive officers. Compensation The employment agreements provideprovided for initial annual base salaries for each of our named executive officers. Pursuantofficers, subject to adjustment from time to time. In addition, 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 adjusted 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. In addition to base salaries, the employment agreements provideprovided that each of our named executive officers iswas eligible to participate in our company’sCompany’s incentive bonus program. Our BoardThe base salaries and our Compensation Committee consider a cashtarget bonus opportunityopportunities that were in in effect for our2019 are described in the “Base Salaries” and “Annual Bonuses” sections above. Termination and Severance The employment agreements historically provided the 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 (which are subject to increase in the Compensation Committee’s discretion), of such respective named executive officer’s base salary dependent upon performance factors. Each 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 notice to the other party. Pursuant to each of the employment agreements,certain severance rights if we terminateterminated one of our named executive officer’s employment without cause (as defined below) or such named executive officer resigns forresigned because of certain reasons described belowmaterial adverse changes to the terms and conditions of his or her employment within 12 months of a change of control (as defined below)(in either case, an Involuntary Termination), or such named executive officer will be entitleddied or became disabled. Generally, the named executive officers were eligible to continue to receive such executive officer’s base salary and health insurance benefits,care continuation at our expense,active employee rates for a period of 12 months following the dateupon an Involuntary Termination.
Notice of termination; with regard to eachAnnual Meeting of Mr.Shareholders and 2020 Proxy Statement 24
EXECUTIVE COMPENSATION (continued) Messrs. Celano and Dr. McCallum, he wouldLake were 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 asin respect of the dateyear preceding the Involuntary Termination, a pro rata annual bonus in respect of termination (referred to as the Accrued Benefits),year in which the Involuntary Termination occurred, and outplacement services up to $25,000. Upon death or disability, the named executive officers were generally eligible to receive base salary and health care continuation at active employee rates for a period of6 months (for Ms. Henwood, 12 months followingin the dateevent of termination,death). Messrs. Celano and Lake were also eligible to receive any earned but unpaid bonus in respect of the year preceding the death or disability, and a pro rata annual bonus, calculated as though the “target” level of performance had been achieved, in respect of the year in which shall not exceed $25,000. If athe death or disability occurred. The severance benefits were generally subject to the named executive officer’s execution of a release of claims in favor of the Company. In addition, the agreements generally provided that if the payments and benefits would be subject to an excise tax under Section 280G of the Code, they 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. In connection with Mr. Celano’s departure from the Company in May of 2019, the Company and Mr. Celano entered into a Separation and Mutual Release Agreement, or the Separation Agreement. Pursuant to the Separation Agreement, in exchange for a general release of all claims against the Company, Mr. Celano received: (1) continued base salary and health benefits for 13 months (12 months per his employment is terminatedagreement, and an additional month as a result of such named executive officer’s death, such named executive officer’s estate willhis waiver of a 30 day notice period); (2) a pro-rated target bonus in respect of the 2019 fiscal year ($87,423), to be entitledpaid when annual bonuses for the 2019 fiscal year are paid to continueother executives; and (3) a $25,000 payment to receive such executive’s base salary for a period of 12 months followingcover outplacement services. In addition, pursuant to the date of termination; with regard to each ofSeparation Agreement, Mr. Celano received accelerated vesting of a portion of his outstanding equity awards, resulting in 142,757 options 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 bonus5,937 time-based restricted stock units becoming vested as of the datetermination date. Mr. Celano also immediately vested into his 2019 performance-based restricted stock unit award as through the target level of termination. In addition, ifperformance had been achieved, resulting in the severance and other benefits provided in a named executive officer’s employment agreement or otherwise payable to a named executive officer would be subject to excise tax under Section 280(G)vesting of an additional 33,750 restricted stock units. Mr. Celano also received an extension of the Code, thenexercise period for vested options until the 18-month anniversary of the termination date. The total value of the accelerated vesting of his various equity awards, calculated based upon our stock price on his termination date, and the extension of his exercise period was $290,879. Restrictive Covenants Under the employment agreements, the named executive officer’s severance benefits will be either delivered in fullofficers are bound by a non-solicitation of employees and customers and a non-compete during their employment and the one-year period thereafter. Under the terms of Mr. Celano’s Separation Agreement, he acknowledged his ongoing obligation to abide by these restrictive covenants, and agreed to an extended non-solicitation period of 18 months. Agreements following the Separation Following the Separation, our employment agreements with Ms. Henwood and Mr. Lake were superseded by agreements that they entered into with Baudax Bio, or delivered asthe Baudax Bio Agreements. Pursuant to such lesser extent that would result in no portionthe Baudax Bio Agreements, all of the severance benefits being subjectnamed executive officers’ rights under their prior employment agreements were terminated. We have no further obligations to such excise tax, whichever resultsthe named executive officers under the prior employment agreements (compensatory or otherwise), other than an obligation to (i) continue to indemnify the named executive officers in accordance with our governing documents and to maintain directors’ and officers’ insurance coverage for the receiptnamed executive officers and to (ii) maintain outstanding equity incentive awards held by the named executive officerofficers, which awards continue to vest into these awards based on anafter-tax basisthose officers’ continued service with us. In addition, pursuant to the Baudax Bio Agreements, the named executive officers reaffirmed that their existing obligations to us under the confidentiality, non-solicitation, non-competition, non-disparagement and intellectual property assignment provisions of the greatest portion of such total severance and other benefits. For purposes of theprior employment agreements “cause” generally means anremain in full force and effect. The named executive officer’s (1) commission of an act of fraud or dishonesty against us; (2) failureofficers also agreed, that during the time they are dually employed by us and Baudax Bio, they will devote such time and energy as necessary to substantially perform his or herfulfill their 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.company.
Notice of Annual Meeting of Shareholdersand 20182020 Proxy Statement | 2325
EXECUTIVE COMPENSATION (continued)
| 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 ShareholdersCERTAIN RELATIONand 2018 Proxy Statement | 24
| CERTAIN RELATIONSHIPS AND RELATED
SHIPS AND RELATED PARTY TRANSACTIONS |
Since January 1, 2017,2019, 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. RELATIONSHIP WITH BAUDAX BIO AND THE SEPARATION Prior to completion of the Separation, 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 separate, independent public companies. In connection with the Separation, Recro and Baudax Bio entered into a Separation Agreement, Employee Matters Agreement, Tax Matters Agreement and Transition Services Agreement. These agreements govern the relationship Recro and Baudax Bio, including the allocation of various assets, liabilities, rights and obligations, as well as transition services to be provided by Recro to Baudax Bio and by Baudax Bio to Recro. 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. EMPLOYMENT OF CERTAIN RELATED PERSONS 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 employees of the Company. Ms. Sharr has been our Senior Director of Human Resources since January 2017 and Mr. Sharr has beenwas our Vice President, Manufacturing since January 2017. Our Audit Committee approved Ms. Sharr’sbeginning in 2017 and until the Separation in November 2019, when he was offered and accepted a similar position at Baudax Bio. Mr. Sharr’s hiring consistent with our related person transaction policy. Our BoardSharr earned $334,355 in compensation in 2019, including base salary, bonus allocable to Recro, and any other compensation. Mr. Sharr also approved their hiring, and our Compensation Committee approved their 2017 cash andearned $235,299 in equity compensation, after considering the recommendations of Radford, our then-current compensation consultant. In 2017, Ms. Sharr received a salary of $202,000 and Mr. Sharr received a salary of $243,100. Upon hire, Ms. Sharr and Mr. Sharr were awarded 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, aswhich is determined in accordance with ASC 718. The assumptions made in these valuationsthe valuation of Mr. Sharr’s equity compensation are included in Note 1615 of the Notes to the Annual Financial Statements included in our 2019 Annual Report on Form10-K. BothReport. Mr. Sharr’s compensation was approved by our Compensation Committee and Audit Committee.
Ms. Suzanne Sharr, Ms. Henwood’s sister-in-law, was our Senior Director of Human Resources until May 2019. Ms. Sharr and Mr. Sharr have been providing services to usearned $170,743 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 2017,2019, including base salary bonus,and any other compensation. Ms. Sharr also earned $117,650 in equity compensation, which is determined in accordance with ASC 718, and any other compensation.718. The assumptions made in the valuation of Ms. MyersSharr’s equity compensation are included in Note 1615 of the Notes to the Annual Financial Statements included in our 2019 Annual Report on Form10-K.Report. Ms. Sharr’s compensation was approved by our Compensation Committee and Audit Committee.
Ms. Diane Myers, Ms. Henwood’s sister, was our Senior Vice President, Regulatory and Quality beginning in 2014 and until the Separation in November 2019, when she was offered and accepted a similar position at Baudax Bio. Ms. Myers earned $452,574 in compensation in 2019, including base salary, bonus allocable to Recro, and any other compensation. Ms. Myers also earned $355,230 in equity compensation, which is determined in accordance with ASC 718. The assumptions made in the valuation of Ms. Myers’ equity compensation are included in Note 15 of the Notes to the Annual Financial Statements included in our 2019 Annual Report. Ms. Myers’ compensation was approved by our Compensation Committee and Audit Committee. Each of Ms. Myers, Ms. Sharr and Mr. Sharr participatesparticipated in our general welfare and benefit plans. Ms. Henwood doesdid not have a material interest in the employment of Ms. Myers, Ms. Sharr or Mr. Sharr, nor doesdid she share a household with any of them. Our Compensation Committee and Audit Committee approve the compensation of all related persons. POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONS Our Board has adopted a written related person transaction 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 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 Notice of Annual Meeting of Shareholdersand 20182020 Proxy Statement26
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 above either were approved or ratified in compliance with this policy. Notice of Annual Meeting of Shareholders and 2020 Proxy Statement | 2527
EXECUTIVE COMPENSATION (continued)
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
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, 201819, 2020 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 19,498,66423,455,226 shares of our Common Stockcommon stock outstanding as of March 22, 2018.19, 2020. 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, 201819, 2020 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, Inc., 490 Lapp Road, Malvern, PA 19355. | | | | 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 | 9.3% | SCP Vitalife Partners (Israel) II, L.P.(1) 32B Habarzel St. Ramat Hachayal Tel Aviv 69710 Israel | 726,055 | 3.1% | Blackrock, Inc.(2)
55 East 52nd Street New York, NY 10055 | 1,332,988 | 5.7% | Named Executive Officers and Directors | | | Gerri Henwood(3) | 818,579 | 3.5% | Ryan Lake(4) | 97,689 | * | Arnaud Ajdler (5) | 1,130,055 | 4.8% | William L. Ashton(6) | 111,267 | * | Michael Berelowitz(7) | 91,767 | * | Winston J. Churchill(8)(1) | 2,998,222 | 12.8% | Bryan M. Reasons(9) | 62,842 | * |
| | | | | | | | | | | | | | | | 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 20182020 Proxy Statement | 2628
| | | Wayne Weisman(1)(10) | 3,005,222 | 12.8% | All executive officers and directors as a group (8 persons)(11) | 5,416,688 | 23.1% |
* Less than 1%
(1) | 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% | | |
(1) | Based upon information set forth in the Schedule 13D filed on March 21, 2014 and information set forth in Form 4’s4s filed through March 22, 201819, 2020 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, (SCPor SCP Vitalife GP),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
(2) | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT(continued)
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(3) | Based upon information set forth in the Schedule 13G/A filed on February 13, 2018, by James E. Flynn, Deerfield Mgmt, L.P., Deerfield Management Company, L.P., Deerfield Special Situations Fund, L.P., Deerfield Partners, L.P., and Deerfield International Master Fund, L.P. Deerfield Mgmt., L.P. serves as the general partner of Deerfield Management Company, L.P., Deerfield Special Situations Fund, L.P., Deerfield Partners, L.P. and Deerfield International Master Fund, L.P. Deerfield Mgmt, L.P., Deerfield Management Company, L.P. and James E. Flynn share voting and dispositive power over 1,901,685 shares of common stock. Deerfield Special Situations Fund, L.P., Deerfield Partners, L.P. and Deerfield International Master Fund, L.P. have voting and dispositive power over 1,176,685, 378,450 and 346,550 shares of common stock, respectively. |
(4) | Based upon information set forth in the Schedule 13G filed on February 4, 2018,7, 2020, by AlyeskaBlackRock, Inc., BlackRock Advisors LLC, BlackRock Fund Advisors, BlackRock Institutional Trust Company, National Association, BlackRock Financial Management, Inc. and BlackRock Investment Group, L.P., or Alyeska, Alyeska Fund GP, LLC, Alyeska Fund 2 GP, LLC, and Anand Parekh. Anand Parekh is the Chief Executive Officer and control person of Alyeska, which is the investment advisor to Alyeska Fund GP, LLC and Alyeska Fund 2 GP,Management, LLC. Alyeska Fund GP, LLC is the general partner of Alyeska Master Fund, L.P. and Alyeska Fund 2 GP, LLC is the general partner of Alyeska Master Fund 2, L.P.s, and therefore is deemed to indirectly beneficially own such shares. Each of the reporting persons has shared voting and dispositive power with respect to these shares. |
(5)(3) | Ms. Henwood holds 129,231(i) 141,996 shares of our common stock, including 50,000 shares of our common stock held by Ms. Henwood’s husband, Thomas Henwood, and (ii) stock options to purchase 549,672676,583 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.19, 2020. As spouses, Mr. and Ms. Henwood may be deemed to beneficially own 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)(4) | Mr. CelanoLake holds 8,47514,063 shares of our common stock and stock options to purchase 79,43383,626 shares of our common stock that may be exercised within 60 days of March 22, 2018.19, 2020. Of these options, stock options to purchase 64,16747,396 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. Ajdler holds 15,741 shares of our common stock and stock options to purchase 76,91217,554 shares of our common stock that may be exercised within 60 days of March 22, 2018. Of these options, stock options to purchase 62,229 shares of our common stock were not granted pursuant to any of our equity compensation plans19, 2020 and were granted as an inducement grant pursuant to NASDAQ listing rule 5635(c)(4). |
(8) | Mr. Altomari holds (i) 1,500 shares of our common stock, (ii) stock options to purchase 52,000 shares of our common stock that may be exercised within 60 days of March 22, 2018 and (iii) restricted stock units covering 13,2747,955 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.19, 2020. Mr. Ajdler has shared voting and investment power with respect to 1,104,546 shares of our common stock that are held by Engine Capital Management, LP, of which he is a managing partner. |
(9)(6) | Mr. Ashton holds (i)19,459 shares of our common stock, stock options to purchase 64,00083,853 shares of our common stock that may be exercised within 60 days of March 22, 201819, 2020 and (ii) restricted stock units covering 13,2747,955 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.19, 2020. |
(10)(7) | Dr. Berelowitz holds (i)19,459 shares of our common stock, stock options to purchase 44,50064,353 shares of our common stock that may be exercised within 60 days of March 22, 2018,19, 2020 and (ii) restricted stock units covering 13,2747,955 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.19, 2020. |
(11)(8) | Mr. Churchill holds (i)19,459 shares of our common stock, stock options to purchase 52,00071,853 shares of our common stock that may be exercised within 60 days of March 22, 201819, 2020 and (ii) restricted stock units covering 13,2747,955 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.19, 2020. Mr. Churchill has shared voting and investment power with respect to 2,898,955 shares of our common stock that are held by SCP Vitalife, of which he is a partner. |
(12) | Mr. Churchill disclaims beneficial ownership of 50,00083,664 shares of our common stock that are held by the ChurchillSharbaugh Trust for the benefit of his son and stock options to purchase 33,200son. |
(9) | Mr. Reasons holds 15,034 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)
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(13) | Ms. Flynn holds (i) 800 shares of our common stock, (ii) stock options to purchase 23,33239,853 shares of our common stock that may be exercised within 60 days of March 22, 201819, 2020 and (iii) restricted stock units covering 13,2747,955 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.19, 2020. |
(14)(10) | Mr. ReasonsWeisman holds (i)26,459 shares of our common stock, stock options to purchase 6,66671,853 shares of our common stock that may be exercised within 60 days of March 22, 201819, 2020 and (ii) restricted stock units covering 8,8497,955 shares of our common stock that may vest and be settled within 60 days of March 22, 2018. |
(15) | Mr. Weisman holds (i) 7,000 shares of our common stock, (ii) stock options to purchase 52,000 shares of our common stock that may be exercised within 60 days of March 22, 2018 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, 2018.19, 2020. Mr. Weisman has shared voting and investment power with respect to 2,898,955 shares of our common stock that are held by SCP Vitalife, of which he is a partner. |
(16)(11) | Includes (i) stock options to purchase 940,4161,109,528 shares of our common stock that may be exercised within 60 days of March 22, 201819, 2020 and (ii) restricted stock units covering 88,49347,730 shares of our common stock that may vest and be settled within 60 days of March 22, 2018.19, 2020. |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent shareholders are also required by SEC rules to furnish us with copies of all Section 16(a) forms they file.
Based solely on a review of the Company’s records and written representations by the persons required to file such reports, all filing requirements of Section 16(a) were satisfied with respect to the 2017 fiscal year, except that the 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 the 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 Shareholdersand 20182020 Proxy Statement| 29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (continued)
| ITEMS TO BE VOTED ON ITEMS TO BE VOTED ON
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ITEM 1: ELECTION OF CLASS IIII DIRECTORS FOR A THREE-YEAR TERM EXPIRING IN 20212023 At the Annual Meeting, our shareholders will vote on the election of threetwo Class IIII director nominees named in this Proxy Statement as directors, each to serve until our 20212023 Annual Meeting of Shareholders and until their respective successors are elected and qualified. Our Board has unanimously nominated Winston J. ChurchillWilliam Ashton and Wayne B. WeismanDr. Michael Berelowitz 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 WILLIAM ASHTON AND DR. MICHAEL BERELOWITZ. | ✓ |
OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE “FOR” THE ELECTION OF WINSTON J. CHURCHILL AND WAYNE B. WEISMAN.
ITEM 2: 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, subject to the outcome of the advisory vote on the frequency of future advisory votes on named executive officer compensation, as discussed in Proposal 3. 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 2019 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 3: ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS In Proposal 2, we are providing our shareholders the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers. In this Proposal 3, we are asking our shareholders to cast a non-binding advisory vote regarding the frequency of future executive compensation advisory votes. Shareholders may vote for a frequency of every one, two, or three years, or may abstain. Our Board will take into consideration the outcome of this vote in making a determination about the frequency of future executive compensation advisory votes. However, because this vote is advisory and non-binding, our Board may decide that it is in the best interests of our shareholders and the Company to hold the advisory vote to approve executive compensation more or less frequently. Notice of Annual Meeting of Shareholders and 2020 Proxy Statement 30
In the future, we will propose an advisory vote on the frequency of the executive compensation advisory vote at least once every six calendar years. After careful consideration, our Board believes that the executive compensation advisory vote should be held annually, and therefore our Board recommends that you vote for a frequency of ONE YEAR for future executive compensation advisory votes. The Board believes that an annual executive compensation advisory vote will facilitate more direct shareholder input about executive compensation. An annual executive compensation advisory vote is consistent with our policy of reviewing our compensation program annually, as well as seeking frequent input from our shareholders on corporate governance and executive compensation matters. | | OUR BOARD UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE FOR “ONE YEAR” AS THE PREFERRED FREQUENCY OF FUTURE SHAREHOLDER ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS | ✓ |
ITEM 4: RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20182020 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 20182020 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 20182020 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 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
| | 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, 2020. | ✓ |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (continued)
| ITEMS TO BE VOTED ONOTHER INFORMATION(continued)
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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.
Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 31
| ITEMS TO BE VOTED ON(continued)
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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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Notice of Annual Meeting of Shareholdersand 2018 Proxy Statement | 32
| ITEMS TO BE VOTED ON(continued)
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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,
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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.
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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 orderShareholders intending to present a proposal to be considered for inclusion in the proxy statement for our 20192021 Annual Meeting of Shareholders, shareholder proposals must be received by us no later than November 23, 2018.27, 2020. If we change the date of the 20192021 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 20192021 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, Inc., 490 Lapp Road, Malvern, PA 19355. 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 2021 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 150th day, and no later than the close of business on the 120th day, prior to the first anniversary of the preceding year’s Annual Meeting. Accordingly, for our 20192021 Annual Meeting of Shareholders, our Corporate Secretary must receive the proposal or nomination no earlier than December 5, 20188, 2020 and no later than the close of business on January 4, 2019.7, 2021. 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, Inc., 490 Lapp Road, Malvern, PA 19355. 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
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AVAILABILITY OF MATERIALS Our 2019 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.recrogainesville.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, Inc., 490 Lapp Road, Malvern, PA 19355. In addition, it is available to beneficial and record holders of our common stock at www.proxyvote.com.www.proxyvote.com.
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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)
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“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).
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
VOTE BY INTERNET—INTERNET - www.proxyvote.com
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 6th, 2020. 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 to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
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 6th, 2020. 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 RECRO PHARMA, INC. – COMMON SHARES 123,456,789,012.12345
THE COMPANY NAMEC/O BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC.—CLASS A 123,456,789,012.12345
THE COMPANY NAME PO BOX 1342 BRENTWOOD, NY 11717 D05448-P36539 RECRO PHARMA, 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
PAGE 1 OF 2
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
For Withhold For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For"For All Except”
Except" and write the number(s) of the
nominee(s) on the line below. The Board of Directors recommends you vote FOR the following: nominee(s) on the line below.
! ! ! 1. Election of Directors
Nominees
01 Winston J. Churchill 02 Wayne B. Weisman
Nominees: 01) William Ashton 02) Michael Berelowitz For The Board of Directors recommends you vote FOR proposalsthe following proposal: Against Abstain ! ! ! 2. Approval of, on an advisory basis, the compensation of the Company's named executive officers. The Board of Directors recommends you vote 1 YEAR on the following proposal: 3 Years 1 Year 2 and 3:
Years Abstain ! ! ! ! 3. Indication of, on an advisory basis, the preferred frequency of future shareholder advisory votes on the compensation of the Company's named executive officers. The Board of Directors recommends you vote FOR the following proposal: For Against Abstain
2 ! ! ! 4. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the 20182020 fiscal year.
3 Approval of Recro Pharma, Inc’s. 2018 Amended and Restated Equity Incentive Plan.
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 & Proxy Statement and Form10-K is/are available at www.proxyvote.com .
www.proxyvote.com. D05449-P36539 RECRO PHARMA, INC.
2018 2020 Annual Meeting of Shareholders
May 4, 2018—7, 2020 - 9:00 AM
This proxy is solicited by the Board of Directors
The undersigned hereby appoints Gerri Henwood and Michael Celano,Ryan 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, INC. that the undersigned is entitled to vote at the 20182020 Annual Meeting of shareholdersShareholders to be held at 09:9:00 AM, EDT, on May 4, 20187, 2020 at Pepper Hamilton LLP, 400 Berwyn Park, 899 Cassatt Road, Berwyn, PA 19312, and any adjournment or postponement thereof.
Depending on concerns about the Coronavirus (COVID-19), RECRO PHARMA, INC. may hold a virtual Annual Meeting of Shareholders. The determination to hold a virtual Annual Meeting of Shareholders will be announced in a press release available at www.recrogainesville.com as soon as practicable before the meeting. In that event, the Annual Meeting of Shareholders would be conducted solely virtually, on the above date and time, via live audio webcast. 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’Directors' recommendations.
Continued and to be signed on reverse side
0000367837_2 R1.0.1.17 |
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