UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

Check the appropriate box:

ATYR PHARMA, INC.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

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aTyr Pharma, Inc.

3545 John Hopkins Court, Suite #250

San Diego, CA  92121

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On April 26, 2022

Dear Stockholder:

You are cordially invited to virtually attend the 2022 Annual Meeting of Stockholders (including any adjournments, continuations or postponements thereof, the “Annual Meeting”) of aTyr Pharma, Inc., a Delaware corporation (the “Company”). The Annual Meeting will be held virtually via live webcast on Tuesday, April 26, 2022 at 8:30 a.m. Pacific Time. The Annual Meeting is being held for the following purposes, which are more fully described in the accompanying materials:

These items of business are more fully described in the Proxy Statement accompanying this Notice.

Proposal 1 relates solely to the election of three Class I directors nominated by the Board of Directors and does not include any other matters relating to the election of directors, including without limitation, the election of directors nominated by any stockholder of the Company.

The Board of Directors has fixed the close of business on            , March   , 2022 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting.

In order to ensure your representation at the 2022 Annual Meeting of Stockholders, please vote over the Internet, by telephone or by completing and returning the enclosed proxy card promptly in the enclosed envelope. The 2022 Annual Meeting of Stockholders will be a virtual meeting. There will be no physical meeting location. The meeting will be conducted via live webcast. In order to attend, you must register in advance at www.proxydocs.com/LIFE prior to the deadline of Friday, April 22, 2022 at 2:00 p.m. Pacific Time. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the meeting and you will have the ability to submit questions. Please be sure to follow the instructions on the enclosed proxy card and/or voting instruction form and subsequent instructions that will be delivered to you via email. If you attend the 2022 Annual Meeting of Stockholders virtually, you may submit an electronic ballot during the meeting.

All stockholders are cordially invited to attend the 2022 Annual Meeting of Stockholders.

Important Notice Regarding the Availability of Proxy Materials for the 2022 Annual Meeting of Stockholders to be Held Virtually on April 26, 2022.

 

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The Notice of Annual Meeting, Proxy Statement and Annual Report are available electronically at https://investors.atyrpharma.com.   Additionally, you may access our proxy materials at www.proxydocs.com/LIFE, a site that does not have “cookies” that identify visitors to the site, using the control number located on your proxy card or in the instructions that accompanied your proxy materials.

 

 

Your vote is important, whether or not you expect to attend the Annual Meeting via live webcast. You are urged to vote either via the Internet or telephone, or by marking, dating and signing the proxy card included in your proxy materials and returning it promptly to ensure your vote is counted. Voting promptly will help avoid the additional expense of further solicitation to assure a quorum at the meeting.

 

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TABLE OF CONTENTS

 

 

 

 

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ATYR PHARMA, INC.

PROXY STATEMENT

FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On April 26, 2022

INFORMATION CONCERNING SOLICITATION AND VOTING

General

This proxy statement (“Proxy Statement”) is furnished in connection with the solicitation of proxies for the 2022 Annual Meeting of Stockholders (including any adjournments, continuations or postponements thereof, the “Annual Meeting”) of aTyr Pharma, Inc., a Delaware corporation (the “Company”), to be held virtually at 8:30 a.m. Pacific Time on Tuesday, April 26, 2022 for the following purposes, which are more fully described in this Proxy Statement:

Virtual Annual Meeting

The Annual Meeting will be a virtual meeting. There will be no physical meeting location. The meeting will be conducted via live webcast. In order to attend, you must register in advance at www.proxydocs.com/LIFE prior to the deadline of Friday, April 22, 2022 at 2:00 p.m. Pacific Time. Please be sure to follow the instructions on the enclosed proxy card and/or voting instruction form and subsequent instructions that will be delivered to you via email.

Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the Annual Meeting and you will have the ability to submit questions. This year’s stockholders question and answer session will include questions submitted in advance of and during the Annual Meeting. You may submit a question in advance of the meeting at www.proxydocs.com/LIFE after logging in with your control number. We do not place restrictions on the type or form of questions that may be asked; however, we reserve the right to edit or reject redundant questions or questions that we deem profane or otherwise inappropriate. During the live question and answer session of the Annual Meeting, we will answer questions as they come in and address those asked in advance, as time permits.

The virtual meeting platform is fully supported across browsers and devices running the most updated version of applicable software and plugins. Participants should ensure that they have a strong internet connection wherever they intend to participate in the Annual Meeting. We will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting. If you have registered for the Annual Meeting, you will receive an email with information about technical support.

On or about March   , 2022, we expect to mail to all stockholders entitled to vote at the Annual Meeting a Notice of Annual Meeting of Stockholders, this Proxy Statement and our 2021 Annual Report, including our annual report on Form 10-K (“Annual Report”).

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Solicitation

This solicitation is made by the Board of Directors on behalf of the Company. We will bear the costs of preparing and mailing materials, online processing and other proxy solicitation costs. In addition, we have engaged Alliance Advisors, LLC (“Alliance Advisors”) to assist us with the solicitation of proxies. We will pay Alliance Advisors a service fee, plus out-of-pocket expenses and additional fees based upon work performed at our request, which is not expected to exceed $15,000. In addition to solicitations by mail, Alliance Advisors may solicit proxies by telephone and e-mail. If you need assistance with the voting of your shares, you may contact Alliance Advisors toll-free at (844) 866-9428. Copies of solicitation materials may be furnished to brokers, custodians, nominees and other fiduciaries for forwarding to beneficial owners of shares of our common stock, and normal handling charges may be paid for such forwarding service. Officers and other Company employees, who will receive no additional compensation for their services, may solicit proxies by mail, e-mail via the Internet or by telephone.

Voting Rights and Outstanding Shares

Only holders of record of our common stock as of the close of business on March   , 2022 (the “Record Date”) are entitled to receive notice of, and to vote at, the Annual Meeting. Each holder of common stock as of the Record Date will be entitled to one vote per share on all matters to be voted upon at the Annual Meeting. At the close of business on the Record Date, there were                            shares of our common stock issued and outstanding.

A quorum of stockholders is necessary to take action at the Annual Meeting. Stockholders representing a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting (present online at the Annual Meeting or represented by proxy) will constitute a quorum. We will appoint an inspector of elections for the meeting to determine whether or not a quorum is present and to tabulate votes cast by proxy or online at the Annual Meeting. Abstentions, withheld votes and broker non-votes (which occur when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular matter because such broker, bank or other nominee does not have discretionary authority to vote on that matter and has not received voting instructions from the beneficial owner) are counted as present for purposes of determining the presence of a quorum for the transaction of business at the Annual Meeting. If there is no quorum, the chairperson of the Annual Meeting or holders of a majority of the voting power of the shares present at the Annual Meeting may adjourn the Annual Meeting to another date.

Votes Required for Each Proposal

To elect our directors and approve the other proposals being considered at the Annual Meeting, the voting requirements are as follows:

 

 

“Discretionary Voting Permitted” means that brokers will have discretionary voting authority with respect to shares held in street name for their clients, even if the broker does not receive voting instructions from their client.

“Majority Cast” means a majority of the votes properly cast for or against such matter.

“Majority Outstanding” means a majority of the shares of common stock outstanding and entitled to vote on the Record Date.  

“Plurality” means a plurality of the votes properly cast on such matter. For the election of directors, the three nominees receiving the most votes will be elected as directors.

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The vote required and method of calculation for the proposals to be considered at the Annual Meeting are as follows:

Proposal 1—Election of Directors.  If a quorum is present, the director nominees named in this Proxy Statement receiving the highest number of votes “FOR” will be elected as directors. You may vote “FOR” or “WITHHOLD” on each of the nominees. Withheld votes and broker non-votes will have no effect on the outcome of the election of the directors. The NYSE has advised us that Proposal 1 is not considered to be a discretionary item, so if you do not instruct your broker how to vote with respect to this proposal, your broker may not vote on this proposal, and those votes will be counted as “broker non-votes.”

Proposal 2—Ratification of Ernst & Young LLP as Independent Registered Public Accountants.  Approval of this proposal requires the affirmative vote of a majority of the votes properly cast “FOR” or “AGAINST” such matter. Broker non-votes and abstentions will not be counted as votes properly cast with respect to such matter, and will have no effect on the proposal. The NYSE has advised us that Proposal 2 is considered to be a discretionary item, and your broker, bank or other nominee will be able to vote on this proposal even if it does not receive instructions from you.

Proposal 3— Approval of the Compensation of the Company’s Named Executive Officers.  Approval of this proposal requires the affirmative vote of a majority of the votes properly cast “FOR” or “AGAINST” such matter. Broker non-votes and abstentions will not be counted as votes properly cast with respect to such matter, and will have no effect on the proposal. The NYSE has advised us that Proposal 3 is not considered to be a discretionary item, so if you do not instruct your broker how to vote with respect to this proposal, your broker may not vote on this proposal, and those votes will be counted as “broker non-votes.”

Proposal 4— Approval of Amendment to the 2015 Stock Plan. Approval of this proposal requires the affirmative vote of a majority of the votes properly cast “FOR” or “AGAINST” such matter. Broker non-votes and abstentions will not be counted as votes properly cast with respect to such matter, and will have no effect on the proposal. The NYSE has advised us that Proposal 4 is not considered to be a discretionary item, so if you do not instruct your broker how to vote with respect to this proposal, your broker may not vote on this proposal, and those votes will be counted as “broker non-votes.”

Proposal 5—Approval of Amendment to the 2015 ESPP. Approval of this proposal requires the affirmative vote of a majority of the votes properly cast “FOR” or “AGAINST” such matter. Broker non-votes and abstentions will not be counted as votes properly cast with respect to such matter, and will have no effect on the proposal. The NYSE has advised us that Proposal 5 is not considered to be a discretionary item, so if you do not instruct your broker how to vote with respect to this proposal, your broker may not vote on this proposal, and those votes will be counted as “broker non-votes.”

Proposal 6—Approval of Increase in Authorized Common Stock. Approval of this proposal requires the affirmative vote of a majority of the shares of common stock outstanding and entitled to vote on the Record Date. You may vote “FOR” or “AGAINST” this proposal. Broker non-votes and abstentions will have the same effect as a vote “AGAINST” the proposal. The NYSE has advised us that Proposal 6 is considered to be a discretionary item, and your broker will be able to vote on this proposal even if it does not receive instructions from you, so we do not anticipate any broker non-votes in connection with Proposal 6.

Proposal 7—Approval of the Authorization to Adjourn the Annual Meeting, if Necessary. Approval of this proposal requires the affirmative vote of a majority of the votes properly cast “FOR” or “AGAINST” such matter. Broker non-votes and abstentions will not be counted as votes properly cast with respect to such matter, and will have no effect on the proposal. The NYSE has advised us that Proposal 7 is considered to be a discretionary item, and your broker will be able to vote on this proposal even if it does not receive instructions from you, so we do not anticipate any broker non-votes in connection with Proposal 7.

We request that you vote your shares by proxy by mail, over the Internet, or by telephone. If you choose to vote by mail, your shares will be voted in accordance with your voting instructions if the proxy card is received prior to the Annual Meeting. If you sign and return your proxy card but do not give voting instructions, your shares will be voted FOR: (i) the election of each of the Company’s three nominees as directors; (ii) the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2022; (iii) the compensation of the Company’s named executive officers; (iv) the amendment to the 2015 Stock Plan; (v) the amendment to the 2015 ESPP; (vi) the increase in the authorized shares of common stock from 42,500,000 to 85,000,000 shares; (vii) the adjournment of the Annual Meeting, if necessary; and (viii) as the proxy holders deem advisable, in their discretion, on other matters that may properly come before the Annual Meeting.

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How to Place your Vote

Stockholders who vote by proxy over the Internet or by telephone need not return a proxy card or voting instruction form by mail, but may incur costs, such as usage charges, from telephone companies or Internet service providers.

Voting by Internet.  Registered stockholders can vote via the Internet at www.proxypush.com/LIFE. You will need to use the control number apprearing on your proxy card to vote via the Internet. You can use the Internet to transmit your voting instructions up until 8:30 a.m. Pacific Time on April 26, 2022. Internet voting is available 24 hours a day. If you vote via the Internet, you do not need to return a proxy card.

Voting by Telephone.  Registered stockholders can vote by telephone by calling the toll-free telephone number 1-866-284-6674. You will need to use the control number apprearing on your proxy card to vote via by telephone. You may transmit your voting instructions by any touch-tone telephone up until 8:30 a.m. Pacific Time on April 26, 2022. Telephone voting is available 24 hours a day. If you vote by telephone, you do not need to return a proxy card.

Voting by Mail.  If you are a registered stockholder and received a printed proxy card, you can vote by marking, dating and signing it, and returning it in the postage-paid envelope provided.  Please promptly mail your proxy card to ensure that it is received prior to the start of the Annual Meeting.

Vote at the Meeting.  The Annual Meeting will be a virtual meeting. There will be no physical meeting location. The meeting will be conducted via live webcast. In order to attend, you must register in advance at www.proxydocs.com/LIFE prior to the deadline of Friday, April 22, 2022 at 2:00 p.m. Pacific Time. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the meeting and you will have the ability to submit questions in advance of and during the Annual Meeting. Please be sure to follow the instructions on the enclosed proxy card and/or voting instruction form and subsequent instructions that will be delivered to you via email. If your shares are registered directly in your name, you are considered a stockholder of record and you have the right to vote online at the Annual Meeting. If your shares are held in the name of your broker, bank or other nominee, you are considered the beneficial owner of shares held in street name. As a beneficial owner, if you wish to vote online at the Annual Meeting, you will need a legal proxy from your broker, bank or other nominee authorizing you to vote those shares.

If your shares are held in street name, the voting instruction form sent to you by your broker, bank or other nominee should indicate whether the institution has a process for beneficial holders to provide voting instructions over the Internet or by telephone. A number of banks and brokerage firms participate in a program that also permits stockholders whose shares are held in street name to direct their vote over the Internet or by telephone. If your bank or brokerage firm gives you this opportunity, the voting instructions from the bank or brokerage firm that accompany this Proxy Statement will tell you how to use the Internet or telephone to direct the vote of shares held in your account. If your voting instruction form does not include Internet or telephone information, please complete and return the voting instruction form in the self-addressed, postage-paid envelope provided by your broker.

Revocability of Proxies

Any proxy may be revoked at any time before the final vote at the Annual Meeting by filing an instrument revoking it with the Company’s Secretary or by submitting a duly executed proxy bearing a later date prior to the time of the Annual Meeting. Stockholders who have voted by proxy over the Internet or by telephone or have executed and returned a proxy and who then attend the Annual Meeting and desire to vote at the Annual Meeting are requested to notify the Secretary in writing prior to the time of the Annual Meeting. We request that all such written notices of revocation to the Company be addressed to Nancy Denyes, Secretary, c/o aTyr Pharma, Inc., at the address of our principal executive offices at 3545 John Hopkins Court, Suite #250, San Diego, CA 92121. Stockholders may also revoke their proxy by entering a new vote over the Internet or by telephone prior to the deadlines described above. If your shares are held by your broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee. In each case, your most current proxy card or telephone or internet proxy is the one that is counted.  

Stockholder Proposals to be Presented at the Next Annual Meeting

To be considered for inclusion in next year’s proxy materials, stockholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), must be submitted in writing by notice delivered or mailed by first-class United States mail, postage prepaid, to our Secretary at our principal executive offices at the address set forth above no later than                 , 2022 in order to be considered for inclusion in next year’s proxy materials. If the 2023 annual meeting of stockholders is scheduled to be held on a date that is more than 30 days before or after April 26, 2023, the one year anniversary of the Annual Meeting, then notice must be received within a reasonable time before we begin to print and send proxy materials. If that happens, we will publicly announce the deadline for submitting a proposal in a press release or in a document filed with the Securities and Exchange Commission (“SEC”).

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Our Amended and Restated Bylaws (“Bylaws”) also provide for separate notice procedures for stockholder nominations or proposals that are not to be included in next year’s proxy materials to be considered by stockholders at a meeting. To be considered timely under these provisions, the stockholder’s notice must be received by our Secretary at our principal executive offices at the address set forth above no earlier than December 21, 2022 and no later than January 20, 2023. Our Bylaws also specify requirements as to the form and content of a stockholder’s notice. However, if our 2023 annual meeting of stockholders is not held between March 21, 2023 and June 19, 2023, the notice must be received not later than the close of business on the later of the ninetieth (90th) day prior to the scheduled date of the 2023 annual meeting of stockholders or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made.

The Board of Directors, a designated committee thereof or the chairman of the meeting may refuse to acknowledge the introduction of any stockholder proposal if it is not made in compliance with the applicable notice provisions.

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PROPOSAL 1

ELECTION OF DIRECTORS

General

Our Restated Certificate of Incorporation provides for a board of directors that is divided into three classes, each with a staggered, three-year term. The term of the Class I directors will expire at the Annual Meeting, and all three of our Class I directors will stand for re-election at the Annual Meeting. Our Board of Directors is currently comprised of seven members. If the Class I director nominees are re-elected at the Annual Meeting, the composition of our Board of Directors will be as follows: Class I— Mr. John K. Clarke, Dr. Paul Schimmel and Dr. Sara L. Zaknoen; Class II— Mr. Timothy P. Coughlin and Dr. Jane A. Gross; and Class III— Dr. Svetlana Lucas and Dr. Sanjay S. Shukla.

In the absence of instructions to the contrary, the persons named as proxy holders in the accompanying proxy intend to vote in favor of the election of the Class I director nominees designated below to serve until the 2025 annual meeting of stockholders and until their successors shall have been duly elected and qualified. Each nominee is currently a director. The Board of Directors expects that each nominee will be available to serve as a director, but if any such nominee should become unavailable or unwilling to stand for election, it is intended that the shares represented by the proxy will be voted for such substitute nominee as may be designated by the Board of Directors. The biographies of our directors and their ages as of February 28, 2022 are set forth below.

 

 

Nominees for Director

Class I:

The three individuals listed below are nominated for election as Class I directors to serve a three-year term expiring at the 2025 annual meeting of stockholders and until their respective successors are elected and qualified. Mr. Clarke and Dr. Schimmel were previously elected by the stockholders. Dr. Zaknoen was appointed to the Board of Directors in May 2021 and was recommended for nomination to the Board of Directors by the Nominating and Corporate Governance Committee.

John K. Clarke has served as Chairman of our Board of Directors since September 2005. Mr. Clarke is Managing Partner of Cardinal Partners, a venture capital firm focused on healthcare investing. He co-founded Cardinal Partners in 1997 and has served as President of CHP Management, Inc. since that time. He currently serves as a director ofIvenix Corporation, a privately held biotechnology company. He has also served as a director for several biotechnology and biopharmaceutical companies including Alnylam Pharmaceuticals, Inc., Momenta Pharmaceuticals, Inc., Verastem, Inc., Vividion Therapeutics, Inc. (acquired by Bayer AG) and Sirtris Pharmaceuticals, Inc. (acquired by GlaxoSmithKline); healthcare information technology companies, including TechRx Technology Services Corporation (acquired by NDCHealth) and Visicu, Inc. (acquired by Phillips Electronics); and a privately held biopharmaceutical company, Rib-X Pharmaceuticals Inc. Mr. Clarke holds an A.B. in economics and biology from Harvard University and an M.B.A. from the Wharton School at the University of Pennsylvania. Our Board of Directors believes Mr. Clarke is qualified to serve on our Board of Directors due to his extensive experience within the field of drug discovery and development and his broad leadership experience on various public and private company boards.

Paul Schimmel, Ph.D. has served as a director since September 2005. Dr. Schimmel is currently a director of several private companies. He was a cofounder of Repligen Corporation, Alkermes, Inc., Cubist Pharmaceuticals, Sirtris Pharmaceuticals, and Alnylam Pharmaceuticals, Inc., and a founding Director of Momenta, Inc. Dr. Schimmel is an Ernest and

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Jean Hahn Professor of Molecular Medicine and of Chemistry at Scripps Research. He was formerly the John D. and Catherine T. MacArthur Professor of Biochemistry and Biophysics in the Department of Biology at the Massachusetts Institute of Technology. Dr. Schimmel holds a B.A. from Ohio Wesleyan University and a Ph.D. in biochemistry and biophysics from the Massachusetts Institute of Technology. He is an elected member of the National Academy of Sciences, the National Academy of Medicine, the National Academy of Inventors, the American Philosophical Society and the American Academy of Arts and Sciences. Our Board of Directors believes Dr. Schimmel is qualified to serve on our Board of Directors due to his role as one of our scientific founders and his discoveries and scientific leadership in the field of tRNA synthetase biology and other areas important to the development of therapeutics.

Sara L. Zaknoen, M.D. has served as a director since May 2021. Since June 2014, through her company, Zed Strategic Consulting, Dr. Zaknoen has worked as a clinical drug development consultant with large pharmaceutical and biotechnology companies across multiple disease indications. Previously, Dr. Zaknoen held Chief Medical Officer positions at several biotechnology companies, including Ignyta, Inc., Polynoma LLC, Tragara Pharmaceuticals, Inc. and Cabrellis Pharmaceuticals Corporation. Prior to that, Dr. Zaknoen served as Executive Director of Phase 2/3 Clinical Oncology Research at Novartis Pharmaceutical Corporation, where she provided oversight for a number of important marketed therapies, such as Gleevec®, Tasigna® and Exiade®. This included supervising the execution of clinical studies, including registrational trials, and involvement with new drug applications and label expansion activities. As Director of Clinical Oncology Research at Schering-Plough (now Merck) she was the lead physician on the Temodar® program, supporting its approval and launch. Additional professional experience includes: Assistant Professor of Medicine at the University of Cincinnati Medical Center; Director of Experimental Therapeutics at the Western Pennsylvania Hospital, Western Pennsylvania Cancer Institute; and Medical Staff Fellow at the National Cancer Institute. Dr. Zaknoen completed her residency, internship and fellowship in hematology/oncology at the University of Minnesota. She received her M.D. from Indiana University School of Medicine and her B.S. in chemistry and biology from Valparaiso University. Our Board of Directors believes that Dr. Zaknoen is qualified to serve on our Board of Directors due to her extensive experience in clinical research, her medical background and her experience in the biotherapeutics industry.

Continuing Directors:

Class II: Currently Serving Until the 2023 Annual Meeting

Timothy P. Coughlin has served as a director since April 2017. Mr. Coughlin is the former Chief Financial Officer of Neurocrine Biosciences, Inc. (“Neurocrine”), a biopharmaceutical company that has received U.S. Food and Drug Administration approval for INGREZZA (valbenazine) and ORILISSA (elagolix), both of which were discovered and developed during his tenure at Neurocrine from 2002 to 2018. Prior to joining Neurocrine, he was with Catholic Health Initiatives, a nationwide integrated healthcare delivery system, where he served as Vice President, Financial Services. Mr. Coughlin also served as a Senior Manager in the Health Sciences practice of Ernst & Young LLP and its predecessors from 1989 to 1999. Mr. Coughlin serves on the board of directors of Travere Therapeutics, Inc. and Fate Therapeutics, Inc., both biotechnology companies. He also served on the board of directors of Peloton Therapeutics prior to its sale to Merck & Co in 2019. Mr. Coughlin holds a master’s degree in international business from San Diego State University and a bachelor’s degree in accounting from Temple University. Mr. Coughlin is a certified public accountant in both California and Pennsylvania. Our Board of Directors believes that Mr. Coughlin is qualified to serve on our Board of Directors due to his extensive background in financial and accounting matters for public companies, his experience in the life science industry and his years of business and leadership experience.

Jane A. Gross, Ph.D. has served as a director since June 2019.Dr. Gross served as the Chief Scientific Officer and Senior Vice President of Research and Development at Aptevo Therapeutics Inc. (“Aptevo”) from September 2016 to September 2021.  She currently serves as a consultant to Aptevo (as of September 2021) holding the title of Chief Scientific Officer. At Aptevo. Dr. Gross led the discovery of novel protein therapeutics based on the ADAPTIR™ and ADAPTIR-FLEX™ platform technologies focusing on development of therapeutics based on immuno-oncology, leading research efforts in molecular biology and protein engineering, immunology, protein and cell sciences, pharmacology, and translational research. Prior to joining Aptevo, Dr. Gross served as Vice President, Applied Research and Non-Clinical Development at Emergent BioSolutions Inc. and Vice President, Immunology Research at ZymoGenetics, Inc., where she led efforts in discovery and development of therapeutics from novel genes. Dr. Gross serves on the board of directors of BriaCell Therapeutics Corp., a biotechnology company. Dr. Gross holds a Ph.D. in Immunology from the University of California, Berkeley under Jim Allison (2018 recipient of the Nobel Prize in Physiology and Medicine) and a Post-Doctoral Fellowship from the University of Washington in Immunology. Our Board of Directors believes that Dr. Gross is qualified to serve on our Board of Directors due to her extensive experience in the biotherapeutics industry and her expertise in immunology and oncology.

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Class III: Currently Serving Until the 2024 Annual Meeting

Svetlana Lucas, Ph.D. has served as a director since June 2019. Dr. Lucas currently serves as Chief Business Officer at Scribe Therapeutics, a private biotechnology company. Prior to her current role, she served as Senior Vice President, Business Development at Tizona Therapeutics, Inc. (“Tizona”), a clinical stage immunotherapy company, where she was responsible for the company’s business development strategy and transactions, including a global strategic collaboration with AbbVie Inc. (“AbbVie”). Before joining Tizona, Dr. Lucas was Head of Oncology and Inflammation External R&D at Amgen Inc. (“Amgen”), where she oversaw business development activities, including Amgen’s strategic cancer immunotherapy research collaboration and licensing agreement with Kite Pharma, and collaborated with Amgen Ventures on several investments in oncology and inflammation. Dr. Lucas joined Amgen following the acquisition of Onyx Pharmaceuticals, Inc. (“Onyx”), where she spearheaded the company’s oncology partnering strategy and due diligence of new opportunities. Prior to Onyx, she held positions of increasing responsibility in strategy, business development and strategic marketing at Amgen, PDL BioPharma/Facet Biotech (acquired by AbbVie), and XOMA Corporation. She began her career as a strategy consultant in the Life Sciences practice of McKinsey & Company, Inc. Dr. Lucas received her Ph.D. in Molecular Biology and Biochemistry from California Institute of Technology, and an undergraduate degree in Biology from Moscow State University. Our Board of Directors believes that Dr. Lucas is qualified to serve on our Board of Directors due to her extensive business development experience in the biotherapeutics industry.

Sanjay S. Shukla, M.D., M.S. has served as our President and Chief Executive Officer and as a director since November 2017. Dr. Shukla served as our Chief Medical Officer from March 2016 to November 2017. From April 2015 to March 2016, Dr. Shukla worked in an advisory capacity for a number of companies, including as a consultant to our company from January 2016 to March 2016. Prior to that, from October 2012 to April 2015, Dr. Shukla served as Vice President and Global Head of Integrated Medical Services for Novartis, a biopharmaceutical company, where he led global medical affairs operations, with oversight for all pharma general medicines therapies, both inline and in development. Dr. Shukla served as Chief Executive Officer of RXMD, a clinical development consultancy that assisted in advancing proof of concept for early stage drug candidates, from April 2009 to September 2012. Prior to that, Dr. Shukla served in a variety of clinical development, data analytics and drug safety roles at Vifor Pharma, a biopharmaceutical company, and Aspreva Pharmaceuticals (acquired by Vifor Pharma). Dr. Shukla received his M.D. from Howard University College of Medicine and his Bachelors of Science in microbiology and Master of Science in epidemiology and biostatistics from the University of Maryland. Our Board of Directors believes that Dr. Shukla is qualified to serve on our Board of Directors due to his experience as our Chief Executive Officer and previously as our Chief Medical Officer, as well as his medical background, experience in the life science industry and his leadership experience.

Independence of the Board of Directors

Our Board of Directors has affirmatively determined that each of our directors, except for Dr. Shukla, are independent, as determined in accordance with the rules of the Nasdaq Stock Market (“Nasdaq”) and the SEC. In making this independence determination, the Board of Directors considered the relationships that each non-employee director has with us and with the holders of greater than 5% of our common stock, and all other facts and circumstances that the Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. There are no family relationships among any of our directors or executive officers.

Board Leadership Structure

The positions of our Chairman of the Board and Chief Executive Officer are presently separated. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead our Board of Directors in its fundamental role of providing advice to and independent oversight of management. Our Board of Directors recognizes the time, effort and energy that the Chief Executive Officer must devote to his position in the current business environment, as well as the commitment required to serve as our Chairman of the Board, particularly as our Board of Directors’ oversight responsibilities continue to grow. Our Board of Directors also believes that this structure ensures a greater role for the independent directors in the oversight of our company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our Board of Directors.

While our Bylaws and corporate governance guidelines do not require that our Chairman of the Board and Chief Executive Officer positions be separate, our Board of Directors believes that having separate positions and having an independent outside director serve as Chairman of the Board is the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance. Our separated Chairman of the Board and Chief Executive Officer positions are augmented by the independence of six of our seven directors, and our three entirely independent Board committees that provide appropriate oversight in the areas described above. At regularly scheduled executive sessions of independent directors, these directors speak candidly on any matter of interest, without the Chief Executive Officer or other executive

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officers present. The independent directors met three times in 2021 without management present. We believe this structure provides consistent and effective oversight of our management and our company.

Board Diversity  

Our Board of Directors believes that a diverse board is better able to effectively oversee our management and strategy, and position us to deliver long-term value for our stockholders. Our Board of Directors considers diversity, including gender and ethnic diversity, as adding to the overall mix of perspectives of our Board of Directors as a whole. With the assistance of the Nominating and Corporate Governance Committee, our Board of Directors regularly reviews trends in board composition, including on director diversity.

 

Board of Directors’ Role in Risk Management

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to our financial condition, development activities, regulatory matters, operations and intellectual property. Management is responsible for the day-to-day management of risks we face, while our Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

The role of our Board of Directors in overseeing the management of our risks is conducted primarily through committees of the Board of Directors, as disclosed in the descriptions of each of the committees below and in the charters of each of the committees. The full Board of Directors (or the appropriate board committee in the case of risks that are under the purview of a particular committee) discusses with management our major risk exposures, their potential impact on our company, and the steps we take to manage them. When a board committee is responsible for evaluating and overseeing the management of a particular risk or risks, the chairman of the relevant committee reports on the discussion to the full Board of Directors during the committee reports portion of the next board meeting. This enables our Board of Directors and its committees to coordinate the risk oversight role, particularly with respect to interrelated risks.

Hedging Policy

The Company maintains Special Trading Procedures for Designated Individuals (the “Trading Procedures”) as an addendum to the Company’s Statement of Company Policy on Insider Trading and Disclosure (the “Insider Trading Policy”). The Trading Procedures regulate securities trades by all directors, officers and employees of the Company and certain designated consultants of the Company (the “Designated Individuals”). Pursuant to the Trading Procedures, all trades must be pre-cleared by the Company’s designated insider trading compliance officer (the “Compliance Officer”). Under the Trading Procedures, no directors, officers or employees of the Company, nor any Designated Individuals, may buy or sell puts, calls or other derivative securities of the Company or any other financial instruments that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity, directly or indirectly, to profit from any change in the value of the Company’s securities or engage in any other hedging or similar transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities, at any time unless such transaction has been approved by the Compliance Officer.

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Meetings of the Board of Directors

During 2021, the Board of Directors held a total of ten meetings. All directors attended at least 75% of the total number of Board meetings and of the total number of meetings of committees of the Board of Directors on which the director served during the time he or she served on the Board of Directors or such committees.

Information Regarding Committees of the Board of Directors

The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is composed entirely of independent directors in accordance with current Nasdaq Marketplace Rules. Furthermore, our Audit Committee meets the enhanced independence standards established by the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) and Rule 10A-3(b)(1) of the Exchange Act. Copies of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee charters and our corporate governance guidelines are available, free of charge, on our website at http://www.atyrpharma.com, under the “Investors/Corporate Governance” link.  

Audit Committee  

Mr. Clarke, Mr. Coughlin and Dr. Lucas currently serve on the Audit Committee, which is chaired by Mr. Coughlin. Our Board of Directors has determined that Mr. Coughlin qualifies as an “audit Committee financial expert,” as defined under the applicable rules of the SEC. We believe that the composition and functioning of our Audit Committee complies with all applicable requirements of the Sarbanes-Oxley Act, and all applicable SEC and Nasdaq rules and regulations. The Audit Committee’s responsibilities include:

During 2021, the Audit Committee held four meetings. Dr. Lucas was appointed as a member of the Audit Committee effective as of April 28, 2021.

Compensation Committee

Mr. Clarke, Mr. Coughlin and Dr. Gross currently serve on the Compensation Committee, which is chaired by Mr. Clarke. We believe that the composition and functioning of our Compensation Committee complies with all applicable requirements of the Sarbanes-Oxley Act, and all applicable SEC and Nasdaq rules and regulations. The Compensation Committee’s responsibilities include:

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Pursuant to its charter, the Compensation Committee has the authority to retain compensation consultants to assist in its evaluation of executive and director compensation. Our Compensation Committee may retain one or more third-party compensation advisors to provide information and advice in future years for consideration in establishing overall compensation for our executives and directors.

During 2021, the Compensation Committee held two meetings.

Nominating and Corporate Governance Committee

Mr. Clarke, Dr. Lucas and Dr. Zaknoen currently serve on the Nominating and Corporate Governance Committee, which is chaired by Mr. Clarke. We believe that the composition and functioning of our Nominating and Corporate Governance Committee complies with all applicable requirements of the Sarbanes-Oxley Act, and all applicable SEC and Nasdaq rules and regulations. The Nominating and Corporate Governance Committee’s responsibilities include:

During 2021, the Nominating and Corporate Governance Committee held three meetings. Dr. Zaknoen was appointed as a member of the Nominating and Corporate Governance Committee on March 2, 2022.

Director Nominations

The director qualifications developed to date focus on what our Board of Directors believes to be essential competencies to effectively serve on the Board of Directors. The Nominating and Corporate Governance Committee reassesses such criteria from time to time and submits any proposed changes to the Board of Directors for approval. Presently, at a minimum, the Nominating and Corporate Governance Committee must be satisfied that each nominee it recommends: (i) has experience at a strategic or policymaking level in a business, government, non-profit or academic organization of high standing, (ii) is highly accomplished in his or her respective field, with superior credentials and recognition, (iii) is well regarded in the community and has a long-term reputation for high ethical and moral standards, (iv) has sufficient time and availability to devote to the affairs of the Company, particularly in light of the number of boards of directors on which such nominee may

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serve, and (v) to the extent such nominee serves or has previously served on other boards, the nominee has a demonstrated history of actively contributing at board meetings.

In addition to those minimum qualifications, the Nominating and Corporate Governance Committee recommends that our Board of Directors select persons for nomination to help ensure that:

In addition to other standards the Nominating and Corporate Governance Committee may deem appropriate from time to time for the overall structure and compensation of the Board of Directors, the Nominating and Corporate Governance Committee may consider the following factors when recommending that our Board of Directors select persons for nomination:

Although the Nominating and Corporate Governance Committee may consider whether nominees assist in achieving a mix of directors that represents a diversity of background and experience, which is not only limited to race, gender or national origin, we have no formal policy regarding director diversity.

The Nominating and Corporate Governance Committee adheres to the following process for identifying and evaluating nominees for the Board of Directors. First, it solicits recommendations for nominees from non-employee directors, our Chief Executive Officer, other executive officers, third-party search firms, stockholders or any other source it deems appropriate. The Nominating and Corporate Governance Committee then reviews and evaluates the qualifications of proposed nominees and conducts inquiries it deems appropriate; all proposed nominees, including those recommended by stockholders, are evaluated in the same manner, regardless of who initially recommended such nominee. In reviewing and evaluating proposed nominees, the Nominating and Corporate Governance Committee may consider, in addition to the minimum qualifications and other criteria for directorship approved by our Board of Directors from time to time, all facts and circumstances that it deems appropriate or advisable, including, among other things, the skills of the proposed nominee, his or her depth and breadth of business experience or other background characteristics, his or her independence and the needs of the Board of Directors.

If the Nominating and Corporate Governance Committee decides to retain a third-party search firm to identify proposed nominees, it has sole authority to retain and terminate such firm and to approve any such firm’s fees and other retention terms.

Each nominee for election as director at the Annual Meeting was recommended by the Nominating and Corporate Governance Committee and is presently a director and is standing for re-election by the stockholders. From time to time, we may pay fees to third-party search firms to assist in identifying and evaluating potential nominees, although no such fees have been paid in connection with nominations to be acted upon at the Annual Meeting.

Pursuant to our Bylaws, stockholders who wish to nominate persons for election to the Board of Directors at an annual meeting of stockholders must be a stockholder of record at the time of giving the notice, entitled to vote at the meeting and present (themselves or by proxy) at the meeting, and must comply with the notice procedures in our Bylaws. A stockholder’s notice of nomination to be made at an annual meeting of stockholders must be delivered to our principal executive offices not later than 90 days nor more than 120 days before the anniversary date of the immediately preceding annual meeting. However, if an annual meeting is more than 30 days before or more than 60 days after such anniversary date, the notice must be delivered no later than the later of the 90^th day prior to such annual meeting or the 10^th day following the day on which the first public announcement of the date of such annual meeting was made. A stockholder’s notice of nomination may not be made at a special meeting of stockholders unless such special meeting is held in lieu of an annual meeting of stockholders. The stockholder’s notice must include the following information for the person making the nomination:

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With respect to proposed director nominees, the stockholder’s notice must include all information required to be disclosed in a proxy statement in connection with a contested election of directors or otherwise required pursuant to Regulation 14A under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected).

For matters other than the election of directors, the stockholder’s notice must also include a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of the stockholder(s) proposing the business.

The stockholder’s notice must be updated and supplemented, if necessary, so that the information required to be provided in the notice is true and correct as of the record date for the meeting and as of the date that is ten business days prior to the meeting.

The Board of Directors, a designated committee thereof or the chairman of the meeting will determine if the procedures in our Bylaws have been followed, and if not, declare that the proposal or nomination will be disregarded. The nominee must be willing to provide any other information reasonably requested by the Nominating and Corporate Governance Committee in connection with its evaluation of the nominee’s independence. There have been no material changes to the process by which stockholders may recommend nominees to our Board of Directors.

Stockholder Communications with the Board of Directors

The Board of Directors has adopted a process for stockholders to send communications to the Board of Directors. Stockholders may send correspondence to the Board of Directors, c/o the Chairman of the Board, at our principal executive offices at the address set forth above. We will forward all correspondence addressed to the Board of Directors or any individual director.

Director Attendance at Annual Meetings

Directors are encouraged to attend the Annual Meeting. All of our directors attended the 2021 Annual Meeting of Stockholders virtually.

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Director Compensation

Our Board of Directors adopted a non-employee director compensation policy in May 2015 that is designed to provide a total compensation package that enables us to attract and retain, on a long-term basis, high-caliber non-employee directors. In January 2016, February 2017 and February 2022, our Board of Directors adopted amendments to the policy with respect to the cash and equity component of compensation to our non-employee directors. Under this policy, as amended to date, all non-employee directors are paid cash compensation for service on the Board of Directors and committees of the Board of Directors as set forth below, prorated based on days of service during a calendar year.

In addition, under the policy, each newly appointed or elected non-employee director will receive an option grant to purchase up to 24,000 shares of common stock, which will vest in equal monthly installments during the 36 months following the grant date, subject to the director’s continued service on our Board of Directors. Thereafter, on the date of each annual meeting of stockholders, each continuing non-employee director will be eligible to receive an annual option grant to purchase up to 12,000 shares of common stock, which will vest in full upon the earlier of the first anniversary of the date of grant or the date of the following annual meeting of stockholders, subject to the director’s continued service on our Board of Directors (the “Annual Grant”). All of the foregoing options will be granted with an exercise price equal to the fair market value of our common stock on the date of grant. In light of the limited shares available under the 2015 Stock Plan, in February 2022, the Board of Directors approved the one-time issuance of restricted stock units covering an aggregate of 6,000 shares of common stock in lieu of option grants for the 2022 Annual Grant.

We have agreed to reimburse all reasonable out-of-pocket expenses incurred by non-employee directors in attending Board and committee meetings.

Director Compensation Table—2021

The following table sets forth information with respect to the compensation earned by our non-employee directors during the fiscal year ended December 31, 2021. During 2021, Dr. Shukla did not receive compensation for his service on the Board of Directors. The compensation paid to Dr. Shukla as an employee of our company is set forth under the heading “Executive Compensation—Summary Compensation Table” below.  

 

 

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Required Vote

Directors are elected by a plurality of the votes of the holders of shares present by virtual attendance or represented by proxy and entitled to vote on the election of directors. Accordingly, the three nominees named in this Proxy Statement receiving the highest number of “FOR” votes properly cast shall be elected as Class I directors to serve until the 2025 annual meeting of stockholders or until their successors have been duly elected and qualified. Broker non-votes will have no effect on the vote for this proposal.

Recommendation of the Board of Directors

The Board of Directors unanimously recommends that the stockholders vote “FOR” the election of the Class I nominees listed above.

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PROPOSAL 2

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed Ernst & Young LLP as the Company’s independent registered public accounting firm for its fiscal year ending December 31, 2022. Ernst & Young LLP has audited the Company’s financial statements since 2008. Representatives of Ernst & Young LLP will attend the Annual Meeting and will have the opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions.

The Company’s organizational documents do not require that the stockholders ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm, and stockholder ratification is not binding on the Company, the Board of Directors or the Audit Committee. The Company requests such ratification, however, as a matter of good corporate practice. Our Board of Directors, including our Audit Committee, values the opinions of our stockholders and, to the extent there is any significant vote against the ratification of the selection of Ernst & Young LLP as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and evaluate what actions may be appropriate to address those concerns, although the Audit Committee, in its discretion, may still retain Ernst & Young LLP.

Principal Accountant Fees and Services

The following table shows information about fees billed to the Company by Ernst & Young LLP for the fiscal years ended December 31, 2021 and 2020:

 

 

Audit Committee Pre-Approval Policies

The Audit Committee is directly responsible for the appointment, retention and termination, and for determining the compensation, of our independent registered public accounting firm. The Audit Committee is required to pre-approve all auditing services and the terms thereof and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board), except that pre-approval is not required for the provision of non-audit services if the “de minimus” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. The Audit Committee has also delegated to the chairperson of the Audit Committee the authority to grant pre-approvals for audit and non-audit services, provided such approvals are presented to the Audit Committee at its next scheduled meeting. All services provided by Ernst & Young LLP during the fiscal years ended December 31, 2021 and 2020 were pre-approved by the Audit Committee in accordance with the pre-approval procedures described above.

Required Vote

The ratification of the selection of Ernst & Young LLP requires the affirmative vote of a majority of the votes properly cast on the proposal at the Annual Meeting. Abstentions and broker non-votes are not considered votes properly cast and will have no effect on the vote for this proposal.

Recommendation of the Board of Directors

The Board of Directors unanimously recommends that the stockholders vote “FOR” the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2022.

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PROPOSAL 3

 

ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION

We are soliciting a non-binding advisory vote on the compensation of our named executive officers identified in the “Executive Compensation” section of this Proxy Statement, commonly referred to as a “say-on-pay vote.”

This vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s named executive officers and the compensation philosophy, policies and practices described in this Proxy Statement. The compensation of our named executive officers is disclosed in the “Executive Compensation” section of this Proxy Statement. As discussed in that section, the Company believes that its compensation policies and decisions are designed to align executive compensation with the Company’s business objectives and corporate performance, to be consistent with current market practices, and to enable the Company to attract and retain talented and experienced executives to lead the Company successfully in a competitive environment.

Accordingly, our Board of Directors is asking the stockholders to indicate their support for the compensation of the Company’s named executive officers as described in this Proxy Statement by casting a non-binding advisory vote “For” the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Proxy Statement, is hereby APPROVED.”

Because the vote is advisory, it is not binding on our Board of Directors or the Company. Nevertheless, the views expressed by stockholders, whether through this vote or otherwise, are important to management and the Board of Directors and, accordingly, the Board of Directors and the Compensation Committee intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements.

Required Vote

Approval of this proposal requires the affirmative vote of a majority of the votes properly cast on the proposal at the Annual Meeting. Abstentions and broker non-votes will have no effect on the vote for this proposal.

Recommendation of the Board of Directors

The Board of Directors unanimously recommends a vote “FOR” the resolution to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement.

 

 

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PROPOSAL 4

 

APPROVAL OF AN AMENDMENT TO THE 2015 STOCK PLAN

 

The Board of Directors believes that stock-based incentive awards can play an important role in our success by encouraging and enabling our employees, officers, non-employee directors and consultants and those of our subsidiaries upon whose judgment, initiative and efforts we largely depend for the successful conduct of our business to acquire a proprietary interest in our company. The Board of Directors believes that providing such persons with a direct stake in our company assures a closer identification of the interests of such individuals with those of our company and our stockholders, thereby stimulating their efforts on our behalf and strengthening their desire to remain with our company.

On March 2, 2022, the Board of Directors adopted an amendment to the 2015 Stock Plan, subject to and effective upon stockholder approval, to increase the maximum number of shares of common stock reserved and available for issuance under the 2015 Stock Plan by 2,000,000 to 3,709,693. This amendment was designed to ensure that we can continue to grant stock options and other awards to our officers, employees, non-employee directors and other key persons at levels determined to be appropriate by the Compensation Committee. A copy of the 2015 Stock Plan (as amended by the proposed amendment) is attached as Annex A to this Proxy Statement and is incorporated herein by reference.

Based solely on the closing price of our common stock as reported on Nasdaq on March   , 2022, the maximum aggregate market value of the additional shares of common stock that would become available for issuance under the 2015 Stock Plan is $                      .

Summary of Material Features of the 2015 Stock Plan

The material features of the 2015 Stock Plan (as amended by the proposed amendment) are:

Based solely on the closing price of our common stock as reported by Nasdaq on March   , 2022 and the maximum number of shares that would have been available for awards as of such date under the 2015 Stock Plan, as amended, the maximum aggregate market value of the common stock that could potentially be issued under the 2015 Stock Plan is $             . The shares of common stock underlying any awards that are forfeited, canceled or otherwise terminated, other than by exercise, under the 2015 Stock Plan and our 2014 Stock Plan, as amended (the “2014 Stock Plan”), will be added back to the shares of common stock available for issuance under the 2015 Stock Plan.

Rationale for Share Increase

The 2015 Stock Plan is critical to our ongoing effort to build stockholder value. Equity incentive awards are an important component of our executive and non-executive employees’ compensation. Our Compensation Committee and the Board of Directors believe that we must continue to offer a competitive equity compensation program in order to attract, retain and motivate the talented and qualified employees necessary for our continued growth and success.

We manage our long-term stockholder dilution by limiting the number of equity incentive awards granted annually. The Compensation Committee carefully monitors our annual net burn rate, total dilution and equity expense in order to maximize stockholder value by granting only the number of equity incentive awards that it believes are necessary and appropriate to attract, reward and retain our employees. Our compensation philosophy reflects broad-based eligibility for equity

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incentive awards for high performing employees. By doing so, we link the interests of those employees with those of our stockholders and motivate our employees to act as owners of the business.

Our Board of Directors determined the size of the share reserve pool under the 2015 Stock Plan based on projected equity awards to anticipated new hires, projected annual equity awards to existing employees and an assessment of the magnitude of dilution to our existing stockholders.

Our Board of Directors also considered the amount of underwater options and overhang in the determination of the proposed share reserve increase under the 2015 Stock Plan. As of March    , 2022, approximately     % of our outstanding employee stock options were “underwater,” meaning the exercise price of each of those options was greater than our stock price as of March    , 2022. Overhang is another measure of the dilutive impact of equity programs. Our overhang is equal to the number of shares subject to outstanding equity compensation awards (i.e., unexercised options, excluding outstanding inducement awards, and unvested stock awards) plus the number of shares available for the grant of future awards under the 2015 Stock Plan, divided by the total number of outstanding shares of common stock. As of March    , 2022, our overhang was     %. The 2,000,000 share reserve increase under the 2015 Stock Plan being proposed in this Proposal 4 would result in our overhang as of March    , 2022 increasing to approximately      %.

Summary of the 2015 Stock Plan

The following description of certain features of the 2015 Stock Plan is intended to be a summary only. The summary is qualified in its entirety by the full text of the 2015 Stock Plan (as amended by the plan amendment), which is attached hereto as Annex A.

Administration.  The 2015 Stock Plan is administered by the Administrator, as defined in the 2015 Stock Plan. The Administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2015 Stock Plan. The Administrator may delegate to our Chief Executive Officer the authority to grant awards to employees who are not subject to the reporting and other provisions of Section 16 of the Exchange Act, subject to certain limitations and guidelines.

Eligibility; Plan Limits.  All full-time and part-time officers, employees, non-employee directors and consultants are eligible to participate in the 2015 Stock Plan, subject to the discretion of the Administrator. As of March    , 2022, each of our non-employee directors and approximately      employees were eligible to participate in the 2015 Stock Plan, which includes     officers. Furthermore, the shares of common stock underlying any awards that are forfeited, canceled or otherwise terminated, other than by exercise, under the 2015 Stock Plan and the Company’s 2014 Stock Plan, will be added back to the shares of common stock available for issuance under the 2015 Stock Plan. Shares of common stock repurchased on the open market will not be added back to the shares of common stock available for issuance under the 2015 Stock Plan.

Stock Options.  The 2015 Stock Plan permits the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and (2) options that do not so qualify. Options granted under the 2015 Stock Plan will be non-qualified options if they fail to qualify as incentive options or exceed the annual limit on incentive stock options. Incentive stock options may only be granted to employees of the Company and its subsidiaries. Non-qualified options may be granted to any persons eligible to receive incentive options and to non-employee directors and consultants. The option exercise price of each option will be determined by the Administrator but may not be less than 100% of the fair market value of the common stock on the date of grant. Fair market value for this purpose will be the last reported sale price of the shares of common stock on Nasdaq on the date immediately preceding the grant date. The exercise price of an option may not be reduced after the date of the option grant, other than to appropriately reflect changes in our capital structure.

The term of each option will be fixed by the Administrator and may not exceed ten years from the date of grant. The Administrator will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Administrator in circumstances involving the optionee’s death, disability, retirement or termination of employment, or a change in control. In general, unless otherwise permitted by the Administrator, no option granted under the 2015 Stock Plan is transferable by the optionee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order, and options may be exercised during the optionee’s lifetime only by the optionee, or by the optionee’s legal representative or guardian in the case of the optionee’s incapacity.

Upon exercise of options, the option exercise price must be paid in full either in cash, by certified or bank check or other instrument acceptable to the Administrator or by delivery (or attestation to the ownership) of shares of common stock

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that are beneficially owned by the optionee and that are not subject to risk of forfeiture. Subject to applicable law, the exercise price may also be delivered to the Company by a broker pursuant to irrevocable instructions to the broker from the optionee. In addition, the Administrator may permit non-qualified options to be exercised using a net exercise feature which reduces the number of shares issued to the optionee by the number of shares with a fair market value equal to the exercise price.

To qualify as incentive options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options that first become exercisable by a participant in any one calendar year.

Stock Appreciation Rights. The Administrator may award stock appreciation rights subject to such conditions and restrictions as the Administrator may determine. Stock appreciation rights entitle the recipient to shares of common stock equal to the value of the appreciation in the stock price over the exercise price. The exercise price is the fair market value of the common stock on the date of grant. The term of a stock appreciation right may not exceed ten years.

Restricted Stock. The Administrator may award shares of common stock to participants subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified restricted period. During the vesting period, restricted stock awards may be credited with dividend equivalent rights (but dividend equivalents payable with respect to restricted stock awards with vesting tied to the attainment of performance criteria shall not be paid unless and until such performance conditions are attained with respect to the restricted stock award).

Restricted Stock Units. The Administrator may award restricted stock units to participants. Restricted stock units are ultimately payable in the form of shares of common stock subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a specified vesting period. In the Administrator’s sole discretion, it may permit a participant to make an advance election to receive a portion of his or her future cash compensation otherwise due in the form of a restricted stock unit award, subject to the participant’s compliance with the procedures established by the Administrator and requirements of Section 409A of the Code. During the deferral period, the deferred stock awards may be credited with dividend equivalent rights.

Unrestricted Stock Awards. The Administrator may also grant shares of common stock which are free from any restrictions under the 2015 Stock Plan. Unrestricted stock may be granted to any participant in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participant.

Dividend Equivalent Rights. The Administrator may grant dividend equivalent rights to participants, which entitle the recipient to receive credits for dividends that would be paid if the recipient had held specified shares of common stock. Dividend equivalent rights granted as a component of another award (other than a stock option or stock appreciation right) may be paid only if the related award becomes vested. Dividend equivalent rights may be settled in cash, shares of common stock or a combination thereof, in a single installment or installments, as specified in the award.

Cash-Based Awards. The Administrator may grant cash bonuses under the 2015 Stock Plan to participants. The cash bonuses may be subject to the achievement of certain performance goals.

Performance Share Awards. The Administrator may grant performance share awards to any participant which entitle the recipient to receive shares of common stock upon the achievement of certain performance goals and such other conditions as the Administrator shall determine. Subject to the Administrator’s discretion to accelerate in the case of retirement, death, disability or a change in control, these awards granted to employees will have a vesting period of at least one year except in the case of a “sale event,” as defined in the 2015 Stock Plan, and such other limitations and conditions as the Administrator shall determine.

Change of Control Provisions. The 2015 Stock Plan provides that upon the effectiveness of a “sale event,” as defined in the 2015 Stock Plan, except as otherwise provided by the Compensation Committee in the award agreement, all stock options,  stock appreciation rights and other awards will be assumed or continued by the successor entity and adjusted accordingly to take into account the impact of the transaction. To the extent, however, that the parties to such sale event do not agree that all stock options, stock appreciation rights or any other awards shall be assumed or continued, then such stock options and stock appreciation rights shall terminate at the effective time of such sale event. In addition, the Company may make or provide for payment, in cash or in kind, to participants holding options and stock appreciation rights equal to the difference between the per share cash consideration and the exercise price of the options or stock appreciation rights. The Administrator shall also have the option to make or provide for a payment, in cash or in kind, to grantees holding other awards in an amount equal to

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the per share cash consideration multiplied by the number of vested shares under such awards. All awards will terminate in connection with a sale event unless they are assumed by the successor entity.

Adjustments for Stock Dividends, Stock Splits, Etc. The 2015 Stock Plan requires the Administrator to make appropriate adjustments to the number of shares of common stock that are subject to the 2015 Stock Plan, to certain limits in the 2015 Stock Plan, and to any outstanding awards to reflect stock dividends, stock splits, extraordinary cash dividends and similar events.

Tax Withholding. Participants in the 2015 Stock Plan are responsible for the payment of any federal, state or local taxes that the Company is required by law to withhold upon the exercise of options or stock appreciation rights or vesting of other awards. Subject to approval by the Administrator, participants may elect to have their tax withholding obligations satisfied by authorizing the Company to withhold shares of common stock to be issued pursuant to exercise or vesting. The Administrator may also require awards to be subject to mandatory share withholding up to the required withholding amount.  

Amendments and Termination. The Board of Directors may at any time amend or discontinue the 2015 Stock Plan and the Administrator may at any time amend or cancel any outstanding award for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action may adversely affect any rights under any outstanding award without the holder’s consent. To the extent required under the rules of Nasdaq, any amendments that materially change the terms of the 2015 Stock Plan will be subject to approval by our stockholders. Amendments shall also be subject to approval by our stockholders if and to the extent determined by the Administrator to be required by the Code to preserve the qualified status of incentive options.

Effective Date of Plan. The 2015 Stock Plan was approved by our Board of Directors and stockholders on April 25, 2015 and became effective on May 6, 2015. No awards may be granted under the 2015 Stock Plan after May 6, 2025, the date that is ten years from the date the 2015 Stock Plan was effective.

New Plan Benefits

Because the grant of awards under the 2015 Stock Plan is within the discretion of the Administrator, we cannot determine the dollar value or number of shares of common stock that will in the future be received by or allocated to any participant in the 2015 Stock Plan, except with respect to non-employee directors. Under our non-employee director compensation policy, each continuing non-employee director is eligible to receive an annual option grant to purchase up to 12,000 shares of common stock on the date of each annual meeting of stockholders. We anticipate that any such stock options will continue to be granted under the 2015 Stock Plan if this Proposal 4 is approved by our stockholders. Regardless of whether this Proposal 4 is approved by our stockholders, in light of the limited shares available under the 2015 Stock Plan, in February 2022, our Board of Directors approved the one-time issuance of restricted stock units covering an aggregate of 6,000 shares of common stock in lieu of option grants for the 2022 Annual Grant. For additional information regarding our current compensation program for non-employee directors, please see “Director Compensation” above.  

 

Awards Granted under the 2015 Stock Plan

The following table shows, for each of the individuals and the various groups indicated and as of March    , 2022, the number of shares subject to awards that have been granted (even if not currently outstanding) under the 2015 Stock Plan.

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Tax Aspects Under the Code

The following is a summary of the principal federal income tax consequences of certain transactions under the 2015 Stock Plan. It does not describe all federal tax consequences under the 2015 Stock Plan, nor does it describe state or local tax consequences.

Incentive Options.  No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option. If shares of common stock issued to an optionee pursuant to the exercise of an incentive option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (ii) the Company will not be entitled to any deduction for federal income tax purposes. The exercise of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.

If shares of common stock acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and one-year holding periods described above (a “disqualifying disposition”), generally (i) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of common stock at exercise (or, if less, the amount realized on a sale of such shares of common stock) over the option price thereof, and (ii) we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive option is paid by tendering shares of common stock.

If an incentive option is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a non-qualified option. Generally, an incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply.

Non-Qualified Options.  No income is realized by the optionee at the time a non-qualified option is granted. Generally (i) at exercise, ordinary income is realized by the optionee in an amount equal to the excess of the fair market value of the shares of common stock on the date of exercise over the option price, and we receive a tax deduction for the same amount, and (ii) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares of common stock. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.

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Other Awards. The Company generally will be entitled to a tax deduction in connection with other awards under the 2015 Stock Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income. Participants typically are subject to income tax and recognize such tax at the time that an award is exercised, vests or becomes non-forfeitable, unless the award provides for a further deferral.

Parachute Payments. The vesting of any portion of an award that is accelerated due to the occurrence of a change in control (such as a sale event) may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to the Company, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).

Limitation on Deductions. Under Section 162(m) of the Code, compensation paid to any publicly held corporation’s “covered employees” (as defined under Section 162(m) of the Code) that exceeds $1 million per taxable year for any covered employee is generally non-deductible. Prior to the enactment of the Tax Cuts and Jobs Act, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code was not subject to this deduction limitation. Pursuant to the Tax Cuts and Jobs Act, this exception for “performance-based compensation” under Section 162(m) of the Code was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for remuneration provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. As a result, compensation paid to any of our “covered employees” in excess of $1 million per taxable year generally will not be deductible unless, among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief described above. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code, as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any award granted under the 2015 Stock Plan will be eligible for such transition relief and, therefore, eligible for the “performance-based compensation” exception under Section 162(m) of the Code.

Equity Compensation Plan Information

The following table provides information as of December 31, 2021 regarding shares of common stock that may be issued under our equity compensation plans approved by our stockholders, consisting of our 2015 Stock Plan, our 2015 ESPP, and our 2014 Stock Plan, and through inducement grants issued outside of our 2015 Stock Plan.  

 

 

 

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Required Vote

The approval of the amendment to the 2015 Stock Plan requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. Abstentions and broker non-votes are not considered votes cast for the foregoing purpose, and will have no effect on the vote for this proposal.

Recommendation of the Board of Directors

The Board of Directors unanimously recommends that the stockholders vote “FOR” the approval of the amendment to the 2015 Stock Plan.

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PROPOSAL 5

 

APPROVAL OF AN AMENDMENT TO THE 2015 ESPP

 

The Company is requesting stockholder approval of an amendment to the 2015 ESPP, which became effective in connection with the Company’s initial public offering in May 2015. On March 2, 2022, the Board of Directors approved an amendment to the 2015 ESPP, subject to stockholder approval, to (i) increase the aggregate number of shares authorized for issuance under the 2015 ESPP by 750,000 shares to 843,246 shares of common stock, and (ii) increase the number of shares that may be purchased by any one employee during earch offering period from 178 shares of common stock to 2,500 shares of common stock.

This amendment was designed to allow us to continue to provide our employees with the opportunity to acquire an ownership interest in the Company through their participation in the 2015 ESPP, thereby encouraging them to remain in our service and more closely aligning their interests with those of our stockholders. A copy of the 2015 ESPP (as amended by the proposed amendment) is attached as Annex B to this Proxy Statement and is incorporated herein by reference.

Summary of the 2015 ESPP

The material features of the 2015 ESPP (as amended by the proposed amendment) are outlined below.

Purpose. The purpose of the 2015 ESPP is to provide a means by which certain employees may be given an opportunity to purchase our common stock through payroll deductions, to attract, motivate, and retain the services of those individuals, and to provide incentives for those individuals to exert maximum efforts toward our success.

Participation.  As of December 31, 2021, 12 employees, or approximately 27% of the Company’s eligible workforce, participated in the 2015 ESPP.

Administration.  The 2015 ESPP is administered by the person or persons (the “Plan Administrator”) appointed by the Board of Directors for such purpose.  The Administrator has authority at any time to: (i) adopt, alter and repeal such rules, guidelines and practices for the administration of the 2015 ESPP and for its own acts and proceedings as it shall deem advisable; (ii) interpret the terms and provisions of the 2015 ESPP; (iii) make all determinations it deems advisable for the administration of the 2015 ESPP; (iv) decide all disputes arising in connection with the 2015 ESPP; and (v) otherwise supervise the administration of the 2015 ESPP.  Our Board of Directors delegated the members of the Compensation Committee as the Plan Administrator.  

Stock Subject to 2015 ESPP.  As of March   , 2022, a total of              shares of our common stock remained available for issuance under the 2015 ESPP. We do not maintain any other employee stock purchase plans.

Offering Periods.  We may make one or more offerings to our employees to purchase stock under the 2015 ESPP. Unless otherwise determined by the Plan Administrator, six month offering periods will begin each May 16th and November 16th, respectively, each referred to as offering periods. The Plan Administrator may designate different offering periods in its discretion but no offering shall exceed 12 months in duration or overlap with another offering.

Eligibility.  All employees (including our named Executive Officers) who have been employed by us or our designated subsidiaries for at least six months and whose customary employment is for more than 20 hours a week are eligible to participate in the 2015 ESPP. Any employee who owns, or would own upon such purchase under the 2015 ESPP, 5% or more of the voting power or value of our stock is not eligible to purchase shares under our the 2015 ESPP. As of March   , 2022, approximately              employees were eligible to participate in the 2015 ESPP.

Participation in the 2015 ESPP. Each employee who is a participant in the 2015 ESPP may purchase shares by authorizing payroll deductions at a minimum of 1% and up to 15% of his or her eligible compensation for each pay period. Unless the participating employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase common stock on the last business day of the offering period at a price equal to 85% of the fair market value of the common stock on either the first or the last day of the offering period, whichever is lower. Under applicable tax rules, an employee may purchase no more than $25,000 worth of common stock, valued at the start of the purchase period, under the 2015 ESPP in any calendar year.

Purchase Price. Unless the participating employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase common stock on the last business day of the offering period at a price equal to

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85% of the fair market value of the common stock on either the first or the last day of the offering period, whichever is lower. As of March    , 2022, the closing price of our common stock as reported on Nasdaq was $       per share.

Payment of Purchase Price; Payroll Deductions. The purchase price of the shares is funded by payroll deductions accumulated over the offering period. During an offering, a participant may change his or her rate of payroll deductions, as determined by our Board in the offering. All payroll deductions made for a participant are credited to his or her account under the 2015 ESPP and deposited with our general funds.

Purchase of Stock. By executing an agreement to participate in the 2015 ESPP, an employee is entitled to purchase shares under the 2015 ESPP. No more than 2,500 shares of common stock or such other lesser maximum number established by the Plan Administrator may be purchased by any one employee during each offering period. If the aggregate number of shares to be purchased upon exercise of outstanding purchase rights in the offering would exceed the maximum aggregate number of shares of common stock available, the shares then available will be apportioned among participants in proportion to the amount of payroll deductions accumulated on behalf of each participant. Unless an employee’s participation is discontinued, his or her right to purchase shares is exercised automatically on the next purchase date at the applicable price. See “Withdrawal” below.

Withdrawal. Participants may withdraw from a given offering period by delivering a notice of withdrawal and terminating their payroll deductions. Such withdrawal may occur at any time prior to the end of an offering. Upon such withdrawal, we will refund accumulated payroll deductions without interest to the employee, and such employee’s right to participate in that offering will terminate. An employee’s withdrawal from an offering does not affect such employee’s eligibility to participate in subsequent offerings under the 2015 ESPP.

Termination of Employment. Purchase rights granted pursuant to any offering under the 2015 ESPP terminate immediately upon cessation of employment for any reason, and we will refund all accumulated payroll deductions to the terminated employee without interest.  

Restrictions on Transfer and Sales. Purchase rights granted under the 2015 ESPP are not transferable and may be exercised only by the person to whom such rights are granted.

Changes in Capitalization. In the event of a subdivision of outstanding shares of common stock, the payment of a dividend in common stock or any other change affecting the common stock, the number of shares approved for the 2015 ESPP and the share limitation for an individual’s purchase in any offering period shall be equitably or proportionately adjusted to give proper effect to such event.

Termination and Amendment. The 2015 ESPP may be terminated or amended by our Board of Directors at any time. Amendments that increase the number of shares of our common stock authorized under the 2015 ESPP and certain other amendments require the approval of our stockholders.

Except as provided in the 2015 ESPP, purchase rights granted before amendment or termination of the 2015 ESPP will not be altered or impaired by any amendment or termination of the 2015 ESPP without the consent of the employee to whom such purchase rights were granted.

Plan Benefits Under 2015 ESPP

The following table shows, for each of the individuals and the various groups indicated and as of March    , 2022, the number of shares purchased under the 2015 ESPP.

 

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New Plan Benefits Under the 2015 ESPP

Participation in the 2015 ESPP is voluntary and each eligible employee will make his or her own decision regarding whether and to what extent to participate in the 2015 ESPP. In addition, we have not approved any grants of purchase rights that are conditioned on stockholder approval of this Proposal 5. Accordingly, we cannot determine the benefits or amounts that will be received in the future by individual employees or groups of employees under the 2015 ESPP. Our non-employee directors will not be eligible to participate in the 2015 ESPP.

Federal Income Tax Information

The following is a summary of the principal United States federal income taxation consequences to employees and us with respect to participation in the 2015 ESPP. This summary is not intended to be exhaustive, and does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside.

The 2015 ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Under such an arrangement, a participant will be taxed on amounts withheld for the purchase of shares of our common stock as if such amounts were paid directly to the participant. However, no taxable income will be recognized by a participant, and no deductions will be allowable to the Company, upon either the grant or exercise of purchase rights. Taxable income is not be recognized until there is a sale or other disposition of the shares acquired under the 2015 ESPP, or in the event the participant should die while still owning the purchased shares.

If a participant sells or otherwise disposes of the purchased shares within two years after the beginning of the offering period in which such shares were acquired or within one year after the actual purchase date of those shares, then the participant will recognize ordinary income in the year of sale or disposition equal to the amount by which the fair market value of the shares on the purchase date exceeded the purchase price paid for those shares, and the Company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal in amount to such excess. The participant will also recognize a capital gain to the extent the amount realized upon the sale of the shares exceeds the sum of the aggregate purchase price for those shares and the ordinary income recognized in connection with their acquisition.

If the participant sells or disposes of the purchased shares more than two years after the beginning of the offering period in which such shares were acquired and more than one year after the actual purchase date of those shares, the participant will generally recognize ordinary income in the year of sale or disposition equal to the lesser of (a) the excess of the fair market value of the shares at the time of such disposition over the purchase price or (b) the excess of the fair market value of the shares as of the beginning of the offering period over the purchase price. Any further gain or any loss will be taxed as a long-term capital gain or loss. At present, such capital gains generally are subject to lower tax rates than ordinary income.

If the participant still owns the purchased shares at the time of death, then a transfer by the estate will be considered a distribution and the lesser of the following amounts will be treated as ordinary income: (a) the excess of the fair market value of the shares at the time of death over the purchase price or (b) the excess of the fair market value of the shares as of the beginning of the offering period over the purchase price. Any further gain or any loss will be taxed as a long-term capital gain or loss. At present, such capital gains generally are subject to lower tax rates than ordinary income.

There are no federal income tax consequences to us by reason of the grant or exercise of rights under the 2015 ESPP. We are entitled to a deduction to the extent amounts are taxed as ordinary income to a participant for shares sold or otherwise disposed of before the expiration of the holding periods described above (subject to the requirement of reasonableness and the satisfaction of tax reporting obligations).

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Vote Required

The approval of the amendment to the 2015 ESPP requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. Abstentions and broker non-votes are not considered votes cast for the foregoing purpose, and will have no effect on the vote for this proposal.

Recommendation of the Board of Directors

The Board of Directors unanimously recommends that the stockholders vote “FOR” the approval of the amendment to the 2015 ESPP.

 

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PROPOSAL 6

 

APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

 

Our Board of Directors is recommending that the stockholders approve an amendment to the Company’s Restated Certificate of Incorporation (the “Charter”) to increase the Company’s number of authorized shares of common stock from 42,500,000 to 85,000,000. The form of the proposed Certificate of Amendment is attached to this proxy statement as Annex C and is incorporated by reference into this proposal.

As of March    , 2022, there were: (i)                shares of common stock outstanding; (ii)             shares of common stock reserved for issuance upon exercise of warrants; (iii)                 shares of common stock reserved for issuance upon exercise of outstanding stock options or vesting and settlement of outstanding RSUs; (iv)              shares available for issuance in connection with additional grants under our 2015 Stock Plan (not including the increase set forth in Proposal 4); and (v)               shares of common stock reserved for issuance under our 2015 ESPP (not including the share reserve increase set forth in Proposal 5). Thus, as of March    , 2022, we had              unissued and unreserved authorized shares of common stock (not including the share reserve increases set forth in Proposals 4 and 5).  

Rationale for the Increase in Authorized Shares

Our Board of Directors believes it is in the best interest of our company to increase the number of authorized shares of common stock to give our company greater flexibility in considering and planning for future potential business needs. The increase in the number of authorized shares of common stock to 85,000,000 is expected to create capital liquidity to permit and enhance opportunities for growth. Unless further stockholder approval is required for a proposed issuance of additional shares by the rules of the Nasdaq Stock Market or other applicable laws or regulations, the additional shares may be issued for various purposes without further stockholder approval. These purposes may include: raising capital; establishing strategic relationships or licensing arrangements with other companies; expanding our business through the acquisition of other businesses, products or technologies; providing equity incentives to employees, officers and directors; and other purposes.

As of the date of this Proxy Statement, the Board of Directors has not approved any plans or proposals to issue any of the additional authorized shares of our common stock contemplated by this proposal and has no commitments to do so. However, in the future, the Board of Directors could authorize certain of the additional authorized shares to be issued (i) pursuant to our equity compensation plans, (ii) pursuant to a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) entered into in March 2021 to create an at-the-market offering program under which we may offer and sell shares of our common stock having an aggregate offering price of up to $25.0 million, and (iii) pursuant to a common stock purchase agreement with Aspire Capital Fund, LLC (“Aspire Capital”) entered into in September 2020, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock at our request from time to time during the 30-month term of such agreement. To date, we have issued $15.3 million of shares of our common stock to Aspire Capital pursuant to this common stock purchase agreement and $4.7 million of shares of our common stock to JonesTrading pursuant to the sales agreement with JonesTrading. The Board of Directors desires to have additional authorized shares available to provide additional flexibility to use our common stock for financing and business purposes in the future. From our inception through December 31, 2021, we have financed our operations primarily through the sale of equity securities and debt financings. To date, we have not derived any revenue from product sales. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance our lead product candidate, efzofitimod (the non-proprietary name of ATYR1923), in clinical development, advance ATYR2810 into clinical development and continue our research and development activities for other potential product candidates based on tRNA synthetase biology and Neuropilin-2 biology, and seek marketing approval for products that we may develop. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Until we can generate sufficient product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and when we are closer to commercialization of our product candidates, potentially through debt financings. We may use some of the additional authorized shares for capital raising transactions if we have an appropriate opportunity. If the increase in the number of authorized shares of common stock is postponed until the foregoing specific needs arise, the delay and expense incident to obtaining approval of the stockholders at that time could impair our ability to meet our objectives.  

If this proposal is not approved by our stockholders, we may be limited in our ability to pursue otherwise attractive equity financing alternatives to fund our operations due to an insufficient number of unissued and unreserved authorized shares

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of common stock, and stockholder value may be harmed by this limitation. In addition, our future success depends upon our ability to attract, retain and motivate highly-skilled scientific, commercial and managerial employees, and if this proposal is not approved by our stockholders, the lack of sufficient unissued and unreserved authorized shares of common stock to provide future equity incentive opportunities as our Board of Directors or the Compensation Committee deems appropriate could adversely impact our ability to achieve these goals. In short, if our stockholders do not approve this proposal, we may not be able to access the capital markets, complete corporate collaborations, partnerships or other strategic transactions, attract, retain and motivate employees, and pursue other business opportunities integral to our growth and success.

Effects of the Increase in Number of Authorized Shares

The additional shares of common stock to be authorized by adoption of the amendment would have rights identical to our currently outstanding common stock. Adoption of the proposed amendment and issuance of the common stock would not affect the rights of the holders of our currently outstanding common stock, but will, with respect to the issuance of additional shares, result in effects incidental to increasing the number of shares of our common stock outstanding, such as dilution of earnings per share, if any, and voting rights of current holders of our common stock.

The additional shares of common stock that would become available for issuance if the proposal is adopted could also be used by us to oppose a hostile takeover attempt or to delay or prevent changes in control or management of our company. For example, without further stockholder approval, the Board of Directors could strategically sell shares of common stock in a private transaction to purchasers who would oppose a takeover or favor the current Board of Directors. Although this proposal to increase the number of authorized of shares common stock has been prompted by business and financial considerations and not by the threat of any hostile takeover attempt (nor is our Board of Directors currently aware of any such attempts directed at our company), stockholders should be aware that approval of the proposal could facilitate future efforts by us to deter or prevent changes in control of our company, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices.

Timing of the Proposed Charter Amendment

If the authorized share increase is approved, as soon as practicable after the Annual Meeting, we will file the Certificate of Amendment with the office of the Secretary of State of Delaware to implement the increase in the number of authorized shares of our common stock. Upon approval and following such filing with the Secretary of State of Delaware, the Certificate of Amendment will become effective on the date it is filed.

Required Vote

The affirmative vote of a majority of the shares of stock outstanding and entitled to vote as of the Record Date is required to approve the amendment of the Charter. You may vote “FOR” or “AGAINST” this proposal. For purposes of determining whether this proposal has passed, abstentions and broker non-votes will have the effect of a vote “AGAINST” the increase in authorized shares of common stock.

Recommendation of the Board of Directors

The Board of Directors unanimously recommends that stockholders vote “FOR” the amendment to the Charter to increase the Company’s number of authorized shares of common stock from 42,500,000 to 85,000,000 shares.

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PROPOSAL 7

 

AUTHORIZATION TO ADJOURN THE ANNUAL MEETING

General

If the Annual Meeting is convened and a quorum is present, but there are not sufficient votes to approve Proposals 4, 5 or 6, our proxy holders may move to adjourn the Annual Meeting at that time in order to enable our Board of Directors to solicit additional proxies.

In this proposal, we are asking our stockholders to authorize the holder of any proxy solicited by our Board of Directors to vote in favor of granting discretionary authority to the proxy holders, and each of them individually, to adjourn the Annual Meeting to another time and place, if necessary, to solicit additional proxies in the event that there are not sufficient votes to approve Proposals 4, 5 or 6. If our stockholders approve this proposal, we could adjourn the Annual Meeting and any adjourned session of the Annual Meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from our stockholders that have previously voted. Among other things, approval of this proposal could mean that, even if we had received proxies representing a sufficient number of votes to defeat Proposals 4, 5 or 6, we could adjourn the Annual Meeting without a vote on such proposals and seek to convince our stockholders to change their votes in favor of such proposals.

If it is necessary to adjourn the Annual Meeting, no notice of the adjourned meeting is required to be given to our stockholders, other than an announcement at the Annual Meeting of the time and place to which the Annual Meeting is adjourned, so long as the meeting is adjourned for 30 days or less and no new record date is fixed for the adjourned meeting. At the adjourned meeting, we may transact any business which might have been transacted at the original meeting.

Required Vote

Approval of this Proposal 7 requires the affirmative vote of the majority of the votes cast. Abstentions and broker non-votes will have no effect on the vote for this proposal.

Recommendation of the Board of Directors

The Board of Directors unanimously recommends that stockholders vote “FOR” the proposal to authorize the adjournment of the Annual Meeting.

 

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EXECUTIVE OFFICERS

The following table sets forth certain information about our executive officers as of February 28,2022:

 

Executive Officers

Sanjay S. Shukla, M.D., M.S. Please see Dr. Shukla’s biography included in “Proposal 1—Election of Directors” above.

Jill M. Broadfoot has served as our Chief Financial Officer since July 2018. From January 2017 to July 2018, Ms. Broadfoot served as Chief Financial Officer of Emerald Health Pharmaceuticals Inc. and Emerald Health Bioceuticals Inc., where she was responsible for establishing operations for the U.S.-based pharmaceutical and bioceutical entities as well as the establishment of operations, corporate governance, finance and accounting and investor relations functions, among others. Prior to Emerald Health, Ms. Broadfoot served as Vice President, U.S. Corporate Controller at GW Pharmaceuticals, from May 2016 to January 2017. While at GW Pharmaceuticals, her responsibilities included establishing U.S. commercial operations and implementing U.S. public company financial and accounting standards in connection with the transfer of corporate operations from the U.K. to the U.S. Prior to joining GW Pharmaceuticals, Ms. Broadfoot served as Chief Financial Officer of Vical Inc., from October 2004 to March 2013, where she had oversight of finance, investor relations, manufacturing, information technology, human resources, and business development. Prior to that, Ms. Broadfoot held various positions at DJO Global, Inc., most recently as Vice President of Finance, and served as an audit manager at Ernst & Young LLP. Ms. Broadfoot serves on the board of directors of AcelRx Pharmaceuticals, Inc. and Otonomy, Inc., both biotechnology companies. Ms. Broadfoot holds a B.S. in business administration and accounting from San Diego State University and is a Certified Public Accountant.  

Nancy E. Denyes has served as our General Counsel since February 2019 and as our Corporate Secretary since January 2015. Ms. Denyes served as our Vice President, Legal Affairs from October 2014 to February 2019, and provided consulting services to us from 2013 to 2014. Ms. Denyes practiced law in the corporate department at Cooley LLP and was named partner in 2000. Her practice at Cooley was focused on securities and corporate matters, including private financings, public offerings, mergers and acquisitions and corporate governance and disclosure issues. Ms. Denyes holds a J.D. from the University of California, Berkeley School of Law and a B.A. in economics and business from the University of California, Los Angeles.

EXECUTIVE COMPENSATION

We are a “smaller reporting company” under Item 10 of Regulation S-K promulgated under the Exchange Act and the following compensation disclosure is intended to comply with the requirements applicable to smaller reporting companies. Although the rules allow the Company to provide less detail about its executive compensation program, the Compensation Committee is committed to providing the information necessary to help stockholders understand its executive compensation-related decisions. Accordingly, this section includes supplemental narratives that describe the 2021 executive compensation program for our principal executive officer and the next two most highly compensated executive officers (“Named Executive Officers”).

Overview

We are a biotherapeutics company engaged in the discovery and development of innovative medicines based on novel biological pathways. We have concentrated our research and development efforts on a newly discovered area of biology, the extracellular functionality and signaling pathways of tRNA synthetases. Built on more than a decade of foundational science on extracellular tRNA synthetase biology and its effect on immune responses, we have built a global intellectual property estate directed to a potential pipeline of protein compositions derived from 20 tRNA synthetase genes and their extracellular targets, such as neuropilin-2 (“NRP2”).

Efzofitimod (the non-proprietary name for ATYR1923, our lead clinical product candidate), is a fusion protein comprised of the immunomodulatory domain of histidyl-tRNA synthetase fused to the fragment crystallizable (Fc) region of a human antibody, and serves as a selective modulator of NRP2 that downregulates innate and adaptive immune response in uncontrolled inflammatory disease states to resolve inflammation and prevent subsequent fibrosis. We are developing

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efzofitimod as a potential disease-modifying therapy for patients with severe inflammatory lung diseases with high unmet medical need. This includes interstitial lung diseases (“ILD”), a group of rare immune-mediated disorders that cause progressive fibrosis of the lung. We designed a Phase 1b/2a multiple-ascending dose, double-blind, placebo-controlled clinical trial in patients with pulmonary sarcoidosis, a major form of ILD, to evaluate the safety, tolerability, immunogenicity, steroid-sparing effect and other exploratory assessments of efficacy, such as lung function. In September 2021, we announced positive results and clinical proof-of-concept from the Phase 1b/2a clinical trial in 37 patients with pulmonary sarcoidosis. Efzofitimod was safe and well-tolerated at all doses with no drug-related serious adverse events or signal of immunogenicity. Additionally, the study demonstrated consistent dose response for efzofitimod on key efficacy endpoints and improvements compared to placebo, including measures of steroid reduction, lung function, sarcoidosis symptom measures and inflammatory biomarkers. Based on the results of the Phase 1b/2a study, we believe efzofitimod has potential in other ILDs, such as chronic hypersensitivity pneumonitis (“CHP”) and connective tissue disease related ILD (“CTD-ILD”).

Named Executive Officers. This section discusses our executive compensation decisions for the year ended December 31, 2021 for our Named Executive Officers.  Our Named Executive Officers are the following:

Executive Summary

Corporate Performance Highlights

In 2021, we executed on our plans to advance the clinical development of ATYR1923, advance our pipeline, foster our partnerships and enhance sustainability through meeting financial objectives. The Compensation Committee considered the achievements described below in determining achievement of our corporate goals. Certain elements of executive compensation are tied to the level of corporate goal achievement as described further below.  

Highlights of our performance in 2021 include:  

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2021 Compensation Actions

Executive Compensation Practices

Our Compensation Committee conducts oversight of our compensation program and policies. Our executive compensation philosophy is based on the following objectives:

Our executive compensation program generally consists of the following three principal components: base salary, annual performance-based bonuses and long-term incentive compensation. We also provide our executive officers with severance and change-in-control payments and benefits, as well as other benefits generally available to all our employees, including retirement benefits under our tax-qualified retirement plan (“401(k) Plan”) and participation in employee benefit plans.

In evaluating our executive compensation program and policies, as well as the short- and long-term value of our executive compensation plans and arrangements, the Compensation Committee focuses on providing a competitive compensation package that provides significant short- and long-term incentives for the achievement of measurable corporate objectives and individual contribution towards our corporate performance. We believe that this approach provides an appropriate blend of short- and long-term incentives to maximize stockholder value.

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We do not currently have formal policies for allocating compensation among base salary, annual performance bonuses and equity awards, short- and long-term compensation or among cash and non-cash compensation. Instead, the Compensation Committee uses its judgment to establish a target total direct compensation opportunity for executive officers that is a mix of current, short- and long-term incentive compensation, and cash and non-cash compensation, that it believes appropriate to achieve the goals of our executive compensation program and our corporate objectives. A significant portion of our Named Executive Officers’ target total direct compensation opportunity is comprised of “at-risk” compensation in the form of an annual performance bonus opportunity and equity awards tied to stockholder returns, in order to align the executive officers’ incentives with the interests of our stockholders and our corporate goals.

Oversight of Executive Compensation

The Compensation Committee reviews and makes decisions with respect to all compensation paid to our executive officers, including our Named Executive Officers, except for the Chief Executive Officer.  With respect to the Chief Executive Officer, the Compensation Committee recommends, and the Board of Directors determines, compensation. The Chief Executive Officer evaluates and provides to the Compensation Committee performance assessments and compensation recommendations. In making these recommendations, the Chief Executive Officer reviews third-party compensation surveys and, if retained, compensation data provided by the independent compensation consultant to the Compensation Committee, as described below. While the Chief Executive Officer discusses these recommendations with the Compensation Committee and the Board, he does not participate in the deliberations concerning, or the determination of, his own compensation. The Compensation Committee makes a recommendation to the Board and the Board discusses and makes final determinations with respect to executive compensation matters without the Chief Executive Officer present during discussions of the Chief Executive Officer’s compensation. From time to time, various other members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee or the Board to make presentations, provide financial or other background information or advice or otherwise participate in the Compensation Committee or Board meetings.

The Compensation Committee meets periodically throughout the year to manage and evaluate our executive compensation program and determines the principal components of compensation (base salary, performance bonus and equity awards) for our executive officers on an annual basis, typically in early February; however, decisions may occur during the year for new hires, promotions or other special circumstances as the Compensation Committee determines appropriate. Neither the Board nor the Compensation Committee delegates authority to approve executive officer compensation. The Compensation Committee does not maintain a formal policy regarding the timing of equity awards to our executive officers, although awards are generally approved at a meeting of the Compensation Committee in February of each year.

The Compensation Committee has the sole authority to retain compensation consultants to assist in its evaluation of executive compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. In 2020 and 2021, the Compensation Committee retained Radford, which is part of the Rewards Solutions practice at Aon plc, to provide a competitive assessment of the Company’s executive compensation program compared to executive compensation paid to executives at selected publicly traded peer companies and, in 2021, to provide the Compensation Committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity compensation.  The cost of Radford’s consulting services directly related to Compensation Committee support for 2021 was approximately $30,000. The Compensation Committee’s direct engagement of Radford in 2021 was not the result of any recommendation by management, and the Compensation Committee approved all fees payable to Radford for its consulting services.  The compensation consultant reports directly to the Compensation Committee, which maintains the authority to direct its work and engagement. The compensation consultant interacts with management to gain access to company information that is required to perform its services and to understand the culture and policies of our organization.

When designing our executive compensation program for 2021, the Compensation Committee reviewed market data for each executive officer’s position, compiled by Radford, from the following peer group of companies for 2021:  

 

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The peer group for 2021 was recommended by Radford and targeted U.S.-based, publicly traded, pre-commercial companies operating in the biopharmaceutical industry, with development programs in Phase I, II or III clinical trials, market capitalizations generally under $150 million and headcount generally under 100 employees, and with a particular focus on companies headquartered in biotechnology hub markets.

The Compensation Committee considered Radford’s independence, taking into account the following factors: (i) the amount of fees paid to Radford, as a percentage of the firm’s total revenue; (ii) the provision of other services to us by Radford; (iii) Radford’s policies and procedures designed to prevent conflicts of interest; (iv) any business or personal relationship of Radford with any member of the Compensation Committee; (v) any business or personal relationship of Radford or the individual compensation advisors employed by Radford with any of our executive officers or any members of the Compensation Committee; and (vi) any shares of our common stock owned by the Radford or the individual compensation advisors employed by Radford.

The Compensation Committee’s general aim is for compensation to remain competitive with the market. We have not developed a specific market positioning or “benchmark” that we consistently aim for in setting compensation levels; instead the Compensation Committee determines each element of compensation, and total target cash and direct compensation, for our executive officers based on various facts and circumstances appropriate for our company in any given year. Competitive market positioning is only one of several factors, as described below under “—Factors Used in Determining Executive Compensation,” that the Compensation Committee considers in making compensation recommendations and decisions, and therefore individual executive officer compensation may fall at varying levels as compared to the market data.

Factors Used in Determining Executive Compensation

The Compensation Committee sets, or recommends to the Board of Directors, the compensation of our executive officers at levels the Committee determines to be competitive and appropriate for each executive officer, using the Committee’s professional experience and judgment. Compensation decisions are not made by use of a formulaic approach; the Compensation Committee believes that these decisions require consideration of a multitude of relevant factors that may vary from year to year. In making executive compensation decisions, the Compensation Committee generally takes into consideration the following factors:

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SUMMARY COMPENSATION TABLE

The following table presents all of the compensation earned by or paid to our Named Executive Officers during the fiscal years ending December 31, 2021 and 2020.

 

 

 

Narrative Disclosure to Summary Compensation Table

As described above, the three principal components of our executive compensation program for our Named Executive Officers in 2021 were base salary, annual performance-based bonuses and long-term equity compensation. In line with our pay for performance philosophy, we structured a significant portion of our Named Executive Officers’ 2021 compensation to be variable, at-risk and tied directly to our measurable performance in the form of annual performance-based bonuses and long-term equity compensation.

Base Salary

Our Compensation Committee reviews the base salaries of our executive officers, including our Named Executive Officers, from time to time and makes adjustments as it determines to be reasonable and necessary to reflect the scope of an executive officer’s performance, contributions, responsibilities, experience, prior salary level, position (in the case of a promotion) and market conditions.

Base salary provides financial stability and security to our executive officers through a fixed amount of cash for performing job responsibilities. In February 2021, the Compensation Committee reviewed the base salaries for our executive officers, peer group data, the scope of each executive officer’s responsibilities for 2021, each executive officer’s prior experience and internal pay equity in order to determine 2021 base salaries for Ms. Broadfoot and Ms. Denyes and to recommend the 2021 base salary for Dr. Shukla. Each of the Named Executive Officers’ 2021 annual base salary rates (effective January 1, 2021), as approved by the Compensation Committee or the Board of Directors, as applicable, are listed in the table below which reflected an 8.5% increase for Dr. Shukla and a 3.0% increase for Ms. Broadfoot and Ms. Denyes from 2020 base salaries to account for closer alignment of Dr. Shukla’s base salary with the 2021 peer group data provided by Radford and general market increases as recommended by Radford according to market data.

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Annual Performance-Based Bonuses  

In January 2016, the Board of Directors adopted our Senior Executive Cash Incentive Bonus Plan (“Bonus Plan”), which applies to certain key executives (“Executives”), that are recommended by the Compensation Committee and selected by the Board of Directors. The Bonus Plan provides for bonus payments based upon the attainment of performance targets established by the Board of Directors and related to operational and financial metrics with respect to our company or any of our subsidiaries (“Performance Goals”). Any bonuses paid under the Bonus Plan will be based upon objectively determinable bonus formulas that tie such bonuses to one or more performance targets relating to the Performance Goals. The bonus formulas will be adopted in each performance period by the Compensation Committee and communicated to each Executive. No bonuses will be paid under the Bonus Plan unless and until the Compensation Committee makes a determination with respect to the attainment of the Performance Goals. Notwithstanding the foregoing, the Compensation Committee may adjust bonuses payable under the Bonus Plan based on individual performance or pay bonuses (including, without limitation, discretionary bonuses) to Executives under the Bonus Plan based upon such other terms and conditions as the Compensation Committee may in its discretion determine.

Each of our Named Executive Officers were eligible to receive performance-based bonuses based entirely on our achievement of Performance Goals established by the Board of Directors for 2021.  The actual amount of any performance-based bonus paid, if any, is calculated by multiplying the Executives’ annual base salary, target bonus percentage, and the percentage attainment of the Performance Goals for 2021. For 2021, the target bonus percentages for Dr. Shukla, Ms. Broadfoot and Ms. Denyes were 50%, 40% and 40%, respectively.  

The Performance Goals for 2021 on which our Named Executive Officer performance-based bonuses were based, included the following:

•Advance the ATYR1923 program;

•Progress ATYR2810 IND-enabling and pipeline activities;

•Foster our partnerships;

•Reboot our culture and adapt our organization towards post-pandemic environment; and

•Enhance sustainability through financing/partnering activities.

For each goal listed above, we developed a list of objectives and each goal was weighted. In evaluating our performance for 2021, the Compensation Committee reviewed the objectives and the 2021 performance highlights described earlier in this section. Given our success in advancing the ATYR9123 program and our successful financing in September 2021, the Compensation Committee determined that our performance exceeded weighting for those objectives.

Based on our achievement of the Performance Goals discussed above, the Compensation Committee or the Board of Directors, as applicable, awarded our Named Executive Officers 115% of their target bonuses for 2021 as reflected in the table below:

Equity-Based Incentive Awards  

Equity incentives are a key component of our executive compensation program that the Compensation Committee believes motivate executive officers to achieve our business objectives by tying incentives to the appreciation of our common

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stock over a longer time horizon.  Equity compensation for our executive officers are generally reviewed and determined at the beginning of each year or as appropriate during the year for new hires, promotions or other special circumstances, such as to encourage retention or as a reward for significant achievement. Individual grants are determined based on a number of factors, including current corporate and individual performance, outstanding equity holdings and their retention value and total ownership, historical value of our stock, internal equity amongst executives and market data.

In February 2021, the Compensation Committee or the Board of Directors, as applicable, approved the following annual stock option grants for our Named Executive Officers. These stock options vest monthly over a four-year period and have an exercise price of $4.52 per share, the closing price of our common stock on the grant date:

In addition, in May 2021, the Compensation Committee determined that our employees, including our Named Executive Officers, did not hold stock awards sufficient to retain and incentivize them in accordance with our executive compensation philosophy. This was due in part to unusually intense competition for talent across the biotechnology industry and also to capital-raising activities in the first half of 2020 that caused dilution to the existing equity awards of our Named Executive Officers. Consequently, each of our employees, including our Named Executive Officers, received a stock option grant approved by the Board of Directors to further incentivize our employees and provide long-term retention value. The May 2021 stock option grants for executives vest monthly over a four-year period and have an exercise price of $4.45 per share, the closing price of our common stock on the grant date:

Other Compensation

Our Named Executive Officers are eligible to participate in all of our employee benefit plans, including our medical, dental vision, group life and disability insurance plans, in each case on the same basis as other employees. We also pay the premiums for term life insurance and long-term disability for all of our employees, including our Named Executive Officers.  None of our Named Executive Officers participate in or have account balances in qualified or non-qualified defined benefit plans sponsored by us. We generally do not provide perquisites or personal benefits to our Named Executive Officers, although we may from time to time provide signing bonuses or other reasonable benefits as our Compensation Committee determines appropriate.

We maintain our 401(k) Plan that provides eligible U.S. employees, including our Named Executive Officers, with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees are able to defer eligible compensation subject to applicable annual Code limits. Employees’ pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their contributions. Our 401(k) Plan is intended to be qualified under Section 401(a) of the Code with our 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to our 401(k) Plan and earnings on those contributions are not taxable to the employees until distributed from our 401(k) Plan. We match employee contributions under the 401(k) Plan in an amount up to 3% of each applicable employee’s compensation (equivalent to a 50% match with respect to up to 6% of such employee’s compensation). We also pay, on behalf of our employees, a significant portion of premiums for health, life and disability insurance.

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Employment Arrangements with Our Named Executive Officers

We consider it essential to the best interests of our stockholders to attract high quality executives and foster the continuous employment of our key management personnel. In this regard, we believe some severance arrangements are necessary. We also recognize that the possibility of a change in control may exist and that the uncertainty and questions that it may raise among management could result in the departure or distraction of management personnel to the detriment of our company and our stockholders. In order to reinforce and encourage the continued attention and dedication of certain key members of management, on December 21, 2015, the Compensation Committee approved the Executive Severance and Change in Control Policy (“Policy”). The purpose of the Policy is to provide certain of our senior management employees with compensation and benefits in the event of a termination of employment without Cause or for Good Reason.  

Under the Policy, the terms below are generally defined as follows:

“Cause” generally means termination by the Company due to the employee’s (i) dishonest statements; (ii) commission of a felony or any misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (iii) failure to substantially perform the duties, functions and responsibilities of his or her position; (iv) gross negligence, willful misconduct or insubordination; or (v) a material breach by the employee of any provision of any agreement with the Company relating to noncompetition, nonsolicitation, nondisclosure and/or assignment of inventions.

“Good Reason” generally means (i) a material reduction in the employee’s responsibilities, authority or duties; (ii) a material reduction in the employee’s base compensation; or (iii) relocation of our executive headquarters to a location more than 50 miles from San Diego, California.

“Sale Event” generally means (i) the sale or other transfer of all or substantially all of the assets of our company, (ii) a merger to which the Company is a party and the Company’s stockholders do not own more than 50% of the combined voting power of the surviving entity or its parent company; (iii) the sale of all of the Company’s stock to un unrelated person, entity or group, or (iv) any other transaction in which the Company’s stockholders do not own more than 50% of the combined voting power of any successor entity.

The post-termination compensation and benefits under the Policy include the (i) acceleration of time-based vesting provisions of outstanding equity awards that would have vested within 12 months of the termination, (ii) severance in the amount of 12 months of base salary, and (iii) if the employee timely elects continued coverage under a group health plan sponsored by us under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), payment or reimbursement of the employer portion of group health care benefits under COBRA for up to 12 months after termination.

In addition, if the termination occurs within two months prior to or one year after the closing of a Sale Event, then, in lieu of the benefits described above, such eligible employee is entitled to (i) full acceleration of time-based vesting provisions of all outstanding equity awards, (ii) severance in the amount of 12 months of base salary, (iii) if the employee timely elects continued coverage under a group health plan sponsored by us under COBRA, payment or reimbursement of the employee’s bonus target for the calendar year in which the termination occurred, and (iv) payment of the employer portion of group health care benefits under COBRA for up to 12 months after termination.

In each case, receipt of any compensation or benefits under the Policy is subject to the eligible employee’s execution of a severance agreement and release.

To the extent Section 280G of the Code is applicable with respect to payments to an eligible employee, such eligible employee shall be entitled to receive either: (a) payment of the full amounts set forth above to which the eligible employee is entitled or (b) payment of such lesser amount that does not trigger excise taxes under Section 4999 of the Code, whichever results in the employee receiving a higher amount after taking into account all federal, state, and local income, excise and employment taxes.

Employees who are party to an agreement or an arrangement with us that provides greater benefits in the aggregate than set forth in the Policy are not eligible to receive any payments or benefits under the Policy.

In addition, we have also entered into a written employment agreement with our President and Chief Executive Officer that provides for payments in connection with his resignation, retirement or other termination, or a change in control, as described below.

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Sanjay S. Shukla, M.D., M.S.

Under the terms of an employment agreement with Dr. Shukla entered into on November 1, 2017 in connection with his transition into the role of our President, Chief Executive Officer and principal executive officer (as amended in February 2021, the “CEO Employment Agreement”), Dr. Shukla is entitled to an initial annual base salary of $450,000, subject to annual review and increase as determined by the Compensation Committee. For 2021, Dr. Shukla’s annual base salary was $510,221. In addition, Dr. Shukla is eligible for an annual bonus target, in the amount of 50% of his then-current base salary for the calendar year, as determined by the Board of Directors.

Dr. Shukla’s employment is at-will. In the event that Dr. Shukla’s employment is terminated by Dr. Shukla for Good Reason or by us without Cause (as such terms are defined below), Dr. Shukla will be entitled to receive (i) the amount of his accrued but unpaid salary and unpaid expense reimbursements and any accrued but unused vacation as of the date of termination, (ii) any vested benefits Dr. Shukla may have under any employee benefit plan, which shall be paid in accordance with the terms of such employee benefit plans, as of the date of termination, (iii) any earned but unpaid incentive compensation from the prior calendar year, (iv) an amount equal to Dr. Shukla’s current annual base salary plus his annual target incentive compensation in the year of termination, (v) acceleration of the time-based vesting provisions of all stock options or other stock-based awards that would have vested within 12 months of the termination, and (vi) if he timely elects continued coverage under a group health plan sponsored by us under COBRA, payment or reimbursement of the employer portion of group health care benefits under COBRA for up to 12 months after termination, in the case of each of (iv), (v) and (vi), subject to the execution of a separation agreement and release.

In the event that Dr. Shukla’s employment is terminated by us without Cause or by Dr. Shukla for Good Reason within two months prior and 12 months after any Change in Control, as such terms are defined below, Dr. Shukla is entitled to (i) a cash payment equal to his then-current base salary plus his annual target incentive compensation in the year of termination, (ii) full acceleration of the time-based vesting provisions of all outstanding stock options or other stock-based awards, and (iii) if he timely elects continued coverage under a group health plan sponsored by us under COBRA, payment or reimbursement of the employer portion of group health care benefits under COBRA for up to 12 months after termination. On February 4, 2021, the Board of Directors approved an amendment to the CEO Employment Agreement to increase the cash payment payable to Dr. Shukla as described in (i) above to 1.5 times his then-current base salary plus his annual target incentive compensation in the year of termination.

Under the CEO Employment Agreement, the terms below are generally defined as follows:

“Cause” generally means termination by the Company due to Dr. Shukla’s (i) material act of willful misconduct in connection with the performance of his duties; (ii) conviction of, or the entry of a pleading of guilty or nolo contendere to, any crime involving fraud or embezzlement or any felony; (iii) willful and repeated failure to substantially perform the duties, functions and responsibilities of his positions; or (iv) a material breach by the employee of any of the material provisions contained in the CEO Employment Agreement; and

“Change in Control” generally means (i) any person or entity becomes the owner of more than 50% of the Company’s combined voting power; (ii) a majority of the members of the Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election; or (iii) the consummation of (A) a merger to which the Company is a party and the Company’s stockholders do not own more than 50% of the combined voting power of the surviving entity or its parent company, or (B) any sale or other transfer of all or substantially all of the assets of our company.

“Good Reason” generally means (i) a material reduction in Dr. Shukla’s responsibilities, authority or duties; (ii) a material reduction in Dr. Shukla’s Base Salary; or (iii) relocation of our executive headquarters to a location more than 50 miles from San Diego, California.

Jill M. Broadfoot

Ms. Broadfoot entered into an at-will employment offer letter with us on July 16, 2018, which provided for an initial base salary of $350,000, subject to adjustments as determined by us in our sole discretion. For 2021, Ms. Broadfoot’s annual base salary was $376,723. Pursuant to the terms of her employment offer letter, Ms. Broadfoot is eligible for an annual bonus, currently in a target amount of up to 40% of her then-current base salary, as determined by our Compensation Committee based on corporate achievements of goals and achievement of Ms. Broadfoot’s individual goals.

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Ms. Broadfoot is also eligible to receive certain post-termination compensation and benefits in accordance with the Policy described above.

Nancy E. Denyes

Ms. Denyes entered into an at-will employment offer letter with us on October 7, 2014, which provided for an initial base salary of $240,000, subject to adjustments as determined by us in our sole discretion. For 2021, Ms. Denyes’ annual base salary was $360,577.

Ms. Denyes is also eligible to receive certain post-termination compensation and benefits in accordance with the Policy described above.

Change in Control and Severance Benefits

Under the terms of the employment arrangements with each of our Named Executive Officers described above, either we or the executive officer may terminate the executive officer’s employment at any time.  Each of our Named Executive Officers is eligible, under the terms of the CEO Employment Agreement with Dr. Shukla or the terms of the Policy for Ms. Broadfoot and Ms. Denyes, to receive, in exchange for a release of claims, severance benefits upon termination of employment either by us or by the executive officer for Good Reason (as defined in the CEO Employment Agreement or the Policy, as applicable), with additional severance benefits provided in the event the termination is in connection with a change in control. In addition, the terms of equity awards granted to our Named Executive Officers are subject to the terms of our equity compensation plans and award agreements thereunder, which include accelerated vesting provisions upon certain change in control transactions. We do not provide any excise tax gross-ups or change-in-control benefits.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information with respect to outstanding equity awards held by each of our Named Executive Officers as of December 31, 2021:  

 

 

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