SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant |
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Check the appropriate box:
Talis Biomedical Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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TALIS BIOMEDICAL CORPORATION
230 Constitution Drive
Menlo Park, California
NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS
To Be Held On June 10, 2022
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of the Stockholders of Talis Biomedical Corporation, a Delaware corporation (the “Company”). The meeting will be held on Friday, June 10, 2022 at 7:30 a.m. Pacific Time. This year’s Annual Meeting will be held through a live webcast at www.virtualshareholdermeeting.com/TLIS2022. We are holding the Annual Meeting for the following purposes:
1. To elect the Board of Directors’ three nominees for director named herein to hold office until the 2025 Annual Meeting of the Stockholders.
2. To approve an amendment to the Company’s 2021 Equity Incentive Plan.
3. To approve an amendment to the Company’s 2021 Employee Stock Purchase Plan.
4. To ratify the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2022.
5. To conduct any other business properly brought before the meeting.
These items of business are more fully described in the proxy statement accompanying this Notice.
You will be able to attend the Annual Meeting, submit questions and vote during the live webcast by visiting www.virtualshareholdermeeting.com/TLIS2022 and entering the 16-digit Control Number included in your Notice of Internet Availability, proxy card, voting instruction form, or in the instructions that you received via email. Please refer to the additional logistical details and recommendations in the accompanying Proxy Statement. You may log-in beginning at 7:15 a.m. Pacific Time, on Friday, June 10, 2022.
The record date for the Annual Meeting is April 18, 2022. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
Gillian Green
Corporate Secretary
Menlo Park, California
April 26, 2022
YOUR VOTE IS IMPORTANT. Whether or not you plan to virtually attend the Annual Meeting, we urge you to submit your vote via the internet, telephone or mail as soon as possible to ensure your shares are represented. For additional instructions on voting by telephone or the internet, please refer to your proxy card. Returning the proxy does not deprive you of your right to virtually attend the Annual Meeting and to vote your shares at the Annual Meeting.
TABLE OF CONTENTS
TALIS BIOMEDICAL CORPORATION
230 Constitution Drive
Menlo Park, California
PROXY STATEMENT
FOR THE 2022 ANNUAL MEETING OF THE STOCKHOLDERS
To Be Held On June 10, 2022
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why did I receive a notice regarding the availability of proxy materials on the internet?
Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the internet. Accordingly, we have sent you a Notice of Internet Availability of Proxy Materials (the “Notice”) because the Board of Directors of Talis Biomedical Corporation (sometimes referred to as “we,” “us,” “our,” the “Company,” “Talis,” or “Talis Biomedical”) is soliciting your proxy to vote at the 2022 Annual Meeting of the Stockholders (the “Annual Meeting”), including at any adjournments or postponements of the Annual Meeting. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice.
We intend to mail the Notice on or about April 26, 2022 to all stockholders of record entitled to vote at the Annual Meeting.
Will I receive any other proxy materials by mail?
We may send you a proxy card, along with a second Notice, on or after May 6, 2022.
How do I attend the Annual Meeting?
You are entitled to attend the virtual Annual Meeting if you were a stockholder as of the close of business on April 18, 2022, the record date, or hold a valid proxy for the Annual Meeting. To be admitted to the Annual Meeting, you will need to visit www.virtualshareholdermeeting.com/TLIS2022 and enter the 16-digit Control Number found next to the label “Control Number” on your Notice, proxy card, voting instruction form or in the instructions you received via email. We encourage you to access the Annual Meeting before it begins. Online check-in will start approximately 15 minutes before the meeting on June 10, 2022. Participation in the Annual Meeting is limited due to the capacity of the host platform and access to the Annual Meeting will be accepted on a first come, first served basis.
If you are a beneficial stockholder, you should contact the bank, broker or other institution where you hold your account well in advance of the Annual Meeting if you have questions about obtaining your Control Number or proxy to vote.
Whether or not you participate in the Annual Meeting, it is important that you vote your shares.
What if I cannot find my Control Number?
Please note that if you do not have your Control Number, you will be able to login as a guest. To view the meeting webcast, visit www.virtualshareholdermeeting.com/TLIS2022 and register as a guest. If you login as a guest, you will not be able to vote your shares or ask questions during the Annual Meeting.
If you are a beneficial owner (that is, you hold your shares in an account at a bank, broker or other holder of record), you will need to contact that bank, broker or other holder of record to obtain your Control Number prior to the Annual Meeting. Beneficial stockholders who did not receive a Control Number from their bank or brokerage firm, who wish to attend the meeting, should follow the instructions
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from their bank or brokerage firm, including any requirement to obtain a legal proxy. Most brokerage firms or banks allow a stockholder to obtain a legal proxy either online or by mail.
Why are we holding a virtual Annual Meeting?
This year we have implemented a virtual format for our Annual Meeting, which will be conducted via live audio webcast and online stockholder tools. A virtual Annual Meeting makes it possible for more stockholders (regardless of size, resources or physical location) to have direct access to information more quickly, while saving the Company and our stockholders time and money. Furthermore, given the health concerns associated with the COVID-19 pandemic, we believe a virtual format helps to facilitate stockholder attendance and participation by enabling stockholders to participate fully, and equally, from any location around the world without person-to-person contact, at no cost (other than any costs associated with your internet access, such as usage charges from internet access providers and telephone companies). We also believe that the online tools we have selected will increase stockholder communication. For example, the virtual format allows stockholders to communicate with us during the Annual Meeting so they can ask questions of our Board of Directors or management. During the Annual Meeting, we may answer questions submitted during the Annual Meeting, to the extent relevant to the business of the Annual Meeting, as time permits.
Will a list of record stockholders as of the record date be available?
A list of our record stockholders as of the close of business on the record date will be made available to stockholders during the Annual Meeting at www.virtualshareholdermeeting.com/TLIS2022. In addition, for the ten days prior to the Annual Meeting, the list will be available for examination by any stockholder of record for a legally valid purpose at our corporate headquarters during regular business hours. To access the list of record stockholders beginning May 30, 2022 and until the Annual Meeting, stockholders should email IR@talisbio.com.
Where can we get technical assistance?
If you have difficulty accessing the Annual Meeting during the meeting time, please navigate to www.virtualshareholdermeeting.com/TLIS2022 where a phone number for IT support will be posted.
For the Annual Meeting, how do we ask questions of management and the Board of Directors?
We plan to have a Q&A session at the Annual Meeting and will include as many stockholder questions as the allotted time permits. Stockholders may submit questions that are relevant to our business live during the Annual Meeting through www.virtualshareholdermeeting.com/TLIS2022.
Who can vote at the Annual Meeting?
Only stockholders of record at the close of business on April 18, 2022 will be entitled to vote at the Annual Meeting. On the record date, there were an aggregate of 56,482,594 shares outstanding and entitled to vote consisting of 26,618,920 shares of common stock outstanding and entitled to vote and 29,863,674 of Series 1 Preferred Stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If on April 18, 2022, your shares were registered directly in your name with our transfer agent, Broadridge Corporate Issuer Solutions, Inc., then you are a stockholder of record. As a stockholder of record, you may vote live online at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the proxy card that may be mailed to you or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on April 18, 2022, your shares were held, not in your name, but rather in an account at a brokerage firm, bank or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker, bank or other agent regarding how to vote the shares in your account. You are also invited to virtually attend the Annual Meeting. You may vote prior to the Annual Meeting by logging in with the
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Control Number on your Notice, proxy card, voting instruction form or in the instructions you received via email at www.ProxyVote.com. You may access the meeting and vote at the Annual Meeting by logging in with your Control Number at www.virtualshareholdermeeting.com/TLIS2022.
What am I voting on?
There are four matters scheduled for a vote:
What if another matter is properly brought before the Annual Meeting?
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.
How do I vote?
You may either vote “For” all the nominees to the Board of Directors or you may “Withhold” your vote for any nominee you specify. For each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting.
The procedures for voting are fairly simple:
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote online during the Annual Meeting, vote by proxy over the telephone, vote by proxy through the internet, or vote by proxy using a proxy card that you may request or that we may elect to deliver at a later time. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote at the Annual Meeting even if you have already voted by proxy.
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Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a notice containing voting instructions from that organization rather than from us. To vote prior to the Annual Meeting, simply follow the voting instructions in such notice to ensure that your vote is counted. You may access and vote during the Annual Meeting by logging in with your Control Number on your voting instruction form at www.virtualshareholdermeeting.com/TLIS2022.
Internet proxy voting will be provided to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock and one vote for each share of Series 1 Preferred Stock you own as of the close of business on April 18, 2022.
If I am a stockholder of record and I do not vote, or if I return a proxy card or otherwise vote without giving specific voting instructions, what happens?
If you are a stockholder of record and do not vote by completing your proxy card, by mail, by telephone, through the internet or online at the Annual Meeting, your shares will not be voted.
If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, “For” each of Proposals 1, 2, 3 and 4. If any other matter is properly presented at the Annual Meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.
If I am a beneficial owner of shares held in street name, and I do not provide my broker or bank with voting instructions, what happens?
If you are a beneficial owner of shares held in street name and you do not instruct your broker, bank or other agent how to vote your shares, your broker, bank or other agent may still be able to vote your shares in its discretion. Under the rules that govern brokers, brokers, banks and other securities intermediaries that are subject to such rules may use their discretion to vote your “uninstructed” shares with respect to matters considered to be “routine,” but not with respect to “non-routine” matters.” The ratification of the selection of a company’s independent registered public accounting firm is a matter that is typically considered routine under applicable rules meaning that if you do not return voting instructions to your broker, bank or other securities intermediary by its deadline, your shares may be voted by your broker, bank or other securities intermediary in its discretion on Proposal 4. The election of directors and the approval of equity incentive plans are typically considered non-routine matters under applicable rules meaning that if you do not return voting instructions to your broker, bank or other securities intermediary by its deadline, your shares may not be voted by your broker on Proposals 1, 2 and 3.
If you a beneficial owner of shares held in street name, and you do not plan to attend the Annual Meeting, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other securities intermediary by the deadline provided in the materials you receive from your broker, bank or other securities intermediary.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We will also reimburse brokerage firms, banks and other securities intermediaries for the cost of forwarding proxy materials to beneficial owners.
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What does it mean if I receive more than one Notice?
If you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the Notices to ensure that all of your shares are voted.
Can I change my vote after submitting my proxy?
Stockholder of Record: Shares Registered in Your Name
Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:
Your most current proxy card or telephone or internet proxy is the one that is counted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other securities intermediary.
When are stockholder proposals and director nominations due for next year’s annual meeting?
To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing no later than December 27, 2022, to our Corporate Secretary at 230 Constitution Drive, Menlo Park, California. If you wish to nominate an individual for election at or bring business other than through a stockholder proposal before the 2023 Annual Meeting of Stockholders, you must deliver your notice to our Corporate Secretary at the address above between February 10, 2023 and March 12, 2023. Your notice to our Corporate Secretary must set forth the information specified in our Amended and Restated Bylaws (“Bylaws”), including your name and address and the class, series and number of shares of our stock that you beneficially own. You are advised to review our Bylaws, which contain additional requirements related to advance notice of stockholder proposals and director nominations.
In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules (once effective), stockholders who intend to solicit proxies in support of director nominees other than our Board’s nominees must provide notice that sets forth any additional information required by Rule 14a-19 promulgated under the Securities Exchange Act of 1934, as amended, no later than April 11, 2023.
How are votes counted?
Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count, for Proposal 1, votes “For,” “Withhold” and broker non-votes; and, with respect to Proposals 2, 3 and 4, votes “For,” “Against,” abstentions and, if applicable, broker non-votes. Abstentions will be counted towards the vote total for each of Proposals 2, 3 and 4, and will have the same effect as “Against” votes. Broker non-votes on Proposals 1, 2 and 3 will have no effect and will not be counted towards the vote total for any of those proposals.
What are “broker non-votes”?
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As discussed above, when a beneficial owner of shares held in street name does not give voting instructions to his or her broker, bank or other securities intermediary holding his or her shares as to how to vote on matters deemed to be “non-routine” under the rules applicable to brokers, the broker, bank or other securities intermediary cannot vote the shares. These un-voted shares are counted as “broker non-votes.” Proposals 1, 2 and 3 are considered “non-routine” under such rules and we, therefore, expect broker non-votes to exist in connection with those proposals. However, because Proposal 4 is considered “routine” under such rules, we do not expect broker non-votes on this proposal.
As a reminder, if you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other securities intermediary by the deadline provided in the materials you receive from your broker, bank or other securities intermediary.
How many votes are needed to approve each proposal?
For Proposal 1, the election of the Board of Directors’ three nominees for director named herein to hold office until the 2025 Annual Meeting of the Stockholders, the three nominees receiving the most “For” votes from the holders of shares present or represented by proxy and entitled to vote on the election of directors will be elected. Only votes “For” will affect the outcome.
To be approved, Proposal 2, approval of an amendment to the 2021 Plan, must receive “For” votes from the holders of a majority of shares present or represented by proxy and entitled to vote on the matter. If you mark your proxy to “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.
To be approved, Proposal 3, approval of an amendment to the 2021 ESPP, must receive “For” votes from the holders of a majority of shares present or represented by proxy and entitled to vote on the matter. If you mark your proxy to “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.
To be approved, Proposal 4, ratification of the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as independent registered public accounting firm of the Company for its fiscal year ending December 31, 2022, must receive “For” votes from the holders of a majority of shares present or represented by proxy and entitled to vote on the matter. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of the outstanding shares entitled to vote are present or represented by proxy at the Annual Meeting. On the record date, there were an aggregate of 56,482,594 shares outstanding and entitled to vote, consisting of 26,618,920 of common stock outstanding and entitled to vote and 29,863,674 of Series 1 Preferred Stock outstanding and entitled to vote. Thus, the holders of an aggregate of 28,241,298 shares must be present or represented by proxy at the Annual Meeting to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other securities intermediary) or if you vote online during the Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, either the chairperson of the Annual Meeting or the holders of a majority of shares present or represented by proxy at the Annual Meeting may adjourn the Annual Meeting to another date.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the Annual Meeting, we intend to file a Form 8‑K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
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Proposal 1
Election Of Directors
Talis Biomedical’s Board of Directors is divided into three classes and each class has a three-year term. Class I, Class II and Class III directors will serve until our annual meeting of our stockholders in 2022, 2023 and 2024, respectively. Our Board of Directors presently has nine members and each class consists, as nearly as possible, of one-third of the total number of directors. Vacancies on the Board of Directors may be filled only by persons elected by a majority of the directors then in office. A director elected by the Board of Directors to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified. As previously announced, on April 20, 2022, Jeryl L. Hilleman, one of our Class III directors with a term expiring at the 2024 annual meeting of our stockholders, tendered her resignation from our Board of Directors and any committee on which she serves, effective immediately prior to the Annual Meeting.
There are three directors in Class I, whose term of office expires at the Annual Meeting. Each of the nominees listed below, except for Dr. Gilliam, is currently a director of the Company who was previously elected by the stockholders. Dr. Gilliam was recommended for nomination to the Board of Directors by certain of our preferred stockholders. If elected at the Annual Meeting, each of these nominees would serve until the 2025 Annual Meeting and until his or her successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. The Company does not have a formal policy but encourages directors and nominees for director to attend each annual meeting of the stockholders.
Directors are elected by a plurality of the votes of the holders of shares present or represented by proxy and entitled to vote on the election of directors. Accordingly, the three nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by Talis Biomedical. Each person nominated for election has agreed to serve if elected. The Company’s management has no reason to believe that any nominee will be unable to serve.
Nominees
The following is a brief biography of each nominee for director and a discussion of the specific experience, qualifications, attributes or skills of each nominee that led the Nominating and Corporate Governance Committee to recommend that person as a nominee for director, as of the date of this proxy statement.
The Nominating and Corporate Governance Committee seeks to assemble a Board of Directors that, as a whole, possesses the appropriate balance of professional and industry knowledge, financial expertise and high-level management experience necessary to oversee and direct the Company’s business. To that end, the Nominating and Corporate Governance Committee has identified and evaluated nominees in the broader context of the Board of Director’s overall composition, with the goal of recruiting members who complement and strengthen the skills of other members and who also exhibit integrity, collegiality, sound business judgment and other qualities that the Nominating and Corporate Governance Committee views as critical to effective functioning of the Board of Directors. To provide a mix of experience and perspective on the Board of Directors, the Nominating and Corporate Governance Committee also takes into account geographic, gender, age, racial and ethnic diversity. The brief biographies below include information, as of the date of this proxy statement, regarding the specific and particular experience, qualifications, attributes or skills of each director or nominee that led the Nominating and Corporate Governance Committee to believe that that nominee should continue to serve on the Board of Directors. However, each of the members of the Nominating and Corporate Governance Committee may have a variety of reasons why he or she believes a particular person would be an appropriate nominee for the Board of Directors, and these views may differ from the views of other members.
The following is a brief biography of each nominee and each director whose term will continue after the Annual Meeting.
Nominees for Election for a Three-year Term Expiring at the 2025 Annual Meeting
Felix Baker, Ph.D., age 53
Felix Baker, Ph.D. has served as a member of our Board of Directors since June 2013. Dr. Baker is a Managing Member of Baker Bros. Advisors LP, a biotechnology-focused investment adviser to fund partnerships whose investors are primarily endowments and
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foundations. Dr. Baker and his brother, Julian Baker, started their fund management careers in 1994 when they co-founded a biotechnology investing partnership with the Tisch family. In 2000, Dr. Baker and his brother founded Baker Bros. Advisors LP. Dr. Baker has served on the boards of directors Seagen, Inc., a public biotechnology company dedicated to revolutionizing cancer care, since July 2003 and currently serves on its nominating and corporate governance committee and as the chair of its compensation committee, Kodiak Sciences, Inc., a public biopharmaceutical company, since September 2015 and currently serves on its nominating and corporate governance committee and as chair of its compensation committee, Kiniksa Pharmaceuticals, Ltd., a public biopharmaceutical company, since October 2015 and currently serves on its nominating and corporate governance committee and its science and research committee and as chair of its compensation committee, IGM Biosciences, Inc., a public biotechnology company engaged in the development of engineered IgM antibodies for the treatment of multiple diseases, since January 2021 and currently serves on its research and clinical development committee. Dr. Baker holds a B.S. and a Ph.D. in Immunology from Stanford University, where he also completed two years of medical school. Our Board of Directors believes that Dr. Baker’s experience as a biotechnology-focused investment advisor and extensive experience as a director of the Company and several other biotechnology and biopharmaceutical companies qualify him to serve on our Board of Directors.
Melissa Gilliam, M.D., M.P.H., age 56
Melissa Gilliam, M.D., M.P.H. has served on our Board of Directors since December 2020. Dr. Gilliam has served as the Executive Vice President and Provost of the Ohio State University since August 2021. Prior to that, Dr. Gilliam was the Ellen H. Block Distinguished Service Professor of Health Justice and Vice Provost at the University of Chicago, where she taught as a Professor of Obstetrics and Gynecology and Pediatrics since 2005. During her tenure at the University of Chicago, Dr. Gilliam also founded and served as a Director of the University of Chicago’s Center for Interdisciplinary Inquiry and Innovation in Sexual and Reproductive Health, which conducts research to improve the health, education and wellbeing of adolescents. Prior to joining the University of Chicago, Dr. Gilliam was an Assistant Professor of Obstetrics and Gynecology at the University of Illinois at Chicago, where she also served as Adjunct Faculty to the Division of Epidemiology and Biostatistics in the School of Public Health. Dr. Gilliam received a B.A. in English from Yale University, an M.A. in Philosophy and Politics from the University of Oxford, an M.D. from Harvard Medical School and an M.P.H. in Epidemiology and Biostatistics from the University of Illinois at Chicago. Our Board of Directors believes Dr. Gilliam’s medical leadership experience and expertise, including her deep expertise in issues of women’s health and sexually transmitted infections, qualify her to serve on our Board of Directors.
Matthew L. Posard, age 55
Matthew L. Posard has served on our Board of Directors since March 2016. Mr. Posard is a Founding Principal at Explore-DNA, Inc., a life sciences and diagnostics consulting firm, a position he has held since March 2016. Mr. Posard served as President and Chief Commercial Officer of GenePeeks, Inc., a genetic research company, from February 2017 to April 2018, and as Executive Vice President and Chief Commercial Officer of Cardiff Oncology, Inc. (formerly Trovagene, Inc.), a publicly held liquid biopsy company, from March 2015 to May 2016. Mr. Posard also held various executive roles at Illumina Inc., a publicly held biotechnology company, from February 2006 to February 2015, including most recently as Senior Vice President, General Manager of New and Emerging Markets. Mr. Posard has served on the board of directors of Halozyme Therapeutics, Inc., a public biotechnology company that develops novel oncology therapies, since March 2013 and currently serves on its audit committee and as the chair of its nominating and corporate governance committee, DermTech, Inc., a public genomics company in dermatology, since July 2016 and currently serves on its nominating and corporate governance committee, and Nautilus Biotechnology, Inc., a public development stage life sciences company, since January 2019 and currently serves on its audit committee and as chair of its compensation committee. Mr. Posard has also served as the Executive Chair of Stemson Therapeutics, LLC, a pre-clinical stage cell therapy company, since March 2019. Mr. Posard received a B.A. in Management Science from the University of California, San Diego. Our Board of Directors believes Mr. Posard’s extensive experience as an executive and director of multiple biotechnology companies qualify him to serve on our Board of Directors.
The Board Of Directors Recommends
A Vote In Favor Of Each Named Nominee.
Directors Continuing in Office Until the 2023 Annual Meeting
Kimberly J. Popovits, age 63
Kimberly J. Popovits has served on our Board of Directors since March 2020, and previously served as our Interim Chief Executive Officer from August 2021 to December 2021. Ms. Popovits served as President and Chief Executive Officer of Genomic Health, Inc., a life science company focused on the development and commercialization of genomic-based clinical diagnostic tests, from January 2009,
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and as Chair of the board of directors from March 2012, until its acquisition by Exact Sciences Corporation in November 2019. Prior to joining Genomic Health, Inc. in 2022, Ms. Popovits held several senior management roles at Genentech, Inc., a biotechnology company. Ms. Popovits served on the board of directors of MyoKardia, Inc., a public, clinical-stage biopharmaceutical company, from March 2017 until its acquisition in November 2020. Ms. Popovits has also served on the board of directors of 10x Genomics, Inc., a public biotechnology company, since March 2020 and currently serves on its compensation committee, and Kiniksa Pharmaceuticals, Ltd., a public biopharmaceutical company, since February 2018 and currently serves on its compensation committee. Ms. Popovits received a B.A. in Business from Michigan State University. Our Board of Directors believes Ms. Popovits’ significant leadership, operations and commercial experience qualify her to serve on our Board of Directors.
Randal Scott, Ph.D., age 64
Randal Scott, Ph.D. has served on our Board of Directors since February 2016. Dr. Scott is a co-founder and Chair of the board of directors of Genome Medical, Inc., a genomic medicine company founded in August 2016. Previously, Dr. Scott was a co-founder of Invitae Corporation, a publicly held genetic information company, where he served as Chair of the board of directors and Chief Executive Officer from August 2012 to January 2017 and Executive Chair from January 2017 to August 2019. Prior to Invitae Corporation, Dr. Scott co-founded Genomic Health, Inc., a life science company focused on the development and commercialization of genomic-based clinical diagnostic tests, where he served as Chair of the board of directors and Chief Executive Officer from August 2000 to 2009 and Executive Chair from 2009 to August 2012. Dr. Scott has also served on the board of directors of BridgeBio Pharma, Inc., a publicly held genetic disease-focused company, since June 2020, and Freenome Holdings, Inc., a private health technology company, since December 2017; and as the executive co-chair of Genomic Life, Inc., a private health technology company, since January 2021. Dr. Scott received a B.S. in Chemistry from Emporia State University and a Ph.D. in Biochemistry from the University of Kansas. Our Board of Directors believes Dr. Scott’s extensive experience building and leading successful biopharmaceutical companies qualify him to serve on our Board of Directors.
Robert Kelley, age 50
Robert Kelley has served as our Chief Executive Officer and a member of our Board of Directors since December 2021. Mr. Kelley previously served as our Chief Commercial Officer from September 2020 to December 2021. From October 2017 to August 2020, Mr. Kelley was Vice President, Sales and Commercial Development of Genalyte, Inc., a healthcare analytics and point-of-care diagnostics company. Prior to Genalyte, Inc., Mr. Kelley was Vice President, Marketing of Cardiff Oncology, Inc. (formerly Trovagene, Inc.), a publicly held liquid biopsy company, from March 2015 to May 2017. From December 2008 to March 2015, Mr. Kelley held various positions of increasing responsibility with Illumina Inc., a publicly held biotechnology company, including Global Sales Manager for clinical applications of NGS and Director, Market Development, New and Emerging Opportunities. Mr. Kelley received a B.S. in Biology from Duke University and an M.B.A. from the UCLA Anderson School of Management. Our Board of Directors believes Mr. Kelley’s experience as the Company’s Chief Commercial Officer and his extensive commercial leadership experience in the biotechnology and diagnostics industry qualify him to serve on our Board of Directors.
Directors Continuing in Office Until the 2024 Annual Meeting
Raymond Cheong, M.D., Ph.D., age 40
Raymond Cheong, M.D., Ph.D. has served on our Board of Directors since June 2020. Dr. Cheong is a Managing Director at Baker Bros. Advisors LP, where he has worked since 2013. Dr. Cheong has also served on the board of directors of Istari Oncology, Inc., a private biotechnology company focused on immuno-oncology and immunotherapy platforms, since December 2018. Dr. Cheong received a B.S. in Chemical Engineering from the University of Maryland, College Park, and an M.D. and a Ph.D. in Biomedical Engineering from Johns Hopkins University, where he was awarded the Michael A. Shanoff Award for best thesis research. Our Board of Directors believes Dr. Cheong’s scientific and medical background and experience in the biotechnology industry qualify him to serve on our Board of Directors.
Rustem F. Ismagilov, Ph.D., age 48
Rustem F. Ismagilov, Ph.D. is one of our co-founders and has served on our board of directors since June 2013. Dr. Ismagilov is a Professor of Chemistry and Chemical Engineering and the Director of the Jacobs Institute for Molecular Engineering for Medicine at the California Institute of Technology, where he has been employed since July 2011. From July 2001 to June 2011, Dr. Ismagilov held various positions of increasing responsibility at the University of Chicago, including as a Professor in the Department of Chemistry. Dr.
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Ismagilov received a B.S. from the Russian Academy of Sciences and a Ph.D. from the University of Wisconsin, Madison. Our Board of Directors believes Dr. Ismagilov’s experience as one of our co-founders, as well has his deep scientific expertise, qualify him to serve on our Board of Directors.
Board Diversity
The Board Diversity Matrix below provides the diversity statistics for our Board of Directors and is reviewed annually by the Board of Directors.
Board Diversity Matrix (As of March 31, 2022) |
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Total Number of Directors |
9 |
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Female |
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Male |
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Non-Binary |
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Did Not Disclose Gender |
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Part I: Gender Identity |
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Directors |
3 |
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6 |
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— |
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— |
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Part II: Demographic Background |
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African American or Black |
1 |
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— |
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— |
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— |
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Alaskan Native or Native American |
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— |
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— |
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— |
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— |
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Asian |
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— |
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1 |
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— |
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— |
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Hispanic or Latinx |
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— |
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— |
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— |
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— |
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Native Hawaiian or Pacific Islander |
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— |
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— |
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— |
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— |
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White |
2 |
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5 |
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— |
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— |
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Two or More Races or Ethnicities |
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— |
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— |
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— |
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— |
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LGBTQ+ |
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— |
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— |
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— |
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— |
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Did Not Disclose Demographic Background |
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— |
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— |
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— |
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— |
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information regarding Our board of directors and corporate governance
Independence of The Board of Directors
As required under the Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our Board of Directors consults with the Company’s counsel to ensure that the Board of Director’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of Nasdaq, as in effect from time to time.
Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent auditors, our Board of Directors has affirmatively determined that all of the directors that served as a director during any part of the year ended December 31, 2021 other than Mr. Kelley, Dr. Baker, Dr. Cheong, Dr. Ismagilov, Brian Coe (former director) and Brian J. Blaser (former director) are independent directors within the meaning of the applicable Nasdaq listing standards. In making this determination, our Board of Directors found that none of these directors or nominees for director had a material or other disqualifying relationship with the Company.
Board Leadership Structure
Our Board of Directors is currently chaired by Dr. Baker, who has authority, among other things, to call and preside over meetings of the Board of Directors, to set meeting agendas and to determine materials to be distributed to the Board of Directors. Accordingly, the Chairman has substantial ability to shape the work of the Board of Directors. We believe that separation of the positions of Chairman and Chief Executive Officer reinforces the independence of the Board of Directors in its oversight of our business and affairs. In addition, we have a separate chair or co-chairs for each committee of our Board of Directors. The chair or co-chairs of each committee are expected to report annually to our Board of Directors on the activities of their committee in fulfilling their responsibilities as detailed in their respective charters or specify any shortcomings should that be the case.
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Role of the Board in Risk Oversight
One of the Board of Directors’ key functions is informed oversight of the Company’s risk management process. The Board of Directors does not have a standing risk management committee, but rather administers this oversight function directly through the Board of Directors as a whole, as well as through various standing committees of the Board of Directors that address risks inherent in their respective areas of oversight. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for the Company. Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including the guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. Audit Committee responsibilities also include oversight of information security and cyber risk management. Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct, as well as overseeing our sustainability and environmental, social and governance activities. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Our Science, Technology and Clinical Affairs Committee assesses and monitors our research and development programs and strategy and technology initiatives, including the level of risk exposure they may present. In addition, the entire Board of Directors receives reports from time to time regarding various enterprise risks facing the Company, and the applicable committees of the Board of Directors receive related reports with respect to the committee’s respective areas of oversight. The Board of Directors has delegated to the Chairman the responsibility of coordinating between the Board of Directors and management with regard to the determination and implementation of responses to any problematic risk management issues.
Meetings of The Board of Directors
The Board of Directors met 13 times during the last fiscal year. Each director attended 75% or more of the aggregate number of meetings of the Board of Directors and of the committees on which he or she served, held during the portion of the last fiscal year for which he or she was a director or committee member.
Information Regarding Committees of the Board of Directors
Our Board of Directors has four committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Science, Technology and Clinical Affairs Committee. The following table provides membership and meeting information for fiscal 2021 for each of the committees of the Board of Directors:
Name |
Audit(1) |
Compensation(2) |
Nominating and Corporate Governance(3) |
Science, Technology and Clinical Affairs |
Melissa Gilliam, M.D., M.P.H. |
|
X |
X |
X** |
Jeryl L. Hilleman(4) |
X* |
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Kimberly J. Popovits |
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X |
X |
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Matthew L. Posard |
X |
X* |
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Randal Scott, Ph.D. |
X |
|
X* |
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Raymond Cheong, M.D., Ph.D. |
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|
X |
Rustem F. Ismagilov, Ph.D. |
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|
X** |
Total meetings in fiscal 2021 |
5 |
5 |
3 |
2 |
* Committee Chairperson
** Committee Co-Chair
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Below is a description of each committee of the Board of Directors.
Our Board of Directors has determined that each member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee meets the applicable Nasdaq rules and regulations regarding “independence” and each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company.
Audit Committee
The Audit Committee of the Board of Directors was established by the Board of Directors in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee the Company’s corporate accounting and financial reporting processes, the system of internal control over financial reporting and audits of its financial statements. For this purpose, the Audit Committee performs several functions including, among other things:
The Audit Committee is currently composed of three directors: Ms. Hilleman (Chair), Mr. Posard and Dr. Scott. The Audit Committee met 5 times during the fiscal year. The Board of Directors has adopted a written Audit Committee charter that is available to stockholders on the Company’s website at https://investors.talisbio.com.
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The Board of Directors reviews the Nasdaq listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of the Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A)(i) and (ii) of the Nasdaq listing standards).
The Board of Directors has also determined that each of Ms. Hilleman and Dr. Scott qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. The Board of Directors made a qualitative assessment of each of Ms. Hilleman’s and Dr. Scott's level of knowledge and experience based on a number of factors, including for (i) Ms. Hilleman, her formal education and experience as a chief financial officer for public reporting companies, and (ii) Dr. Scott, his prior experience as a chief executive officer for public reporting companies and his business acumen. On April 20, 2022, Ms. Hilleman tendered her resignation from our Board of Directors and any committee on which she serves, effective immediately prior to the Annual Meeting. On April 21, 2022, our Board of Directors appointed Dr. Scott as the Chair of the Audit Committee and appointed Ms. Popovits as a member of the Audit Committee, effective as of immediately prior to the Annual Meeting. The Board of Directors determined that Ms. Popovits is independent (as independence is currently defined in Rule 5605(c)(2)(A)(i) and (ii) of the Nasdaq listing standards).
Report of the Audit Committee of the Board of Directors*
The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2021 with management of the Company. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the audit committee concerning independence and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Jeryl L. Hilleman, Chair
Matthew L. Posard
Randal Scott, Ph.D.
*The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Compensation Committee
The Compensation Committee is currently composed of three directors: Mr. Posard (Chair), Dr. Gilliam and Ms. Popovits. All members of the Compensation Committee are independent (as independence is currently defined in Rule 5605(d)(2) of the Nasdaq listing standards). The Compensation Committee met 5 times during the fiscal year. The Board of Directors has adopted a written Compensation Committee charter that is available to stockholders on the Company’s website at https://investors.talisbio.com.
The functions of the Compensation Committee include, among other things:
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Compensation Committee Processes and Procedures
Typically, the Compensation Committee meets at least once annually and with greater frequency if necessary. The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with the Chief Financial Officer, the human resources and legal departments and Compensia, Inc. (“Compensia”), the Compensation Committee’s independent compensation consultant. The Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding his or her compensation or individual performance objectives. The charter of the Compensation Committee grants it full access to all books, records, facilities and personnel of the Company. In addition, under the charter, the Compensation Committee has the authority to obtain, at the expense of the Company, advice and assistance from compensation consultants and internal and external legal, accounting or other advisors and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. The Compensation Committee has direct responsibility for the oversight of the work of any consultants or advisers engaged for the purpose of advising the Compensation Committee. In particular, the Compensation Committee has the sole authority to retain, in its sole discretion, compensation consultants to assist in its evaluation of senior executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. Under the charter, the Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the compensation committee, other than in-house legal counsel and certain other types of advisers, only after taking into consideration six factors, prescribed by the SEC and Nasdaq, that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent.
During the past fiscal year, after taking into consideration the six factors prescribed by the SEC and Nasdaq described above, the Compensation Committee engaged Compensia as compensation consultants. The Compensation Committee identified Compensia based on its general reputation in the industry. The Compensation Committee requested that Compensia:
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Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees as appropriate, including but not limited to, a subcommittee composed of one or more members of the Board of Directors or officers of the Company to grant stock awards under the Company’s equity incentive plans. In 2021, the Compensation Committee delegated authority to the Company’s Chief Executive Officer to grant, without further action required by the Board of Directors or the Compensation Committee, stock awards to employees who are not executive officers of the Company or members of the Board of Directors. The purpose of this delegation of authority is to support the Company’s recruiting and retention efforts by enhancing the flexibility of option administration within the Company and facilitating the timely grant of options to such employees within specified limits approved by the Compensation Committee. In particular, the maximum number of stock awards that the Chief Executive Officer may grant pursuant to such authority may not exceed stock awards to acquire more than an aggregate of 1,500,000 shares and each individual grant must fall within certain target grants by job level set by our Compensation Committee. Typically, as part of its oversight function, the Compensation Committee will review on a quarterly basis the list of grants made by the Chief Executive Officer. During fiscal 2021, the Chief Executive Officer exercised his authority to grant stock awards to purchase an aggregate of 350,300 shares to non-officer employees.
For fiscal year 2021, which was the first year in which the Company was a public company, the Compensation Committee worked with the Company’s outside consultants and management to make adjustments to annual compensation for executive officers and determine target bonus amounts for executive officers. The process of establishing corporate goals stretched over numerous meetings, were agreed in concept in the middle of the year, and were finally approved in the third quarter. The Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of the Company’s compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation. Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Compensation Committee by the Chief Executive Officer. In the case of the Chief Executive Officer, the evaluation of his performance is conducted by the Compensation Committee, which determines any adjustments to his or her compensation as well as awards to be granted. For all executives and directors as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executives in various hypothetical scenarios, executive and director stock ownership information, company stock performance data, analyses of historical executive compensation levels and current Company-wide compensation levels and recommendations of the Compensation Committee’s compensation consultant, including analyses of executive and director compensation paid at other companies identified by the consultant.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is currently composed of three directors: Dr. Scott (Chair), Dr. Gilliam and Ms. Popovits. On April 21, 2022, the Board of Directors appointed Ms. Popovits as the Chair of the Nominating and Corporate Governance Committee, effective as of immediately prior to the Annual Meeting. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing standards). The Nominating and Corporate Governance Committee met 3 times during the fiscal year. The Board of Directors has adopted a written Nominating and Corporate Governance Committee charter that is available to stockholders on the Company’s website and https://investors.talisbio.com.
The functions of the Nominating and Corporate Governance Committee include, among other things:
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The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of the Company’s stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board of Directors, the operating requirements of the Company and the long-term interests of stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee typically considers diversity (including gender, racial and ethnic diversity), age, skills and such other factors as it deems appropriate, given the current needs of the Board of Directors and the Company, to maintain a balance of knowledge, experience and capability.
The Nominating and Corporate Governance Committee appreciates the value of thoughtful Board of Director refreshment, and regularly identifies and considers qualities, skills and other director attributes that would enhance the composition of the Board of Directors, including, but not limited to, independence, age, diversity (including race, ethnicity, gender, age, education and cultural background), integrity and experience. In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors’ overall service to the Company during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence. The Nominating and Corporate Governance Committee also takes into account the results of the Board of Directors’ self-evaluation, conducted annually on a group and individual basis and for which we utilize outside counsel. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee is independent for Nasdaq purposes, which determination is based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board of Directors. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the Board by majority vote.
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. In addition, pursuant to the Nominating Agreement with Baker Brothers (as further described in “Transactions with Related Persons and Indemnification—Agreements with Baker Brothers—Nominating Agreement”), we are obligated to support the nomination of certain individuals designated by Baker Brothers, subject to certain exceptions. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder, including Baker Brothers. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board of Directors may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address: 230 Constitution Drive, Menlo Park, California, no later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting of the stockholders. Submissions must include, among other things, (1) the name and address of the stockholder on whose behalf the submission is made; (2) number of our shares that are owned beneficially by such stockholder as of the date of the submission; (3) the full name of the proposed candidate; (4) description of
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the proposed candidate’s business experience for at least the previous five years; (5) complete biographical information for the proposed candidate; (6) a description of the proposed candidate’s qualifications as a director and (7) any other information required by our Bylaws. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. We may require any proposed nominee to furnish such other information as we may reasonably require to determine the eligibility of such proposed nominee to serve as our independent director or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such proposed nominee.
Science, Technology and Clinical Affairs Committee
The Science, Technology and Clinical Affairs Committee was established by the Board of Directors to review and advise the Board of Directors on the Company’s research and development programs, its technology and relevant scientific advances. The Science, Technology and Clinical Affairs Committee is composed of three directors: Dr. Ismagilov (Co-Chair), Dr. Gilliam (Co-Chair) and Dr. Cheong. The Science, Technology and Clinical Affairs Committee met two times during the fiscal year. The Board of Directors has adopted a written Science, Technology and Clinical Affairs Committee charter that is available to stockholders on the Company’s website and https://investors.talisbio.com.
The functions of the Science, Technology and Clinical Affairs Committee include, among other things:
Stockholder Communications With The Board Of Directors
The Board of Directors has adopted a formal process by which stockholders may communicate with the Board of Directors or any of its directors. Stockholders who wish to communicate with the Board of Directors may do so by sending written communications addressed to our Corporate Secretary at 230 Constitution Drive, Menlo Park, California. These communications will be reviewed by our Corporate Secretary, who will determine whether the communication should be presented to the Board of Directors. The purpose of this screening is to allow the Board of Directors to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations and hostile communications). The screening procedures have been approved by a majority of the independent directors. All communications directed to the Audit Committee in accordance with the Company’s Open Door Policy for Reporting Complaints Regarding Accounting and Auditing Matters that relate to questionable accounting or auditing matters involving the Company will be promptly and directly forwarded to the Audit Committee.
Code of Business Conduct and Ethics
The Company has adopted the Talis Biomedical Corporation Code of Business Conduct and Ethics that applies to all officers, directors and employees. The Code of Business Conduct and Ethics is available on the Company’s website at https://investors.talisbio.com. If the Company makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.
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Hedging Policy
Our Insider Trading Policy prohibits our employees, including our executive officers, directors and consultants of the Company and members of their immediate family, persons which whom they share a household, persons who are their economic dependents and other individuals or entities whose transactions in securities such persons influence, direct or control from engaging in short sales, transactions in put or call options, hedging transactions, using margin accounts, pledges, standing and limit orders or other inherently speculative transactions involving our equity securities.
* The disclosure under the caption “Hedging Policy” is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
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Proposal 2
Approval of an Amendment to the Talis Biomedical Corporation 2021 Equity Incentive Plan
The Board of Directors is requesting stockholder approval of an amendment to the Talis Biomedical Corporation 2021 Equity Incentive Plan (the “2021 Plan”).
Why We Are Asking Our Stockholders to Approve an Amendment to the 2021 Plan
The Board of Directors believes that equity awards are a foundational element in our ability to retain, recruit and motivate key personnel critical to our ability to successfully advance the development and commercialization of the Talis One system. Equity awards align the interests of our personnel with those of our stockholders and are a substantial contributing factor to our success and the future growth of our business.
Accordingly, our Board of Directors voted to approve an amendment to the 2021 Plan to amend the automatic increase to the Share Reserve (as defined in the 2021 Plan) that occurs on January 1 of each calendar year until (and including) January 1, 2031 from 4% of the total number of shares of our common stock outstanding on December 31st of the preceding calendar year to 4% of the total number of shares of (i) our common stock plus (ii) the Company’s Series 1 Preferred Stock plus (ii) the Company’s Series 2 Non-Voting Preferred Stock (the Series 1 Preferred Stock and the Series 2 Non-Voting Preferred Stock, collectively are referred to herein and in the amended 2021 Plan as the Series Preferred) outstanding on December 31st of the preceding calendar year.
On January 1, 2022, the Share Reserve was increased by 1,056,321 shares of common stock pursuant to the terms of the 2021 Plan. Assuming the amendment to the 2021 Plan was in effect on January 1, 2022, the increase in the Share Reserve would have been 2,250,868 shares of common stock, which is an increase of 1,194,547 additional shares of common stock. We are requesting stockholder approval of this amendment to the 2021 Plan because the increased Share Reserve will provide us the flexibility to offer competitive equity compensation packages to (a) recruit the talent necessary for our continued growth and success and (b) retain our current employees.
Stockholder Approval
If this Proposal 2 is approved by our stockholders, the amendments to our 2021 Plan will become effective as of the date of the Annual Meeting.
If this Proposal 2 is approved, then the number of shares of our common stock reserved for issuance under our 2021 Plan will automatically increase on January 1st of each year, beginning on January 1, 2023 and continuing through and including January 1, 2031, by 4% of the total number of shares of our common stock and Series Preferred outstanding on December 31st of the preceding calendar year, or a lesser number of shares determined by our Board of Directors.
In the event that our stockholders do not approve this Proposal 2, the amendments to our 2021 Plan will not become effective and the 2021 Plan will continue to be effective in accordance with its current terms.
Before the Board of Directors approved the amendment to the 2021 Plan, we proactively contacted and met with stockholders representing over 60% of our outstanding capital stock to solicit feedback on our equity incentive practices and the ways in which we were considering amending the 2021 Plan. Stockholder feedback received during these meetings was supportive, including about increasing the annual automatic share increase, and communicated to our Compensation Committee and to our Board of Directors.
Vote Required
The affirmative vote of a majority of shares present or represented by proxy and entitled to vote on this Proposal 2 at the Annual Meeting will be required to approve this Proposal 2. Abstentions will have the same effect as “Against” votes. Broker non-votes are counted towards a quorum but are not counted for any purpose in determining whether this Proposal 2 has been approved.
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Description of the 2021 Plan
A summary of the material features of the 2021 Plan follows below. The summary is qualified by the full text of the 2021 Plan, as proposed to be amended, that is attached as Appendix A to this proxy statement.
Our Board of Directors adopted our 2021 Plan, and our stockholders approved our 2021 Plan, in February 2021. Our 2021 Plan is a successor to and continuation of the Talis Biomedical Corporation 2013 Equity Incentive Plan (the “2013 Plan”). Our 2021 Plan became effective on the date of the underwriting agreement related to our initial public offering, which occurred on February 11, 2021. No further grants have been, or will be, made under the 2013 Plan following the effectiveness of the 2021 Plan.
Awards. Our 2021 Plan provides for the grant of incentive stock options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of our affiliates. As of March 31, 2022, we had 175 employees and 8 non-employee directors who were eligible for awards under the 2021 Plan. No non-employee consultants or advisors were eligible for awards under the 2021 Plan.
Authorized shares. Initially, the maximum number of shares of our common stock issuable under our 2021 Plan was 12,840,904 shares of our common stock, which is the sum of (1) 3,200,000 new shares, plus (2) 7,673,915 shares that remained available for the issuance of awards under our 2013 Plan as of immediately prior to the time our 2021 Plan became effective, plus (3) up to 5,166,989 shares subject to outstanding stock options or other stock awards granted under our 2013 Plan that, on or after the 2021 Plan became effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, as such shares become available from time to time.
In addition, the number of shares of our common stock reserved for issuance under our 2021 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2022 through (and including) January 1, 2031, in an amount equal to (i) 4% of the total number of shares of our common stock outstanding on December 31 of the preceding year, or (ii) a lesser number of shares determined by our Board of Directors prior to the applicable January 1. If the 2021 Plan, as proposed to be amended by Proposal 2, is approved by our stockholders, the number of shares of our common stock reserved for issuance under our 2021 Plan will automatically increase in January 1 of each calendar year, starting on January 1, 2023 through (and including) January 1, 2031, in an amount equal to (i) 4% of the total number of shares of our common stock and Series Preferred outstanding on December 31st of the preceding calendar year, or (ii) a lesser number of shares determined by our Board of Directors prior to the applicable January 1.
The maximum number of shares of our common stock that may be issued on the exercise of ISOs under our 2021 Plan is 39,000,000 shares.
Shares subject to stock awards granted under our 2021 Plan that expire or terminate without being exercised in full or that are paid out in cash rather than in shares do not reduce the number of shares available for issuance under our 2021 Plan. Shares withheld under a stock award to satisfy the exercise, strike or purchase price of a stock award or to satisfy a tax withholding obligation do not reduce the number of shares available for issuance under our 2021 Plan. If any shares of our common stock issued pursuant to a stock award are forfeited back to or repurchased or reacquired by us (1) because of a failure to meet a contingency or condition required for the vesting of such shares, (2) to satisfy the exercise, strike or purchase price of an award or (3) to satisfy a tax withholding obligation in connection with an award, the shares that are forfeited or repurchased or reacquired will revert to and again become available for issuance under the 2021 Plan. Any shares previously issued which are reacquired in satisfaction of tax withholding obligations or as consideration for the exercise or purchase price of a stock award will again become available for issuance under the 2021 Plan.
The maximum number of shares of common stock subject to stock awards granted under the 2021 Plan or otherwise during any period commencing on the date of the company’s annual meeting of stockholders for a particular year and ending on the day immediately prior to the date of the company’s annual meeting of stockholders for the next subsequent year to any non-employee director, taken together with any cash fees paid by us to such non-employee director during such period for service on the Board of Directors, will not exceed $750,000 in total value, or with respect to the period in which a non-employee director is first appointed or elected to our Board of Directors, $1,000,000 in total value, in each case calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes.
20
As of March 31, 2022, 8,290,389 shares of common stock were subject to outstanding awards under the 2021 Plan and 5,606,836 shares remained available for grant.
Plan administration. Our Board of Directors, or a duly authorized committee of our Board of Directors, will administer our 2021 Plan and is referred to as the “plan administrator” herein. Our Board of Directors may also delegate to one or more of our officers the authority to (1) designate employees (other than officers) to receive specified stock awards and (2) determine the number of shares subject to such stock awards. Under our 2021 Plan, the plan administrator has the authority to determine award recipients, grant dates, the numbers and types of stock awards to be granted, the applicable fair market value, and the provisions of each stock award, including the period of exercisability and the vesting schedule applicable to a stock award.
The plan administrator has the power to modify outstanding awards under our 2021 Plan. Subject to the terms of our 2021 Plan, the plan administrator has the authority to reprice any outstanding stock award, cancel and re-grant any outstanding stock award in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any materially impaired participant.
Stock options. ISOs and NSOs are granted under stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for stock options, within the terms and conditions of the 2021 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2021 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.
The plan administrator determines the term of stock options granted under the 2021 Plan, up to a maximum of 10 years. Unless the terms of an optionholder’s stock option agreement, or other written agreement between us and the recipient approved by the plan administrator, provide otherwise, if an optionholder’s service relationship with us or any of our affiliates ceases for any reason other than disability, death, or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service. This period may be extended in the event that either an exercise of the option or an immediate sale of shares acquired upon exercise of the option following such a termination of service is prohibited by applicable securities laws or our insider trading policy. If an optionholder’s service relationship with us or any of our affiliates ceases due to death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of 18 months following the date of death. If an optionholder’s service relationship with us or any of our affiliates ceases due to disability, the optionholder may generally exercise any vested options for a period of 12 months following the cessation of service. In the event of a termination for cause, options generally terminate upon the termination date. In no event may an option be exercised beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (1) cash, check, bank draft or money order, (2) a broker-assisted cashless exercise, (3) the tender of shares of our common stock previously owned by the optionholder, (4) a net exercise of the option if it is an NSO, or (5) other legal consideration approved by the plan administrator.
Unless the plan administrator provides otherwise, options or stock appreciation rights generally are not transferable except by will or the laws of descent and distribution. Subject to approval of the plan administrator or a duly authorized officer, an option may be transferred pursuant to a domestic relations order, official marital settlement agreement, or other divorce or separation instrument.
Tax limitations on ISOs. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an award holder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our parent or subsidiary corporations unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (2) the term of the ISO does not exceed five years from the date of grant.
Restricted stock unit awards. Restricted stock unit awards are granted under restricted stock unit award agreements adopted by the plan administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration that may be acceptable to our Board of Directors and permissible under applicable law. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the plan administrator, or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit award. Except as otherwise provided in the applicable award agreement, or other written agreement between us and
21
the recipient approved by the plan administrator, restricted stock unit awards that have not vested will be forfeited once the participant’s continuous service ends for any reason.
Restricted stock awards. Restricted stock awards are granted under restricted stock award agreements adopted by the plan administrator. A restricted stock award may be awarded in consideration for cash, check, bank draft or money order, past or future services to us, or any other form of legal consideration that may be acceptable to our Board of Directors and permissible under applicable law. The plan administrator determines the terms and conditions of restricted stock awards, including vesting and forfeiture terms. If a participant’s service relationship with us ends for any reason, we may receive any or all of the shares of common stock held by the participant that have not vested as of the date the participant terminates service with us through a forfeiture condition or a repurchase right.
Stock appreciation rights. Stock appreciation rights are granted under stock appreciation right agreements adopted by the plan administrator. The plan administrator determines the purchase price or strike price for a stock appreciation right, which generally cannot be less than 100% of the fair market value of our common stock on the date of grant. A stock appreciation right granted under the 2021 Plan vests at the rate specified in the stock appreciation right agreement as determined by the plan administrator. Stock appreciation rights may be settled in cash or shares of common stock or in any other form of payment as determined by the Board of Directors and specified in the stock appreciation right agreement.
The plan administrator determines the term of stock appreciation rights granted under the 2021 Plan, up to a maximum of 10 years. If a participant’s service relationship with us or any of our affiliates ceases for any reason other than cause, disability, or death, the participant may generally exercise any vested stock appreciation right for a period of three months following the cessation of service. This period may be further extended in the event that exercise of the stock appreciation right following such a termination of service is prohibited by applicable securities laws. If a participant’s service relationship with us, or any of our affiliates, ceases due to disability or death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generally exercise any vested stock appreciation right for a period of 12 months in the event of disability and 18 months in the event of death. In the event of a termination for cause, stock appreciation rights generally terminate immediately upon the occurrence of the event giving rise to the termination of the individual for cause. In no event may a stock appreciation right be exercised beyond the expiration of its term.
Performance awards. The 2021 Plan permits the grant of performance awards that may be settled in stock, cash or other property. Performance awards may be structured so that the stock or cash will be issued or paid only following the achievement of certain pre-established performance goals during a designated performance period. Performance awards that are settled in cash or other property are not required to be valued in whole or in part by reference to, or otherwise based on, the common stock.
The performance goals may be based on any measure of performance selected by the Board of Directors. The performance goals may be based on company-wide performance or performance of one or more business units, divisions, affiliates, or business segments, and may be either absolute or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Board of Directors at the time the performance award is granted, the Board of Directors will appropriately make adjustments in the method of calculating the attainment of performance goals as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects; (iii) to exclude the effects of changes to generally accepted accounting principles; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; (v) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (vi) to exclude the dilutive effects of acquisitions or joint ventures; (vii) to assume that any portion of our business which is divested achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (viii) to exclude the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (ix) to exclude the effects of stock based compensation and the award of bonuses under our bonus plans; (x) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; and (xi) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles.
Other stock awards. The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the stock award (or cash equivalent) and all other terms and conditions of such awards.
Changes to capital structure. In the event there is a specified type of change in our capital structure, such as a stock split, reverse stock split, or recapitalization, appropriate adjustments will be made to (1) the class and maximum number of shares reserved for issuance
22
under the 2021 Plan, (2) the class and maximum number of shares by which the share reserve may increase automatically each year, (3) the class and maximum number of shares that may be issued on the exercise of ISOs, and (4) the class and number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding stock awards.
Corporate transactions. The following applies to stock awards under the 2021 Plan in the event of a corporate transaction, unless otherwise provided in a participant’s stock award agreement or other written agreement with us or one of our affiliates or unless otherwise expressly provided by the plan administrator at the time of grant.
In the event of a corporate transaction, any stock awards outstanding under the 2021 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation (or its parent company), and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then (i) with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the corporate transaction, or current participants, the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the effective time of the corporate transaction (contingent upon the effectiveness of the corporate transaction), and such stock awards will terminate if not exercised (if applicable) at or prior to the effective time of the corporate transaction, and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the corporate transaction), and (ii) any such stock awards that are held by persons other than current participants will terminate if not exercised (if applicable) prior to the effective time of the corporate transaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the corporate transaction.
In the event a stock award will terminate if not exercised prior to the effective time of a corporate transaction, the plan administrator may provide, in its sole discretion, that the holder of such stock award may not exercise such stock award but instead will receive a payment equal in value to the excess (if any) of (i) the per share amount payable to holders of common stock in connection with the corporate transaction, over (ii) any per share exercise price payable by such holder, if applicable. In addition, any escrow, holdback, earn out or similar provisions in the definitive agreement for the corporate transaction may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of common stock.
Under the 2021 Plan, a corporate transaction is generally defined as the consummation of: (i) a sale of all or substantially all of our assets, (ii) the sale or disposition of at least 50% of our outstanding securities, (iii) a merger or consolidation where we do not survive the transaction, or (iv) a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction.
Change in control. Awards granted under the 2021 Plan may be subject to acceleration of vesting and exercisability upon or after a change in control (as defined in the 2021 Plan) as may be provided in the applicable stock award agreement or in any other written agreement between us or any affiliate and the participant, but in the absence of such provision, no such acceleration will automatically occur.
Under the 2021 Plan, a change in control is generally defined as: (i) the acquisition by any person or company of more than 50% of the combined voting power of our then outstanding stock; (ii) a consummated merger, consolidation or similar transaction in which our stockholders immediately before the transaction do not own, directly or indirectly, more than 50% of the combined voting power of the surviving entity (or the parent of the surviving entity) in substantially the same proportions as their ownership immediately prior to such transaction; (iii) a consummated sale, lease, exclusive license or other disposition of all or substantially all of our assets other than to an entity more than 50% of the combined voting power of which is owned by our stockholders in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction; or (iv) when a majority of our Board of Directors becomes comprised of individuals who were not serving on our Board of Directors on the date the 2021 Plan was adopted by the Board of Directors, or the incumbent Board of Directors, or whose nomination, appointment, or election was not approved by a majority of the incumbent Board of Directors still in office.
Plan amendment or termination. Our Board of Directors has the authority to amend, suspend, or terminate our 2021 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our stockholders. No ISOs may be granted after the tenth anniversary of the date our Board of Directors adopts our 2021 Plan. No stock awards may be granted under our 2021 Plan while it is suspended or after it is terminated.
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U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax consequences to participants and us with respect to participation in the 2021 Plan, as proposed to be amended by Proposal 2. This summary is not intended to be exhaustive and does not discuss the income tax laws of any local, state or foreign jurisdiction in which a participant may reside. The information is based upon federal income tax rules in effect as of the date hereof and therefore is subject to change when those rules change. Because the tax consequences to any participant may depend on his or her particular situation, each participant should consult the participant’s tax adviser regarding the federal, state, local and other tax consequences of the grant or exercise of an award or the disposition of stock acquired under the 2021 Plan. The 2021 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of our tax reporting obligations.
Nonstatutory Stock Options
Generally, there is no taxation upon the grant of an NSO if the stock option is granted with an exercise price equal to the fair market value of the underlying stock on the grant date. Upon exercise, a participant will recognize compensation taxable as ordinary income (and subject to withholding in respect of an employee) equal to the excess, if any, of the fair market value of the underlying stock on the date of exercise over the exercise price. The participant’s tax basis in those shares will be equal to their fair market value on the date of exercise of the stock option, and the participant’s capital gain holding period for those shares will begin on that date.
We will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the participant.
Incentive Stock Options
The 2021 Plan provides for the grant of stock options that are intended to qualify as “incentive stock options,” as defined in Section 422 of the Code. Under the Code, a participant generally is not subject to ordinary income tax upon the grant or exercise of an ISO. If the participant holds a share received upon exercise of an ISO for more than two years from the date the stock option was granted and more than one year from the date the stock option was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the participant’s tax basis in that share will be long-term capital gain or loss.
If, however, a participant disposes of a share acquired upon exercise of an ISO before the end of the required holding period, which is referred to as a disqualifying disposition, the participant generally will recognize ordinary income in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date of exercise of the stock option over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of exercise of the stock option, the amount of ordinary income recognized by the participant will not exceed the gain, if any, realized on the sale. If the amount realized on a disqualifying disposition exceeds the fair market value of the share on the date of exercise of the stock option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired upon exercise of an ISO exceeds the exercise price of the stock option generally will be an adjustment included in the participant’s alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifying disposition of the share in the year in which the stock option is exercised, there will be no adjustment for alternative minimum tax purposes with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired upon exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the stock option is exercised.
We are not allowed a tax deduction with respect to the grant or exercise of an ISO or the disposition of a share acquired upon exercise of an ISO after the required holding period. If there is a disqualifying disposition of a share, however, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the participant, provided that either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.
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Restricted Stock Awards
A participant will not recognize taxable income at the time of grant of shares of restricted stock, and we will not be entitled to a tax deduction at such time, unless the participant makes an election under Section 83(b) of the Code to be taxed at such time. If such election is made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of the grant equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. If such election is not made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time the restrictions lapse in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. We are entitled to a corresponding deduction at the time the ordinary income is recognized by the participant. In addition, a participant receiving dividends with respect to restricted stock for which the above‐described election has not been made and prior to the time the restrictions lapse will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee), rather than dividend income. We will be entitled to a corresponding deduction.
Restricted Stock Unit Awards
A participant will not recognize taxable income at the time of grant of a restricted stock unit, and we will not be entitled to a tax deduction at such time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of settlement of the award equal to the fair market value of any shares delivered and the amount of cash paid by us, and we will be entitled to a corresponding deduction.
Stock Appreciation Rights
Generally, if a stock appreciation right is granted with an exercise price equal to the fair market value of the underlying stock on the grant date, the recipient will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) equal to the fair market value of the stock or cash received upon such exercise. We will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock appreciation right.
Performance Units/Performance Shares
Participants incur no income tax liability upon the initial grant of performance units or performance shares. At the end of the performance or measurement period, however, employees realize ordinary income on any amounts received in cash or stock. Any subsequent appreciation on the stock is treated as a capital gain.
Cash-Based Awards/Other Stock-Based Awards
Any cash payments or the fair market value of any stock or other property an employee receives in connection with cash-based awards or other stock-based awards are includable in income in the year received or made available to the employee without substantial limitations or restrictions. Generally, we will be entitled to deduct the amount the employee includes in income as a business expense in the year of payment.
Section 162(m) Limitations
Under Section 162(m) of the Code (“Section 162(m)”), compensation paid to any publicly held corporation’s “covered employees” that exceeds $1 million per taxable year for any covered employee is generally non-deductible. Awards granted under the 2021 Plan will be subject to the deduction limit under Section 162(m) and will not be eligible to qualify for the performance-based compensation exception under Section 162(m) pursuant to the transition relief provided by the Tax Cuts and Jobs Act.
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NEW PLAN BENEFITS UNDER THE 2021 PLAN, AS AMENDED, AND THE 2021 ESPP, AS AMENDED
The following table sets forth the benefits or amounts that will be received by or allocated to each of the individuals and groups indicated below under (i) the 2021 Plan, as proposed to be amended by this Proposal 2, and (ii) the 2021 ESPP, as proposed to be amended by Proposal 3, in each case, if such benefits or amounts are determinable. See “Proposal 3—Approval of an Amendment to the Talis Biomedical Corporation 2021 Employee Stock Purchase Plan” for more information.
|
|
2021 Plan |
|
|
2021 ESPP |
|
||
Name and Position |
|
Number of Shares |
|
|
Number of Shares |
|
||
Robert J. Kelley |
|
|
(1 |
) |
|
|
(4 |
) |
J. Roger Moody, Jr. |
|
|
(1 |
) |
|
|
(4 |
) |
Douglas Liu |
|
|
(2 |
) |
|
|
(2 |
) |
Brian Coe |
|
|
(2 |
) |
|
|
(2 |
) |
Kimberly J. Popovits |
|
(2)(3) |
|
|
(2)(5) |
|
||
Brian J. Blaser |
|
|
(2 |
) |
|
|
(2 |
) |
All current executive officers as a group |
|
|
(1 |
) |
|
|
(4 |
) |
All current directors who are not executive officers as a group |
|
|
(3 |
) |
|
|
(5 |
) |
All employees, including all current officers who are not executive officers, as a group |
|
|
(1 |
) |
|
|
(4 |
) |
(1) Awards granted under the 2021 Plan to our executive officers and other employees are discretionary and are not subject to set benefits or amounts under the terms of the 2021 Plan. Accordingly, the benefits or amounts that will be received by or allocated to our executive officers and other employees under the 2021 Plan are not determinable. No additional benefits or amounts would have been received by or allocated to any executive officers or other employees for the year ended December 31, 2021, if the 2021 Plan, as proposed to be amended by this Proposal 2, had been in effect. In addition, no awards have been granted under the 2021 Plan, as proposed to be amended by this Proposal 2, that are contingent on, or subject to, stockholder approval of this Proposal 2.
(2) Former executive officers that are no longer employees of the Company are not entitled to any benefits or amounts that will be received by or allocated to our executive officers and other employees under the 2021 Plan and the 2021 ESPP. No additional benefits or amounts would have been received by or allocated to any executive officers or other employees for the year ended December 31, 2021, if (i) the 2021 Plan, as proposed to be amended by this Proposal 2, had been in effect and/or (ii) the 2021 ESPP, as proposed to be amended by Proposal 3, had been in effect. No awards have been granted under the 2021 Plan, as proposed to be amended by this Proposal 2, and no purchase rights have been granted under the 2021 ESPP, as proposed to be amended by Proposal 3, that are contingent on, or subject to, stockholder approval of this Proposal 2 or Proposal 3, as applicable.
(3) Awards granted under the 2021 Plan to our non-employee directors are discretionary and are not subject to set benefits or amounts under the terms of the 2021 Plan. However, pursuant to our current compensation policy for non-employee directors, a non-employee director who is first elected to our Board of Directors will be granted an option to purchase a number of shares of our common stock on the date of his or her initial election with an aggregate grant date fair value (as calculated using a Black-Scholes methodology) of $340,000. In addition, on the date of each annual meeting, each person who continues to serve as a non-employee member of our Board of Directors following such annual meeting will be granted an option to purchase a number of shares of our common stock with an aggregate grant date fair value (as calculated using a Black-Scholes methodology) of $170,000. All option grants will have an exercise price per share equal to the fair market value of our common stock on the date of grant. Each initial grant for a non-employee director will vest over a 36-month period, and each annual grant for a non-employee director will vest over a 12-month period, in each case subject to the director's continuing service on our Board of Directors. With respect to an eligible non-employee director who is first elected or appointed to our Board of Directors on a date other than the date of our annual stockholder meeting, upon our first annual stockholder meeting following such non-employee director’s first joining our Board of Directors, such director’s first annual option grant will be prorated. After the date of the Annual Meeting, any such options will be granted under the 2021 Plan, as proposed to be amended by this Proposal 2, if this Proposal 2 is approved by our stockholders. However, the amendments to the 2021 Plan set forth in this Proposal 2 do not have any effect on the Share Reserve until January 1, 2023. For additional information regarding our current compensation policy for non-employee directors, please refer to the section titled “Executive and Director Compensation—Director Compensation.” The actual value realized upon exercise of an option will depend on the excess, if any, of the stock price over the exercise prices on the date of exercise. No additional benefits or amounts would have been received by or allocated to any non-employee directors for the year ended December 31, 2021, if the 2021 Plan, as proposed to be amended by this Proposal 2, had been in effect. In addition, no awards have been granted under the 2021 Plan, as proposed to be amended by this Proposal 2, that are contingent on, or subject to, stockholder approval of this Proposal 2.
(4) The benefits that will be received by or allocated to persons eligible to participate in the 2021 ESPP in the future are not determinable at this time because the amount of contributions set aside to purchase shares of our common stock under the 2021 ESPP (subject to the limits of the plan) are entirely within the discretion of each participant. No purchase rights have been granted under the 2021 ESPP, as proposed to be amended by Proposal 3, that are contingent on, or subject to, stockholder approval of Proposal 3
(5) Directors are not eligible participants under the 2021 ESPP.
26
PLAN BENEFITS UNDER THE 2021 PLAN
The following table sets forth, for each of the individuals and the various groups indicated, the total number of shares of our common stock subject to awards that have been granted (even if not currently outstanding) under the 2021 Plan, as of March 31, 2022.
Name and Position |
|
Number of Shares |
|
|
Robert J. Kelley |
|
|
580,000 |
|
J. Roger Moody, Jr. |
|
|
130,000 |
|
Douglas Liu |
|
|
200,000 |
|
Brian Coe |
|
|
— |
|
Kimberly J. Popovits |
|
|
550,000 |
|
Brian J. Blaser |
|
|
111,856 |
|
All current executive officers as a group |
|
|
710,000 |
|
All current directors who are not executive officers as a group |
|
|
35,112 |
|
Each nominee for election as a director |
|
|
|
|
Felix Baker, Ph.D. |
|
|
— |
|
Melissa Gilliam, M.D., M.P.H. |
|
|
— |
|
Matthew L. Posard |
|
|
— |
|
Each associate of any such directors, executive officers or director nominees |
|
|
— |
|
Each other person who received or is to receive 5% of awards |
|
|
— |
|
All employees, including all current officers who are not executive officers, as a group |
|
|
2,749,960 |
|
The Board of Directors Recommends
a Vote in Favor of Proposal 2.
27
Proposal 3
Approval of an Amendment to the Talis Biomedical Corporation 2021 Employee Stock Purchase Plan
The Board of Directors is requesting stockholder approval of an amendment to the Talis Biomedical Corporation 2021 Employee Stock Purchase Plan (the “2021 ESPP”).
Why We Are Asking Our Stockholders to Approve an Amendment to the 2021 ESPP
Approval of the amendment to our 2021 ESPP will allow us to continue to provide our eligible employees with the opportunity to acquire an ownership interest in the Company through the purchase of shares of common stock. Through the 2021 ESPP, we seek to retain the services of such eligible employees, to secure and retain the services of new employees and to provide incentives for such persons to exert maximum efforts for our success, including to successfully advance the development and commercialization of the Talis One system.
Accordingly, our Board of Directors voted to approve an amendment to the 2021 ESPP to amend the automatic increase in the shares of common stock that may be issued under the 2021 ESPP that occurs on January 1 of each calendar year until (and including) January 1, 2031 from an amount equal to the lesser of (i) 1% of the total number of shares of our common stock outstanding on December 31st of the preceding calendar year and (ii) 1,550,000 shares of common stock to an amount equal to the lesser of (i) 1% of the total number of shares of our common stock plus (ii) the Company’s Series 1 Preferred Stock plus (ii) the Company’s Series 2 Non-Voting Preferred Stock (the Series 1 Preferred Stock and the Series 2 Non-Voting Preferred Stock, collectively are referred to herein and in the amended 2021 ESPP as the Series Preferred) outstanding on December 31st of the preceding calendar year and (ii) 1,550,000 shares of common stock.
On January 1, 2022, the share reserve was increased by 264,080 shares of common stock pursuant to the terms of the 2021 ESPP. Assuming the amendment to the 2021 ESPP was in effect on January 1, 2022, the increase in the share reserve would have been 562,717 shares of common stock, which is an increase of 298,637 additional shares of common stock. We are requesting stockholder approval of this amendment to the 2021 ESPP so that our employees have the opportunity to purchase the maximum amount of shares of our common stock permitted by applicable law under the 2021 ESPP. We believe that the ability to participate in the 2021 ESPP is an important component of our equity compensation packages and our overall talent strategy.
Stockholder Approval
If this Proposal 3 is approved by our stockholders, the amendment to our 2021 ESPP will become effective as of the date of the Annual Meeting.
If this Proposal 3 is approved, then the number of shares of our common stock reserved for issuance under our 2021 ESPP will automatically increase on January 1st of each year, beginning on January 1, 2023 and continuing through and including January 1, 2031, by the lesser of (i) 1% of the total number of shares of our common stock and Series Preferred and (ii) 1,550,000 shares of common stock.
In the event that our stockholders do not approve this Proposal 3, the amendments to our 2021 ESPP will not become effective and the 2021 ESPP will continue to be effective in accordance with its current terms.
Before the Board of Directors approved the amendment to the 2021 ESPP, we proactively contacted and met with stockholders representing over 60% of our outstanding capital stock to solicit feedback on our equity incentive practices and the ways in which we were considering amending the 2021 ESPP. Stockholder feedback received during these meetings was supportive, including about increasing the annual automatic share increase, and communicated to our Compensation Committee and to our Board of Directors.
28
Vote Required
The affirmative vote of a majority of shares present or represented by proxy and entitled to vote on this Proposal 3 at the Annual Meeting will be required to approve this Proposal 3. Abstentions will have the same effect as “Against” votes. Broker non-votes are counted towards a quorum but are not counted for any purpose in determining whether this Proposal 3 has been approved.
Description of the 2021 ESPP
A summary of the material features of the 2021 ESPP follows below. The summary is qualified by the full text of the 2021 ESPP, as proposed to be amended, that is attached as Appendix B to this proxy statement.
Our Board of Directors adopted our 2021 ESPP, and our stockholders approved our 2021 ESPP, in February 2021. The 2021 ESPP became effective immediately prior to, and contingent upon, the execution of the underwriting agreement related to our initial public offering, which occurred on February 11, 2021. The purpose of the 2021 ESPP is to secure the services of new employees, to retain the services of existing employees, and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. The 2021 ESPP includes two components. One component is designed to allow eligible U.S. employees to purchase our common stock in a manner that may qualify for favorable tax treatment under Section 423 of the Code, as amended. In addition, purchase rights may be granted under a component that does not qualify for such favorable tax treatment because of deviations necessary to permit participation by eligible employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws. As of March 31, 2022, we had 175 U.S. employees who were eligible purchase shares of our common stock under the 2021 ESPP. As of such date, we employed no foreign nationals or other individuals employed outside of the United States.
Share reserve. The 2021 ESPP authorizes the issuance of 550,000 shares of our common stock under purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our common stock reserved for issuance automatically increases on January 1 of each calendar year, beginning on January 1, 2022, through (and including) January 1, 2031, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on December 31st of the preceding year and (ii) 1,550,000 shares of common stock; provided that before the date of any such increase, our Board of Directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). If the 2021 ESPP, as proposed to be amended by Proposal 3, is approved by our stockholders, the number of shares of our common stock reserved for issuance under our 2021 ESPP will automatically increase in January 1 of each calendar year, starting on January 1, 2023 through (and including) January 1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of our common stock and Series Preferred outstanding on December 31st of the preceding calendar year and (ii) 1,550,000 shares of common stock; provided that before the date of any such increase, our Board of Directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). As of March 31, 2022, 212,147 shares of our common stock have been purchased under the 2021 ESPP and 601,933 shares of our common stock remained available for issuance.
Administration. Our Board of Directors administers the 2021 ESPP and may delegate its authority to administer the 2021 ESPP to our Compensation Committee. The 2021 ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of our common stock on specified dates during such offerings. Under the 2021 ESPP, we may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for employees participating in the offering. An offering under the 2021 ESPP may be terminated under certain circumstances. In February 2022, our Board of Directors adopted an offering document that governs offerings under the 2021 ESPP (the “Offering Document”) pursuant to which offerings will generally be for consecutive, non-overlapping periods of six months, commencing on March 10 and September 10 each year.
Payroll deductions. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the 2021 ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the 2021 ESPP) for the purchase of our common stock under the 2021 ESPP. Unless otherwise determined by our Board of Directors, common stock will be purchased for the accounts of employees participating in the 2021 ESPP at a price per share that is at least the lesser of (1) 85% of the fair market value of a share of our common stock on the first date of an offering, or (2) 85% of the fair market value of a share of our common stock on the date of purchase. As of March 31, 2022, the closing price of our common stock as reported on Nasdaq was $1.41 per share.
29
Limitations. Employees may have to satisfy one or more of the following service requirements before participating in the 2021 ESPP, as determined by our Board of Directors, including: (1) being customarily employed for more than 20 hours per week, (2) being customarily employed for more than five months per calendar year, or (3) continuous employment with us or one of our affiliates for a period of time (not to exceed two years) .
No employee may purchase shares under the 2021 ESPP at a rate in excess of $25,000 worth of our common stock based on the fair market value per share of our common stock at the beginning of an offering for each calendar year such a purchase right is outstanding. In addition, no employee will be eligible for the grant of any purchase rights under the 2021 ESPP if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value under Section 424(d) of the Code. Finally, pursuant to the Offering Document, in no event may an employee purchase more than 4,750 shares of our common stock during any six month offering.
Changes to capital structure. In the event that there occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or similar transaction, the Board of Directors will make appropriate adjustments to: (1) the class(es) and maximum number of shares reserved under the 2021 ESPP, (2) the class(es) and maximum number of shares by which the share reserve may increase automatically each year, (3) the class(es) and number of shares subject to and purchase price applicable to outstanding offerings and purchase rights, and (4) the class(es) and number of shares that are subject to purchase limits under ongoing offerings.
Corporate transactions. In the event of certain significant corporate transactions, any then-outstanding rights to purchase our stock under the 2021 ESPP may be assumed, continued, or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue, or substitute for such purchase rights, then the participants’ accumulated payroll contributions will be used to purchase shares of our common stock within 10 business days before such corporate transaction, and such purchase rights will terminate immediately after such purchase.
Under the 2021 ESPP, a corporate transaction is generally the consummation of: (1) a sale of all or substantially all of our assets, (2) the sale or disposition of more than 50% of our outstanding securities, (3) a merger or consolidation where we do not survive the transaction, and (4) a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction.
2021 ESPP amendment or termination. Our Board of Directors has the authority to amend or terminate our 2021 ESPP, provided that except in certain circumstances such amendment or termination may not materially impair any outstanding purchase rights without the holder’s consent. We will obtain stockholder approval of any amendment to our 2021 ESPP as required by applicable law or listing requirements.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income tax consequences to participants and us with respect to participation in the 2021 ESPP, as proposed to be amended by Proposal 3. The discussion is based on the Code, applicable Treasury regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. This summary is not intended to be exhaustive and does not discuss the income tax laws of any local, state or foreign jurisdiction in which a participant may reside. Because the tax consequences to any participant may depend on his or her particular situation, each participant should consult the participant’s tax adviser regarding the federal, state, local and other tax consequences of participation in the 2021 ESPP.
The Company intends that the 2021 ESPP qualify as an “employee stock purchase plan” under Code Section 423.
Under the Code, the Company is deemed to grant participants an “option” on the first day of each offering period to purchase as many shares of common stock as the participant will be able to purchase with the payroll deductions credited to his or her account during the offering period. On the last day of each offering period, the purchase price is determined and the participant is deemed to have exercised the “option” and to have purchased the number of shares of common stock his or her accumulated payroll deductions will purchase at the purchase price on the last day of the offering period.
30
Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income as well as the requirement of reasonableness and the satisfaction of our tax reporting obligations.
423 Component
Rights granted under the 423 Component (as defined in the 2021 ESPP) of the 2021 ESPP are intended to qualify for favorable federal income tax treatment associated with rights granted under an employee stock purchase plan which qualifies under the provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares of our common stock as if such amounts were actually received. Otherwise, under the 423 Component, no income will be taxable to a participant as a result of the granting or exercise of a purchase right until a sale or other disposition of the acquired shares. The taxation upon such sale or disposition will depend upon the holding period of the acquired shares.
Under the 423 Component, if the shares are sold or otherwise disposed of more than two years after the beginning of the offering period and more than one year after the shares are transferred to the participant, then the lesser of the following will be treated as ordinary income: (i) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price; or (ii) the excess of the fair market value of the shares as of the beginning of the offering period over the purchase price (determined as of the beginning of the offering period). Any further gain or any loss will be taxed as a long-term capital gain or loss.
Under the 423 Component, if the shares are sold or otherwise disposed of before the expiration of either of the holding periods described above, then the excess of the fair market value of the shares on the purchase date over the purchase price will be treated as ordinary income at the time of such sale or disposition. The balance of any gain will be treated as capital gain. Even if the shares are later sold or otherwise disposed of for less than its fair market value on the purchase date, the same amount of ordinary income is attributed to the participant, and a capital loss is recognized equal to the difference between the sales price and the fair market value of the shares on such purchase date. Any capital gain or loss will be short-term or long-term, depending on how long the shares have been held.
There are no federal income tax consequences to us by reason of the grant or exercise of rights under the 423 Component. 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).
Non-423 Component
Under the Non-423 Component (as defined in the 2021 ESPP), the excess of the fair market value of the shares on the purchase date over the purchase price will be treated as ordinary income at the time of such purchase. The amount of such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be a capital gain or loss. Any capital gain or loss will be short-term or long-term, depending on how long the shares have been held.
Under the Non-423 Component, we are entitled to a deduction in the year of purchase equal to the amount of ordinary income realized by a participant as a result of such purchase (subject to the requirement of reasonableness and the satisfaction of tax reporting obligations).
NEW PLAN BENEFITS UNDER THE 2021 ESPP, AS AMENDED
The table setting forth the benefits or amounts that will be received by or allocated to certain individuals and groups under the 2021 ESPP, as proposed to be amended by this Proposal 3, if such benefits or amounts are determinable are set forth under the section titled “Proposal 2—Approval of an Amendment to the Talis Biomedical Corporation 2021 Equity Incentive Plan—New Plan Benefits Under the 2021 Plan, as Amended, and the 2021 ESPP, as Amended.”
31
PLAN BENEFITS UNDER THE 2021 ESPP
The following table sets forth, for each of the individuals and the various groups indicated, the total number of shares of our common stock purchased by participating employees under the 2021 ESPP, as of March 31, 2022.
Name and Position |
|
Number of Shares |
|
|
Robert J. Kelley |
|
|
2,564 |
|
J. Roger Moody, Jr. |
|
|
— |
|
Douglas Liu |
|
|
— |
|
Brian Coe |
|
|
— |
|
Kimberly J. Popovits |
|
|
— |
|
Brian J. Blaser |
|
|
— |
|
All current executive officers as a group |
|
|
2,564 |
|
All current directors who are not executive officers as a group |
|
|
— |
|
Each nominee for election as a director |
|
|
|
|
Felix Baker, Ph.D. |
|
|
— |
|
Melissa Gilliam, M.D., M.P.H. |
|
|
— |
|
Matthew L. Posard |
|
|
— |
|
Each associate of any such executive directors, executive officers or director nominees |
|
|
— |
|
Each other person who received or is to receive 5% of awards |
|
|
— |
|
All employees, including all current officers who are not executive officers, as a group |
|
|
209,583 |
|
The Board of Directors Recommends
a Vote in Favor of Proposal 3.
32
Proposal 4
Ratification of Selection of Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022 and has further directed that management submit the selection of its independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited the Company’s financial statements since January 2016. Representatives of Ernst & Young LLP will be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither the Company’s Bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm. However, the Audit Committee of the Board of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board of Directors will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board of Directors in its discretion may direct the appointment of different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present or represented by proxy and entitled to vote on the matter at the Annual Meeting will be required to ratify the selection of Ernst & Young LLP.
Principal Accountant Fees and Services
The following table presents fees for professional audit services by Ernst & Young LLP for the audit of the Company’s financial statements for the years ended December 31, 2021 and December 31, 2020 and fees billed for other services rendered by Ernst & Young during these periods.
|
|
Fiscal Year Ended |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(in thousands) |
|
|||||
Audit Fees(1) |
|
$ |
1,036 |
|
|
$ |
1,740 |
|
Audit-related Fees |
|
|
— |
|
|
|
— |
|
Tax Fees |
|
|
— |
|
|
|
— |
|
All Other Fees(2) |
|
|
2 |
|
|
|
— |
|
Total Fees |
|
$ |
1,038 |
|
|
$ |
1,740 |
|
All fees described above were pre-approved by the Audit Committee or our Board of Directors.
Pre-Approval Policies and Procedures.
The Audit Committee has adopted a policy (the “Pre-Approval Policy”) that sets forth the procedures and conditions pursuant to which audit and non-audit services proposed to be performed by the independent auditor may be pre-approved. The Pre-Approval Policy generally provides that we will not engage Ernst & Young LLP to render any audit, review, attest, tax or other non-audit services unless the service is either (i) explicitly approved by the Audit Committee (specific pre-approval) or (ii) entered into pursuant to the pre-approval policies and procedures described in the Pre-Approval Policy. With respect to each service proposed to be pre-approved, the independent registered public accounting firm must provide timely and sufficient detail to enable the Audit Committee’s assessment of the permissibility of the service to be provided, fee arrangements and the effect of the service on the independent registered public accounting firm’s independence.
33
The Board Of Directors Recommends
A Vote In Favor Of Proposal 4.
Security Ownership of
Certain Beneficial Owners and Management
The following table sets forth certain information regarding the ownership of the Company’s common stock, as of March 31, 2022 by: (i) each director and nominee for director; (ii) each of the executive officers named in the Summary Compensation Table; (iii) all current executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent of its common stock.
The table is based upon information supplied by officers, directors and principal stockholders, and found in Schedules 13D and 13G filed with the SEC and other sources believed to be reliable by the Company. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 26,618,920 shares of common stock and 29,863,674 shares of Series 1 Preferred Stock outstanding on March 31, 2022, adjusted as required by rules promulgated by the SEC. The number of shares of common stock and Series 1 Preferred Stock used to calculate the percentage ownership of each listed beneficial owner includes the shares of common stock underlying options or convertible securities held by such beneficial owner that are exercisable or convertible within 60 days following March 31, 2022. Unless otherwise indicated, the address for each person or entity listed in the table is c/o Talis Biomedical Corporation, 230 Constitution Drive, Menlo Park, California 94025.
|
|
Beneficial Ownership |
|
|||||||||||||||||
|
|
Common Stock |
|
|
Series 1 Preferred Stock |
|
|
Total |
|
|||||||||||
Beneficial Owner |
|
Number of |
|
|
Percent of |
|
|
Number of |
|
|
Percent of |
|
|
Percent of |
|
|||||
5% or Greater Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Entities Affiliated with Baker Brothers Advisors, |
|
|
7,625,536 |
|
|
|
29 |
% |
|
|
29,863,674 |
|
|
|
100 |
% |
|
|
66 |
% |
Entities affiliate with Greenlight Capital(2) |
|
|
3,970,279 |
|
|
|
15 |
% |
|
|
— |
|
|
|
— |
|
|
|
7 |
% |
Entities affiliated with ArrowMark Colorado |
|
|
3,735,237 |
|
|
|
14 |
% |
|
|
— |
|
|
|
— |
|
|
|
7 |
% |
Named Executive Officers and Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Robert Kelley(4) |
|
|
126,398 |
|
|
* |
|
|
|
— |
|
|
|
— |
|
|
* |
|
||
J. Roger Moody, Jr(5) |
|
|
217,454 |
|
|
|
1 |
% |
|
|
— |
|
|
|
— |
|
|
* |
|
|
Douglas Liu(6) |
|
|
122,006 |
|
|
* |
|
|
|
— |
|
|
|
— |
|
|
* |
|
||
Brian Coe(7) |
|
|
1,014,720 |
|
|
|
4 |
% |
|
|
— |
|
|
|
— |
|
|
|
2 |
% |
Kimberly J. Popovits(8) |
|
|
546,618 |
|
|
|
2 |
% |
|
|
— |
|
|
|
— |
|
|
|
1 |
% |
Brian J. Blaser |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Felix Baker, Ph.D.(9) |
|
|
7,625,536 |
|
|
|
29 |
% |
|
|
29,863,674 |
|
|
|
100 |
% |
|
|
66 |
% |
Raymond Cheong, M.D., Ph.D. |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Melissa Gilliam, M.D., M.P.H.(10) |
|
|
22,290 |
|
|
* |
|
|
|
— |
|
|
|
— |
|
|
* |
|
||
Jeryl L. Hillman(11) |
|
|
13,654 |
|
|
* |
|
|
|
— |
|
|
|
— |
|
|
* |
|
||
Rustem F. Ismagilov(12) |
|
|
588,767 |
|
|
|
2 |
% |
|
|
— |
|
|
|
— |
|
|
|
1 |
% |
Matthew L. Posard(13) |
|
|
148,232 |
|
|
|
1 |
% |
|
|
— |
|
|
|
— |
|
|
* |
|
|
Randal Scott, Ph.D.(14) |
|
|
1,788,297 |
|
|
|
7 |
% |
|
|
— |
|
|
|
— |
|
|
|
3 |
% |
All executive officers and directors as a group |
|
|
11,077,246 |
|
|
|
42 |
% |
|
|
29,863,674 |
|
|
|
100 |
% |
|
|
72 |
% |
* Less than one percent.
34
35
Information About Our Executive Officers
Executive Officers
The names, ages, and positions of all executive officers as of April 26, 2022 are listed below.
Name |
Age |
Position(s) |
Robert Kelley |
50 |
Chief Executive Officer and Director |
J. Roger Moody, Jr. |
54 |
Chief Financial Officer |
The biography of Mr. Kelley is set forth in “Proposal 1: Election of Directors” above.
J. Roger Moody, Jr. has served as our Chief Financial Officer since May 2020. From August 2017 to May 2020, Mr. Moody was Chief Financial Officer of Clinical Genomics, Inc., a colorectal cancer diagnostics company. From July 2015 to August 2017, Mr. Moody was Chief Executive Officer and a member of the board of directors of GlySure Limited, a medical device company, and from February 2015 to July 2015 he was Chief Operating Officer of GlySure Limited. Prior to GlySure Limited, Mr. Moody served as the Chief Financial Officer and Vice President of Finance & Administration of Nanosphere, Inc., a publicly held molecular diagnostics platform company, from May 2007 to February 2015. Mr. Moody received a B.S. in Finance from Syracuse University and an M.B.A. from the University of Chicago.
36
Executive and director Compensation
Summary Compensation Table
The following table shows, for the years ended December 31, 2021 and 2020, compensation awarded or paid to, or earned by, all individuals who served as the Company’s principal executive officer during the year ended December 31, 2021 and the two most highly compensated executive officers (other than the principal executive officer) who were serving as an executive officer at December 31, 2021 (the “named executive officers”).
Summary Compensation Table for Fiscal 2021
Name and Principal Position5 |
Year |
Salary |
|
Bonus |
|
Stock Awards |
|
Option Awards |
|
All Other Compensation |
|
Total ($) |
|
||||||
Robert Kelley |
2021 |
|
321,894 |
|
|
57,822 |
|
|
— |
|
|
1,778,459 |
|
12,697(9) |
|
|
2,170,872 |
|
|
|
2020 |
|
88,636 |
|
|
30,750 |
|
|
— |
|
|
1,261,103 |
|
|
3,701 |
|
|
1,384,190 |
|
J. Roger Moody, Jr. |
2021 |
|
370,200 |
|
|
65,546 |
|
|
— |
|
|
521,198 |
|
13,084 (10) |
|
|
970,028 |
|
|
Douglas Liu |
2021 |
|
351,167 |
|
|
63,781 |
|
|
— |
|
|
801,844 |
|
2,806(11) |
|
|
1,219,598 |
|
|
|
2020 |
|
71,402 |
|
|
33,583 |
|
|
— |
|
|
1,335,600 |
|
|
355 |
|
|
1,440,940 |
|
Brian Coe |
2021 |
|
270,521 |
|
|
— |
|
|
— |
|
|
— |
|
351,831(12) |
|
|
622,352 |
|
|
|
2020 |
|
359,542 |
|
|
180,000 |
|
|
— |
|
|
4,698,594 |
|
|
16,481 |
|
|
5,254,617 |
|
Kimberly J. Popovits |
2021 |
|
96,354 |
|
|
— |
|
|
— |
|
|
1,633,055 |
|
40,761(13) |
|
|
1,770,170 |
|
|
Brian J. Blaser |
2021 |
|
14,773 |
|
|
— |
|
2,793,750(14) |
|
|
2,184,521 |
|
722(15) |
|
|
4,993,766 |
|
||
37
Narrative to the Summary Compensation Table
Annual Base Salary
The base salary of our named executive officers is generally determined and approved by our Board of Directors in connection with the commencement of employment of the named executive officer and may be adjusted from time to time thereafter as the board of directors determines appropriate, within the ranges recommended by Compensia, our independent compensation consultant. The 2021 annual base salaries for our named executive officers are set forth in the table below.
Name |
|
2021 Base Salary ($) |
|
|
Robert Kelley |
|
525,000(1) |
|
|
J. Roger Moody, Jr. |
|
374,000(2) |
|
|
Douglas Liu |
|
375,000(3) |
|
|
Brian Coe |
|
390,000(4) |
|
|
Kimberly J. Popovits |
|
|
375,000 |
|
Brian J. Blaser |
|
|
650,000 |
|
Bonus Opportunity
In addition to base salaries, each of our named executive officers generally is eligible to receive annual cash bonuses, which are designed to provide appropriate incentives to our named executive officers to achieve defined annual corporate goals and to reward our named executive officers for their individual achievements. The annual bonus awarded to each named executive officer may be based in part on the extent to which we achieve corporate goals. At the end of the year, our Board of Directors reviews our performance against each corporate goal and considers the extent to which we achieved each of our corporate goals.
There is no minimum bonus percentage or amount established for our named executive officer and, as a result, the bonus amounts vary from year to year based on corporate and, when applicable, individual performance.
For 2021, each of our named executive officers was eligible for a target bonus equal to the following percentage of their respective base salaries: 75% for Mr. Kelley, 45% for Mr. Moody, 45% for Mr. Liu, 55% for Mr. Coe and 40% for Ms. Popovits. Mr. Blaser was not eligible for a target bonus in 2021. In March 2022, the Compensation Committee of our Board of Directors determined that, given the challenges in the business and the ambiguity in the 2021 corporate goals, it would exercise its discretion and pay bonuses to executive officers at 40% of the individuals’ target bonus percentage. As a result, the Company paid annual performance bonuses for 2021 of $57,822 to Mr. Kelley, $65,546 to Mr. Moody and $63,781 to Mr. Liu.
Pursuant to the terms of his Separation Agreement (as defined below) with us, Mr. Coe was entitled to be paid his 2021 annual bonus assuming achievement at 100% of target prorated through August 30, 2021, which amounted to a payment of $140,938. See “—Employment Agreements with our Named Executive Officers” below for more information on the Separation Agreement.
Equity-Based Incentive Awards
38
Our equity-based incentive awards are designed to align our named executive officers’ interests with those of our stockholders and to retain and incentivize our named executive officers over the long-term. Generally, our Board of Directors, or Compensation Committee of our Board of Directors, approves equity grants. In 2021, the Compensation Committee delegated authority to the Company’s Chief Executive Officer to grant, without further action required by the Board of Directors or the Compensation Committee, stock awards to employees who are not executive officers of the Company or members of the Board of Directors. The purpose of this delegation of authority is to support the Company’s recruiting and retention efforts by enhancing the flexibility of option administration within the Company and facilitating the timely grant of options to such employees within specified limits approved by the Compensation Committee. In particular, the maximum number of stock awards that the Chief Executive Officer may grant pursuant to such authority may not exceed stock awards to acquire more than an aggregate of 1,500,000 shares and each individual grant must fall within certain target grants by job level set by our Compensation Committee.
Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. Our named executive officers generally are awarded an initial new hire grant upon commencement of employment. Additional grants may occur periodically in order to specifically incentivize our named executive officers with respect to achieving certain corporate goals or to reward our named executive officers for exceptional performance.
Prior to the closing of our initial public offering in February 2021, we granted all equity awards pursuant to our 2013 Plan. Following our initial public offering, we have granted all equity awards pursuant to our 2021 Plan and the Talis Biomedical Corporation 2021 Inducement Plan (the “2021 Inducement Plan”). All options are granted with a per share exercise price equal to no less than the fair market value of a share of our common stock on the date of the grant of such award. Generally, our options vest over a four-year period subject to the holder’s continuous service to us, as further described under “—Outstanding equity awards at fiscal year-end” below. For more information about our 2013 Plan, 2021 Plan and our 2021 Inducement Plan see below under “—Equity Benefit Plans.”
In August 2021, in connection with her appointment as our Interim Chief Executive Officer, we granted Ms. Popovits an option to purchase 550,000 shares of our common stock with an exercise price per share of $9.06. The option was issued pursuant to the 2021 Plan and vested in 12 equal monthly installments beginning on September 30, 2021. Such option ceased vesting upon the commencement of full-time employment of Mr. Blaser in December 2021 and resulted in her vesting in an aggregate of 275,000 shares subject to such option.
In September 2021, we granted options to purchase 130,000 shares to Mr. Kelley, 130,000 shares to Mr. Moody and 200,000 shares to Mr. Liu, each with an exercise price per share of $6.17. Twenty-five percent of the option shares vest on September 28, 2022 and the balance vests in 36 equal monthly installments thereafter, subject to the named executive officer’s continued services to us. In addition, the options fully vest if upon or within 12 months following a change in control of the Company the named executive officer experiences an involuntary termination without cause (and not due to death or disability) or voluntarily resigns for certain good reasons.
In December 2021, in connection with his appointment as our Chief Executive Officer, we granted Mr. Blaser (i) pursuant to the 2021 Plan, an incentive stock option to purchase 111,856 shares of our common stock with an exercise price per share of $4.47 (the “Incentive Option”) and (ii) pursuant to the Inducement Plan, (A) a nonqualified stock option to purchase 638,144 shares of our common stock with an exercise price per share of $4.47 (the “Inducement Option” and, together with the Incentive Option, the “Options”), and (B) a restricted stock unit award covering 625,000 shares of our common stock (the “RSU Award”). Each Option will vest over a five-year period, with 20% of the shares subject to such Option vesting on December 1, 2022 and the balance of the shares subject to such Option vesting in equal installments over the following 48 months. The RSU Award will vest over a five-year period, with 20% of the shares subject to the RSU Award vesting on December 1, 2022 and the balance of the shares subject to the RSU Award vesting in a series of four equal successive annual installments on December 31, 2023, 2024, 2025 and 2026. The Options and RSU Award ceased vesting on the date of Mr. Blaser’s resignation, resulting in Mr. Blaser forfeiting all shares underlying such Options and RSU Award.
In December 2021, in connection with his appointment as our Chief Executive Officer, we granted Mr. Kelley a stock option to purchase 450,000 shares of our common stock with an exercise price per share of $4.28. The option was issued pursuant to our 2021 Plan and will vest over a four-year period, with 25% of the shares subject to such option vesting on December 8, 2022 and the balance of the shares subject to such option vesting in equal installments over the following 36 months. In addition, the options fully vest if upon or within 12 months following a change in control of the Company the named executive officer experiences an involuntary termination without cause (and not due to death or disability) or voluntarily resigns for certain good reasons.
Employment Agreements with our Named Executive Officers
39
Robert Kelley. In August 2020, we entered into an offer letter with Mr. Kelley in connection with his service as our Chief Commercial Officer that provided for, among other things, an initial annual base salary of $300,000, an annual target bonus equal to 30% of his annual base salary and a stock option to purchase 297,202 shares of our common stock (as reflected below under “—Outstanding Equity Awards at Fiscal Year End”). In connection with his appointment as our Chief Executive Officer, in December 2021, we entered into an offer letter with Mr. Kelley that provides for, among other things, an initial annual base salary of $525,000, an annual target bonus equal to 75% of his annual base salary beginning in 2022, continued eligibility for his 2021 annual target bonus pursuant to the terms of his Chief Commercial Officer offer letter and a stock option to purchase 450,000 shares of our common stock (as further described above under “—Equity Based Incentive Awards”). Mr. Kelley is also entitled to certain travel and housing reimbursements (plus tax gross ups) in connection with his weekly travel from his remote working location to one of our facilities, which began in fiscal 2022.
J. Roger Moody, Jr. In April 2020, we entered into an offer letter with Mr. Moody that provides for, among other things, an initial annual base salary of $360,000, an annual target bonus of 40% of his annual base salary, a stock option to purchase 302,797 shares of our common stock and an additional option to purchase 145,454 shares of our common stock (equal to 1.25% of the outstanding shares of common stock on an as converted basis of the Company) when we elected to take our Tranche 3 investments from our prior investment round, which condition was met and an option to purchase 147,100 shares of our common stock was granted in August 2020 (equal to 1.25% of the outstanding shares of common stock on an as converted basis of the Company on the grant date) (as reflected below under “—Outstanding Equity Awards at Fiscal Year End”).
Douglas Liu. In September 2020, we entered into an offer letter with Mr. Liu that provides for, among other things, an initial annual base salary of $325,000, an annual target bonus of 40% of his annual base salary and an option to purchase 314,685 shares of our common stock (as reflected below under “—Outstanding Equity Awards at Fiscal Year End”). In December 2021, we approved certain travel and housing reimbursements (plus tax gross ups) with respect to calendar year 2022 for Mr. Liu. In March 2022, we entered into a Separation Agreement and General Release with Mr. Liu (the “Liu Separation Agreement”), pursuant to which he received (i) a lump sum severance payment of $187,500 (equal to 6 months of his base salary) and (ii) and payment of COBRA premiums for 6 months.
Brian Coe. Prior to his resignation, we did not maintain a written employment agreement or offer letter agreement with Mr. Coe. In connection with his resignation in August 2021, we entered into a separation and consulting agreement with Mr. Coe (the “Separation Agreement”) pursuant to which he will provide consulting and advisory services to us through May 31, 2022 (the “Consulting Period) for a monthly fee of $31,250, payment of COBRA premiums during the Consulting Period (subject to early termination) and continued vesting of all outstanding equity awards during the Consulting Period. Following the termination of the Consulting Period, provided that Mr. Coe has not been terminated for Cause (as defined in the Separation Agreement) and subject to receipt of an effective release of claims against us, Mr. Coe will receive a lump sum payment of $375,000 and continued payment of COBRA premiums for 12 months (subject to early termination). In addition, the Separation Agreement provides that Mr. Coe will be (i) indemnified by us in respect of services provided by Mr. Coe to the Company during the Consulting Period and (ii) paid his 2021 annual bonus prorated through August 30, 2021. The benefits Mr. Coe may receive pursuant to the Separation Agreement are in lieu of any benefits that Mr. Coe may be eligible to receive under our Severance and Change in Control Plan.
Kimberly J. Popovits. In March 2020, we entered into a letter agreement with Ms. Popovits confirming her appointment to our Board of Directors, that provides for an annual stipend of $24,000, to be paid on a quarterly basis (of which $12,818 was actually paid), and an option to purchase shares of our common stock equal to 0.35% of the Company on a fully diluted basis. In May 2020, we granted Ms. Popovits an option to purchase 84,615 shares of our common stock in connection with her commencement of services with us as a director (as further described below under “—Outstanding Equity Awards at Fiscal Year End”). The annual stipend provided for in her letter agreement was superseded by our non-employee director compensation policy that was adopted in February 2021. During her period of service as our Interim Chief Executive Officer, Ms. Popovits continued to vest in outstanding equity awards granted in connection with her service as a member of our Board of Directors but was not entitled to receive any additional cash retainers payable to non-employee members of our Board of Directors.
We did not enter into any written agreement with Ms. Popovits in connection with her appointment as our Interim Chief Executive Officer in August 2021. However, in connection with such appointment, we agreed to pay her an annual base salary of $375,000 and she was eligible for a target bonus equal to 40% of such base salary. We also granted Ms. Popovits an option to purchase 550,000 shares of the Company’s common stock, vesting in 12 equal monthly installments beginning on September 30, 2021. Such option ceased vesting upon the commencement of full-time employment of Mr. Blaser in December 2021 and resulted in her vesting in an aggregate of 275,000 shares subject to such option.
40
Brian J. Blaser. In November 2021, we entered into a letter agreement with Mr. Blaser that provided for, among other things, an initial annual base salary of $650,000, an annual target bonus equal to 100% of his annual base salary beginning in 2022, the Incentive Option, the Inducement Option and the RSU Award (as further described above under “—Equity Based Incentive Awards”).
Each of our named executive officer’s employment is (or was) “at will” and may be terminated by us at any time. For a discussion of the severance and other benefits to be provided in connection with a termination of employment and/or a change in control under the arrangements with our named executive officers please see “—Potential Payments Upon Termination or Change in Control” below.
Outstanding Equity Awards at Fiscal year end
The following table shows for the fiscal year ended December 31, 2021, certain information regarding outstanding equity awards at fiscal year end for the named executive officers.
Outstanding Equity Awards At December 31, 2021
Option Awards(1) |
|
|||||||||||||||||
Name |
Vesting Commencement Date |
|
Number of |
|
Number of Securities Underlying Unexercised Options |
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options |
|
Option Exercise Price |
|
Option Expiration Date |
|
||||||
Robert Kelley |
8/31/2020 |
|
|
99,067 |
|
|
198,135 |
|
|
— |
|
|
6.25 |
|
9/3/2030 |
|
||
|
9/28/2021 |
|
|
— |
|
|
130,000 |
|
|
— |
|
|
6.17 |
|
10/2/2031 |
|
||
|
12/8/2021 |
|
|
— |
|
|
450,000 |
|
|
— |
|
|
4.28 |
|
12/8/2031 |
|
||
J. Roger Moody, Jr. |
5/4/2020 |
|
|
119,857 |
|
|
182,940 |
|
|
— |
|
|
1.51 |
|
5/5/2030 |
|
||
|
8/4/2020 |
|
|
49,033 |
|
|
98,067 |
|
|
— |
|
|
6.25 |
|
8/6/2030 |
|
||
|
9/28/2021 |
|
|
— |
|
|
130,000 |
|
|
— |
|
|
6.17 |
|
10/2/2031 |
|
||
Douglas Liu |
9/28/2020 |
|
|
98,339 |
|
|
216,346 |
|
|
— |
|
|
6.25 |
|
9/28/2030 |
|
||
|
9/28/2021 |
|
|
— |
|
|
200,000 |
|
|
— |
|
|
6.17 |
|
10/2/2031 |
|
||
Brian Coe |
5/1/2018 |
|
|
6,364 |
|
|
741 |
|
|
— |
|
1.51(4) |
|
5/20/2028 |
|
|||
|
10/1/2018 |
|
|
1,457 |
|
|
7,285 |
|
|
— |
|
1.51(4) |
|
11/4/2028 |
|
|||
|
|
— |
|
|
— |
|
|
— |
|
241,958(3) |
|
1.51(4) |
|
2/11/2030 |
|
|||
|
11/1/2019 |
|
|
200,771 |
|
|
391,711 |
|
|
— |
|
1.51(4) |
|
2/11/2030 |
|
|||
|
8/4/2020 |
|
|
195,875 |
|
|
391,752 |
|
|
— |
|
|
6.25 |
|
8/6/2030 |
|
||
Kimberly J. Popovits |
3/19/2020 |
|
|
37,019 |
|
|
47,596 |
|
|
— |
|
|
1.51 |
|
5/5/2030 |
|
||
|
8/4/2020 |
|
|
13,702 |
|
|
27,404 |
|
|
— |
|
|
6.25 |
|
8/6/2030 |
|
||
|
8/30/2021 |
|
275,000(5) |
|
|
— |
|
|
— |
|
|
9.06 |
|
8/30/2031 |
|
|||
Brian J. Blaser |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
41
Potential Payments Upon Termination or Change in Control
Regardless of the manner in which service terminates, certain of our named executive officers is entitled to receive amounts earned during his or her term of service, including unpaid salary and unused vacation, as applicable.
Each of our named executive officers is eligible to receive benefits under the terms of our Severance and Change in Control Plan adopted by the Board of Directors in February 2021 (“Severance Plan”). The Severance Plan provides for severance and/or change in control benefits to the named executive officers upon (i) a “change in control termination” or (ii) a “regular termination” (each as described below). All severance benefits under the Severance Plan are subject to the executive’s execution of an effective release of claims against the Company.
Upon a change in control termination, each of our named executive officers is entitled to a lump sum payment equal to a portion of his base salary (18 months for Mr. Kelley and 12 months for Mr. Moody), a lump sum payment equal to 150% (for Mr. Kelley) or 100% (for Mr. Moody) of his or her annual target cash bonus, payment of COBRA premiums for a period of time (up to 18 months for Mr. Kelley and 12 months for Mr. Moody) and accelerated vesting of outstanding time-vesting equity awards.
To the extent an equity award is not assumed, continued or substituted for in the event of certain change in control transactions and the executive’s employment is not terminated as of immediately prior to such change in control, the vesting of such equity award will also accelerate in full (and for equity awards subject to performance vesting, performance will be deemed to be achieved at target, unless otherwise provided in individual award documents).
Upon a regular termination, each of our named executive officers is entitled to a lump sum payment equal to a portion of his base salary (12 months for Mr. Kelley and 6 months for Mr. Moody) and payment of COBRA premiums for a period of time (up to 12 months for Mr. Kelley and 6 months for Mr. Moody). In addition, Mr. Moody is entitled to a lump sum payment equal to 100% of his annual target cash bonus.
For purposes of the Severance Plan, a “regular termination” is an involuntary termination (i.e., a termination other than for cause (and not as a result of death or disability) or a resignation for good reason (as such terms are defined in the Severance Plan) that does not occur during the period of time beginning three months prior to, and ending 12 months following, a “change in control” (as defined in the 2021 Plan), or the “change in control period.” A “change in control termination” is a regular termination that occurs during the change in control period.
Each of our named executive officers, other than Mr. Blaser, holds options that were granted subject to the terms of our 2013 Plan. A description of the termination and change in control provisions in our 2013 Plan and applicable to the options granted to our named executive officers is provided under “—Equity Benefit Plans” and, with respect to our named executive officers, “—Outstanding Equity Awards at Fiscal Year-End.”
Although Mr. Coe was eligible to receive benefits under our Severance Plan, such eligibility for benefits was superseded by the terms of his Separation Agreement with us. Such benefits are described in more detail above under “—Employment Agreements with our Named Executive Officers.” In addition, although Mr. Liu was eligible to participate in the Severance Plan, he was not eligible to receive benefits under such plan in connection with his resignation. Mr. Liu received severance benefits pursuant to the Liu Separation Agreement, as described in more detail above under “—Employment Agreements with our Named Executive Officers.”
Because of the interim nature of her service as an executive officer, Ms. Popovits did not participate in any generally available employee benefits in connection with the conclusion of her service as our Interim Chief Executive Officer. Although Mr. Blaser was eligible to participate in the Severance Plan, he did not receive any severance or similar benefits in connection with his resignation.
Perquisites, health, welfare and retirement benefits
Each of our named executive officers is eligible to participate in our employee benefit plans, including our medical, dental, vision, life, long term disability and accidental death and dismemberment insurance plans, in each case on the same basis as all of our other employees. We pay the premiums for the life, disability, accidental death and dismemberment insurance for all of our employees. In addition, we provide the opportunity to participate in a 401(k) plan to our employees, including each of our named executive officers, as discussed in the section below entitled “—401(k) plan.”
42
401(k) plan
We maintain a defined contribution employee retirement plan (“401(k) plan”), for our employees. Our named executive officers are each eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Code. The 401(k) plan provides that each participant may contribute up to the lesser of 100% of his or her compensation or the statutory limit, which is $19,500 for calendar year 2021. Participants that are 50 years or older can also make “catch-up” contributions, which in calendar year 2021 may be up to an additional $6,500 above the statutory limit. Participant contributions are held and invested, pursuant to the participant’s instructions, by the plan’s trustee.
We provide an automatic matching contribution as follows: 100% with respect to the first 3% of an employee’s contributions, and 50% for the next 2% of the employee’s contributions, up to a maximum company match of 4% of the employee’s contributions. We may also elect to provide for discretionary profit sharing contributions, but we did not provide any such contributions in 2021. The 401(k) plan currently does not offer the ability to invest in our securities.
Perquisites
We do not provide perquisites or personal benefits to our executive officers that we do not generally provide to our other employees (such as limited reimbursement of cell and internet expenses), except in limited circumstances. For example, in December 2021, we approved the reimbursement of certain travel and housing expenses, including tax gross ups, that may be incurred for business-related travel by Mr. Kelley and Mr. Liu that are not generally available to our other employees. However, in 2021, all business-related travel expenses incurred by Mr. Kelley and Mr. Liu were reimbursed pursuant to our reimbursement policy generally available to all employees. Accordingly, we did not provide any perquisites or personal benefits to our named executive officers in 2021 that were not generally available to our other employees.
Equity Benefit Plans
2021 Plan
Our Board of Directors adopted our 2021 Plan, and our stockholders approved our 2021 Plan, in February 2021. Our 2021 Plan is a successor to and continuation of our 2013 Equity Incentive Plan (the “2013 Plan”). Our 2021 Plan became effective on the date of the underwriting agreement related to our initial public offering, which occurred on February 11, 2021. No further grants have been, or will be, made under the 2013 Plan following the effectiveness of the 2021 Plan.
Awards. Our 2021 Plan provides for the grant of incentive stock options (“ISOs”) within the meaning of Section 422 of the Code, to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of our affiliates.
Authorized shares. Initially, the maximum number of shares of our common stock issuable under our 2021 Plan was 12,840,904 shares of our common stock, which is the sum of (1) 3,200,000 new shares, plus (2) 7,673,915 shares that remained available for the issuance of awards under our 2013 Plan as of immediately prior to the time our 2021 Plan became effective, plus (3) up to 5,166,989 shares subject to outstanding stock options or other stock awards granted under our 2013 Plan that, on or after the 2021 Plan became effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, as such shares become available from time to time.
In addition, the number of shares of our common stock reserved for issuance under our 2021 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2022 through (and including) January 1, 2031, in an amount equal to (and prior to giving effect to Proposal 2 related to our 2021 Plan described elsewhere in this proxy statement) (i) 4% of the total number of shares of our common stock outstanding on December 31 of the preceding year, or (ii) a lesser number of shares determined by our Board of Directors prior to the applicable January 1.
43
The maximum number of shares of our common stock that may be issued on the exercise of ISOs under our 2021 Plan is 39,000,000 shares.
Shares subject to stock awards granted under our 2021 Plan that expire or terminate without being exercised in full or that are paid out in cash rather than in shares do not reduce the number of shares available for issuance under our 2021 Plan. Shares withheld under a stock award to satisfy the exercise, strike or purchase price of a stock award or to satisfy a tax withholding obligation do not reduce the number of shares available for issuance under our 2021 Plan. If any shares of our common stock issued pursuant to a stock award are forfeited back to or repurchased or reacquired by us (1) because of a failure to meet a contingency or condition required for the vesting of such shares, (2) to satisfy the exercise, strike or purchase price of an award or (3) to satisfy a tax withholding obligation in connection with an award, the shares that are forfeited or repurchased or reacquired will revert to and again become available for issuance under the 2021 Plan. Any shares previously issued which are reacquired in satisfaction of tax withholding obligations or as consideration for the exercise or purchase price of a stock award will again become available for issuance under the 2021 Plan.
The maximum number of shares of common stock subject to stock awards granted under the 2021 Plan or otherwise during any period commencing on the date of the company’s annual meeting of stockholders for a particular year and ending on the day immediately prior to the date of the company’s annual meeting of stockholders for the next subsequent year to any non-employee director, taken together with any cash fees paid by us to such non-employee director during such period for service on the Board of Directors, will not exceed $750,000 in total value, or with respect to the period in which a non-employee director is first appointed or elected to our Board of Directors, $1,000,000 in total value, in each case calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes.
Plan administration. Our Board of Directors, or a duly authorized committee of our Board of Directors, will administer our 2021 Plan and is referred to as the “plan administrator” herein. Our Board of Directors may also delegate to one or more of our officers the authority to (1) designate employees (other than officers) to receive specified stock awards and (2) determine the number of shares subject to such stock awards. Under our 2021 Plan, the plan administrator has the authority to determine award recipients, grant dates, the numbers and types of stock awards to be granted, the applicable fair market value, and the provisions of each stock award, including the period of exercisability and the vesting schedule applicable to a stock award.
The plan administrator has the power to modify outstanding awards under our 2021 Plan. Subject to the terms of our 2021 Plan, the plan administrator has the authority to reprice any outstanding stock award, cancel and re-grant any outstanding stock award in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any materially impaired participant.
Stock options. ISOs and NSOs are granted under stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for stock options, within the terms and conditions of the 2021 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2021 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.
The plan administrator determines the term of stock options granted under the 2021 Plan, up to a maximum of 10 years. Unless the terms of an optionholder’s stock option agreement, or other written agreement between us and the recipient approved by the plan administrator, provide otherwise, if an optionholder’s service relationship with us or any of our affiliates ceases for any reason other than disability, death, or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service. This period may be extended in the event that either an exercise of the option or an immediate sale of shares acquired upon exercise of the option following such a termination of service is prohibited by applicable securities laws or our insider trading policy. If an optionholder’s service relationship with us or any of our affiliates ceases due to death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of 18 months following the date of death. If an optionholder’s service relationship with us or any of our affiliates ceases due to disability, the optionholder may generally exercise any vested options for a period of 12 months following the cessation of service. In the event of a termination for cause, options generally terminate upon the termination date. In no event may an option be exercised beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (1) cash, check, bank draft or money order, (2) a broker-assisted cashless exercise, (3) the tender of shares of our common stock previously owned by the optionholder, (4) a net exercise of the option if it is an NSO, or (5) other legal consideration approved by the plan administrator.
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Unless the plan administrator provides otherwise, options or stock appreciation rights generally are not transferable except by will or the laws of descent and distribution. Subject to approval of the plan administrator or a duly authorized officer, an option may be transferred pursuant to a domestic relations order, official marital settlement agreement, or other divorce or separation instrument.
Tax limitations on ISOs. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an award holder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our parent or subsidiary corporations unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (2) the term of the ISO does not exceed five years from the date of grant.
Restricted stock unit awards. Restricted stock unit awards are granted under restricted stock unit award agreements adopted by the plan administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration that may be acceptable to our Board of Directors and permissible under applicable law. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the plan administrator, or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit award. Except as otherwise provided in the applicable award agreement, or other written agreement between us and the recipient approved by the plan administrator, restricted stock unit awards that have not vested will be forfeited once the participant’s continuous service ends for any reason.
Restricted stock awards. Restricted stock awards are granted under restricted stock award agreements adopted by the plan administrator. A restricted stock award may be awarded in consideration for cash, check, bank draft or money order, past or future services to us, or any other form of legal consideration that may be acceptable to our Board of Directors and permissible under applicable law. The plan administrator determines the terms and conditions of restricted stock awards, including vesting and forfeiture terms. If a participant’s service relationship with us ends for any reason, we may receive any or all of the shares of common stock held by the participant that have not vested as of the date the participant terminates service with us through a forfeiture condition or a repurchase right.
Stock appreciation rights. Stock appreciation rights are granted under stock appreciation right agreements adopted by the plan administrator. The plan administrator determines the purchase price or strike price for a stock appreciation right, which generally cannot be less than 100% of the fair market value of our common stock on the date of grant. A stock appreciation right granted under the 2021 Plan vests at the rate specified in the stock appreciation right agreement as determined by the plan administrator. Stock appreciation rights may be settled in cash or shares of common stock or in any other form of payment as determined by the Board of Directors and specified in the stock appreciation right agreement.
The plan administrator determines the term of stock appreciation rights granted under the 2021 Plan, up to a maximum of 10 years. If a participant’s service relationship with us or any of our affiliates ceases for any reason other than cause, disability, or death, the participant may generally exercise any vested stock appreciation right for a period of three months following the cessation of service. This period may be further extended in the event that exercise of the stock appreciation right following such a termination of service is prohibited by applicable securities laws. If a participant’s service relationship with us, or any of our affiliates, ceases due to disability or death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generally exercise any vested stock appreciation right for a period of 12 months in the event of disability and 18 months in the event of death. In the event of a termination for cause, stock appreciation rights generally terminate immediately upon the occurrence of the event giving rise to the termination of the individual for cause. In no event may a stock appreciation right be exercised beyond the expiration of its term.
Performance awards. The 2021 Plan permits the grant of performance awards that may be settled in stock, cash or other property. Performance awards may be structured so that the stock or cash will be issued or paid only following the achievement of certain pre-established performance goals during a designated performance period. Performance awards that are settled in cash or other property are not required to be valued in whole or in part by reference to, or otherwise based on, the common stock.
The performance goals may be based on any measure of performance selected by the Board of Directors. The performance goals may be based on company-wide performance or performance of one or more business units, divisions, affiliates, or business segments, and may be either absolute or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Board of Directors at the time the performance award is granted, the Board of Directors will appropriately make adjustments in the method of calculating the attainment of performance goals as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects; (iii) to exclude the effects of changes to generally accepted
45
accounting principles; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; (v) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (vi) to exclude the dilutive effects of acquisitions or joint ventures; (vii) to assume that any portion of our business which is divested achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (viii) to exclude the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (ix) to exclude the effects of stock based compensation and the award of bonuses under our bonus plans; (x) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; and (xi) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles.
Other stock awards. The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the stock award (or cash equivalent) and all other terms and conditions of such awards.
Changes to capital structure. In the event there is a specified type of change in our capital structure, such as a stock split, reverse stock split, or recapitalization, appropriate adjustments will be made to (1) the class and maximum number of shares reserved for issuance under the 2021 Plan, (2) the class and maximum number of shares by which the share reserve may increase automatically each year, (3) the class and maximum number of shares that may be issued on the exercise of ISOs, and (4) the class and number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding stock awards.
Corporate transactions. The following applies to stock awards under the 2021 Plan in the event of a corporate transaction, unless otherwise provided in a participant’s stock award agreement or other written agreement with us or one of our affiliates or unless otherwise expressly provided by the plan administrator at the time of grant.
In the event of a corporate transaction, any stock awards outstanding under the 2021 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation (or its parent company), and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then (i) with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the corporate transaction, or current participants, the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the effective time of the corporate transaction (contingent upon the effectiveness of the corporate transaction), and such stock awards will terminate if not exercised (if applicable) at or prior to the effective time of the corporate transaction, and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the corporate transaction), and (ii) any such stock awards that are held by persons other than current participants will terminate if not exercised (if applicable) prior to the effective time of the corporate transaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the corporate transaction.
In the event a stock award will terminate if not exercised prior to the effective time of a corporate transaction, the plan administrator may provide, in its sole discretion, that the holder of such stock award may not exercise such stock award but instead will receive a payment equal in value to the excess (if any) of (i) the per share amount payable to holders of common stock in connection with the corporate transaction, over (ii) any per share exercise price payable by such holder, if applicable. In addition, any escrow, holdback, earn out or similar provisions in the definitive agreement for the corporate transaction may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of common stock.
Under the 2021 Plan, a corporate transaction is generally defined as the consummation of: (i) a sale of all or substantially all of our assets, (ii) the sale or disposition of at least 50% of our outstanding securities, (iii) a merger or consolidation where we do not survive the transaction, or (iv) a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction.
Change in control. Awards granted under the 2021 Plan may be subject to acceleration of vesting and exercisability upon or after a change in control (as defined in the 2021 Plan) as may be provided in the applicable stock award agreement or in any other written agreement between us or any affiliate and the participant, but in the absence of such provision, no such acceleration will automatically occur.
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Under the 2021 Plan, a change in control is generally defined as: (i) the acquisition by any person or company of more than 50% of the combined voting power of our then outstanding stock; (ii) a consummated merger, consolidation or similar transaction in which our stockholders immediately before the transaction do not own, directly or indirectly, more than 50% of the combined voting power of the surviving entity (or the parent of the surviving entity) in substantially the same proportions as their ownership immediately prior to such transaction; (iii) a consummated sale, lease, exclusive license or other disposition of all or substantially all of our assets other than to an entity more than 50% of the combined voting power of which is owned by our stockholders in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction; or (iv) when a majority of our Board of Directors becomes comprised of individuals who were not serving on our Board of Directors on the date the 2021 Plan was adopted by the Board of Directors, or the incumbent Board of Directors, or whose nomination, appointment, or election was not approved by a majority of the incumbent Board of Directors still in office.
Plan amendment or termination. Our Board of Directors has the authority to amend, suspend, or terminate our 2021 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our stockholders. No ISOs may be granted after the tenth anniversary of the date our Board of Directors adopts our 2021 Plan. No stock awards may be granted under our 2021 Plan while it is suspended or after it is terminated.
2021 Inducement Plan
On November 11, 2021, our Board of Directors adopted the 2021 Inducement Plan. The 2021 Inducement Plan was adopted without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4) and will be administered by our Board of Directors. Our Board of Directors reserved 3,000,000 shares of common stock for issuance under the 2021 Inducement Plan. The only persons eligible to receive grants of Inducement Awards (as defined below) under the 2021 Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Listing Rule 5635(c)(4) or 5635(c)(3), as applicable. Individuals who previously served as an employee or director of the Company will not be eligible to receive Inducement Awards under the 2021 Inducement Plan, other than following a bona fide period of non-employment. Inducement Awards may only be granted by: (i) the Compensation Committee, provided such committee is comprised solely of “independent directors” (as defined by Nasdaq Market Place Rule 5605(a)(2)) or (ii) a majority of the Company’s “independent directors”. An “Inducement Award” means any right to receive common stock, cash or other property granted under the 2021 Inducement Plan (including nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, or other stock-based awards). Our Board of Directors also adopted a (i) form of stock option grant notice, option agreement, and notice of exercise (the “Inducement Option Grant Package”) and (ii) form of restricted stock unit award grant notice and award agreement (the “Inducement RSU Grant Package”) for use under the 2021 Inducement Plan.
2013 Plan
Our Board of Directors and stockholders adopted our 2013 Plan in June 2013. The 2013 Plan was most recently amended by our Board of Directors and stockholders in October 2020. No further grants have been, or will be, made under the 2013 Plan following the effectiveness of the 2021 Plan.
Authorized shares. As of December 31, 2021, there were outstanding stock options covering a total of 5,939,604 shares of our common stock that were granted under our 2013 Plan and there were 804,922 shares of common stock that were issued and outstanding pursuant to stock options that had been exercised. Any shares of common stock remaining available for issuance under the 2013 Plan upon the 2021 Plan’s effectiveness became available for issuance under the 2021 Plan. In addition, shares subject to outstanding stock options or other stock awards granted under our 2013 Plan that, on or after the date that the 2021 Plan became effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, will become issuable under our 2021 Plan.
Stock awards. Our 2013 Plan provides for the grant of ISOs within the meaning of Section 422 of the Code, to employees, including employees of any parent or subsidiary, and for the grant of NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards and other forms of stock awards to employees, directors and consultants, including employees and consultants of our affiliates. The maximum number of shares of our common stock issuable pursuant to the exercise of ISOs under our 2013 Plan is 9,665,351 shares.
Plan administration. Our Board of Directors, or a duly authorized committee of our Board of Directors to which the Board of Directors delegates its administrative authority, administers our 2013 Plan and is referred to as the “plan administrator” herein. Under our 2013 Plan, the plan administrator has the authority to, among other things, determine award recipients, dates of grant, the numbers and types
47
of stock awards to be granted, the applicable fair market value and the provisions of each stock award, including the period of their exercisability and the vesting schedule applicable to a stock award, to construe and interpret the 2013 Plan and awards granted thereunder (and to establish, amend and revoke any rules and regulations for the administration of the 2013 Plan and any such awards), or to accelerate the vesting of awards.
Under the 2013 Plan, the plan administrator also generally has the authority to effect, with the consent of any adversely affected participant, (A) the reduction of the exercise, purchase, or strike price of any outstanding award; (B) the cancellation of any outstanding award and the grant in substitution therefor of other awards, cash, or other consideration; or (C) any other action that is treated as a repricing under generally accepted accounting principles.
Stock options. ISOs and NSOs are granted under stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for stock options, within the terms and conditions of the 2013 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our common stock on the date of grant (or 110% of the fair market value for certain major stockholders). Options granted under the 2013 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.
The plan administrator determines the term of stock options granted under the 2013 Plan, up to a maximum of 10 years (or five years, for certain major stockholders). If an optionholder’s service relationship with us or any of our affiliates ceases for any reason other than disability, death or cause, the optionholder may generally exercise any vested options for a period of up to three months following the cessation of service. This period may be extended in the event that either an exercise of the option or an immediate sale of shares acquired upon exercise of the option following such a termination of service is prohibited by applicable securities laws or our insider trading policy. If an optionholder’s service relationship with us or any of our affiliates ceases due to death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of up to 18 months following the date of death. If an optionholder’s service relationship with us or any of our affiliates ceases due to disability, the optionholder may generally exercise any vested options for a period of up to 12 months following the cessation of service. In the event of a termination for cause, options generally terminate upon the termination date. In no event may an option be exercised beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (1) cash, check, bank draft or money order payable to us, (2) a broker-assisted cashless exercise, (3) the tender of shares of our common stock previously owned by the optionholder, (4) a net exercise of the option if it is an NSO, (5) a deferred payment arrangement (to the extent permitted by applicable law), or (6) other legal consideration approved by the plan administrator and specified in the stock award agreement.
Unless the plan administrator provides otherwise, options generally are not transferable except by will or the laws of descent and distribution. Subject to approval of the plan administrator or a duly authorized officer in each case, (i) an option may be transferred pursuant to a domestic relations order, official marital settlement agreement, or other divorce or separation instrument and (ii) an optionholder may designate a beneficiary who may exercise the option following the optionholder’s death.
Tax limitations on ISOs. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (2) the term of the ISO does not exceed five years from the date of grant.
Changes to capital structure. In the event of a capitalization adjustment, the plan administrator will make appropriate and proportionate adjustments to (1) the class and maximum number of shares reserved for issuance under the 2013 Plan, (2) the class and maximum number of shares that may be issued on the exercise of ISOs, and (3) the class and number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding stock awards.
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Corporate transactions. Our 2013 Plan provides that in the event of a corporate transaction, unless otherwise provided in an award agreement or other written agreement between us and the award holder, the plan administrator may take one or more of the following actions with respect to such stock awards:
The plan administrator is not obligated to treat all stock awards or portions of stock awards in the same manner and is not obligated to treat all participants in the same manner.
Under the 2013 Plan, a corporate transaction is generally defined as the consummation of: (i) a sale or other disposition of all or substantially all of our assets, (ii) the sale or disposition of at least 50% of our outstanding securities, (iii) a merger or consolidation where we do not survive the transaction, or (iv) a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction.
Change in control. A stock award may be subject to additional acceleration of vesting and exercisability upon or after a change in control as may be provided in an applicable award agreement or other written agreement, but in the absence of such provision, no such acceleration will occur.
Under the 2013 Plan, a change in control is generally defined as: (i) the acquisition by any person or company of more than 50% of the combined voting power of our then outstanding stock; (ii) a consummated merger, consolidation or similar transaction in which our stockholders immediately before the transaction do not own, directly or indirectly, more than 50% of the combined voting power of the surviving entity (or the parent of the surviving entity) in substantially the same proportions as their ownership immediately prior to such transaction; or (iii) a consummated sale, lease, exclusive license or other disposition of all or substantially all of our assets other than to an entity more than 50% of the combined voting power of which is owned by our stockholders in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction.
Plan amendment or termination. Our Board of Directors has the authority to amend, suspend, or terminate our 2013 Plan, provided that such action does not impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our stockholders. No stock awards may be granted under our 2013 Plan while it is suspended or after it is terminated. No further grants will be made under the 2013 Plan.
2021 ESPP
Our Board of Directors adopted our 2021 ESPP, and our stockholders approved our 2021 ESPP, in February 2021. The 2021 ESPP became effective immediately prior to, and contingent upon, the execution of the underwriting agreement related to our initial public offering, which occurred on February 11, 2021. The purpose of the 2021 ESPP is to secure the services of new employees, to retain the services of existing employees, and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. The 2021 ESPP includes two components. One component is designed to allow eligible U.S. employees to purchase our common stock in a manner that may qualify for favorable tax treatment under Section 423 of the Code. In addition, purchase rights may
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be granted under a component that does not qualify for such favorable tax treatment because of deviations necessary to permit participation by eligible employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws.
Share reserve. The 2021 ESPP authorizes the issuance of 550,000 shares of our common stock under purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our common stock reserved for issuance automatically increases on January 1 of each calendar year, beginning on January 1, 2022, through (and including) January 1, 2031, by the lesser of (and prior to giving effect to Proposal 3 related to our 2021 ESPP described elsewhere in this proxy statement) (i) 1% of the total number of shares of our common stock outstanding on December 31st of the preceding year and (ii) 1,550,000 shares of common stock; provided that before the date of any such increase, our Board of Directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).
Administration. Our Board of Directors administers the 2021 ESPP and may delegate its authority to administer the 2021 ESPP to our Compensation Committee. The 2021 ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of our common stock on specified dates during such offerings. Under the 2021 ESPP, we may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for employees participating in the offering. An offering under the 2021 ESPP may be terminated under certain circumstances. In February 2022, our Board of Directors adopted an offering document that governs offerings under the 2021 ESPP (the “Offering Document”) pursuant to which offerings will generally be for consecutive, non-overlapping periods of six months, commencing on March 10 and September 10 each year.
Payroll deductions. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the 2021 ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the 2021 ESPP) for the purchase of our common stock under the 2021 ESPP. Unless otherwise determined by our Board of Directors, common stock will be purchased for the accounts of employees participating in the 2021 ESPP at a price per share that is at least the lesser of (1) 85% of the fair market value of a share of our common stock on the first date of an offering, or (2) 85% of the fair market value of a share of our common stock on the date of purchase.
Limitations. Employees may have to satisfy one or more of the following service requirements before participating in the 2021 ESPP, as determined by our Board of Directors, including: (1) being customarily employed for more than 20 hours per week, (2) being customarily employed for more than five months per calendar year, or (3) continuous employment with us or one of our affiliates for a period of time (not to exceed two years). No employee may purchase shares under the 2021 ESPP at a rate in excess of $25,000 worth of our common stock based on the fair market value per share of our common stock at the beginning of an offering for each calendar year such a purchase right is outstanding. In addition, no employee will be eligible for the grant of any purchase rights under the 2021 ESPP if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value under Section 424(d) of the Code. Finally, pursuant to the Offering Document, in no event may an employee purchase more than 4,750 shares of our common stock during any six month offering.
Changes to capital structure. In the event that there occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or similar transaction, the Board of Directors will make appropriate adjustments to: (1) the class(es) and maximum number of shares reserved under the 2021 ESPP, (2) the class(es) and maximum number of shares by which the share reserve may increase automatically each year, (3) the class(es) and number of shares subject to and purchase price applicable to outstanding offerings and purchase rights, and (4) the class(es) and number of shares that are subject to purchase limits under ongoing offerings.
Corporate transactions. In the event of certain significant corporate transactions, any then-outstanding rights to purchase our stock under the 2021 ESPP may be assumed, continued, or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue, or substitute for such purchase rights, then the participants’ accumulated payroll contributions will be used to purchase shares of our common stock within 10 business days before such corporate transaction, and such purchase rights will terminate immediately after such purchase.
Under the 2021 ESPP, a corporate transaction is generally the consummation of: (1) a sale of all or substantially all of our assets, (2) the sale or disposition of more than 50% of our outstanding securities, (3) a merger or consolidation where we do not survive the transaction, and (4) a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction.
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2021 ESPP amendment or termination. Our Board of Directors has the authority to amend or terminate our 2021 ESPP, provided that except in certain circumstances such amendment or termination may not materially impair any outstanding purchase rights without the holder’s consent. We will obtain stockholder approval of any amendment to our 2021 ESPP as required by applicable law or listing requirements.
The following table provides information as of December 31, 2021, with respect to shares of our common stock that may be issued under our existing equity compensation plans:
Plan Category |
|
Number of |
|
|
Weighted-average |
|
|
Number of |
||
|
|
(a) |
|
|
(b) |
|
|
(c) |
||
Equity compensation plans approved by stockholders |
|
8,998,131(1) |
|
|
$5.48(2) |
|
|
4,358,253(3) |
||
Equity compensation plans not approved by stockholders |
|
|
— |
|
|
$ |
— |
|
|
3,000,000(4) |
Director Compensation
The following table shows for the fiscal year ended December 31, 2021 certain information with respect to the compensation of all non-employee directors of the Company:
Director Compensation for Fiscal 2021
Name |
Fees |
|
Option |
|
All Other |
|
Total |
|
||||
Felix Baker, Ph.D. |
|
70,888 |
|
|
— |
|
|
— |
|
|
70,888 |
|
Raymond Cheong, M.D., Ph.D. |
|
35,444 |
|
|
— |
|
|
— |
|
|
35,444 |
|
Melissa Gilliam, M.D., M.P.H. |
|
50,633 |
|
|
— |
|
|
— |
|
|
50,633 |
|
Rustem F. Ismagilov, Ph.D. |
35,444(3) |
|
|
— |
|
75,000(4) |
|
|
110,444 |
|
||
Matthew L. Posard |
|
53,242 |
|
|
— |
|
|
— |
|
|
53,242 |
|
Randal Scott, Ph.D. |
|
55,900 |
|
|
— |
|
|
— |
|
|
55,900 |
|
Jeryl Hilleman(5) |
|
53,167 |
|
|
331,299 |
|
|
— |
|
|
384,466 |
|
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Narrative To Director Compensation Table
In January 2019, we entered into a consulting agreement with Dr. Ismagilov, pursuant to which he was paid consulting fees of $75,000 in 2021. For more information on the consulting agreement see “Transactions with Related Persons and Indemnification—Consulting Agreements.”
In March 2021, our Board of Directors granted Ms. Hilleman an option to purchase 35,112 shares of our common stock at an exercise price of $17.60 per share and fair value of $9.44 per share. The option vests in 36 equal monthly installments from March 16, 2021, subject to Ms. Hilleman’s continued services to us. The option also provides for full vesting on an accelerated basis if a change in control occurs and Ms. Hilleman remains in service immediately prior to the change in control.
Outstanding equity awards held by our non-employee directors are subject to the terms of our 2013 Plan and 2021 Plan, as described above under “—Equity Benefit Plans.”
Non-employee director compensation policy
Our Board of Directors adopted a non-employee director compensation policy in February 2021, effective upon the date of our initial public offering, which we amended in December 2021 to add the annual cash retainers for the chair and non-chair members of our Science, Technology and Clinical Affairs Committee, that is applicable to all of our non-employee directors. This compensation policy provides that each such non-employee director will receive the following compensation for service on our Board of Directors. Cash retainers are paid in equal quarterly installments, in arrears on the last day of each fiscal quarter in which service occurs, and are prorated based on days served in the applicable fiscal year:
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Each of the option grants described above will be granted under our 2021 Plan, the terms of which are described in more detail above under “—Equity Benefit Plans—2021 Plan.” Each such option grant will vest and become exercisable subject to the director’s continuous service with us, provided that each option will vest in full upon a change in control of the company. The exercise price per share of each option will be 100% of the Fair Market Value (as defined in our 2021 Plan) of the underlying common stock on the date of grant. The term of each option will be 10 years, subject to earlier termination as provided in the 2021 Plan (provided that upon a termination of service other than by death or for cause, the post-termination exercise period will be 12 months from the date of termination).
We have reimbursed and will continue to reimburse all of our non-employee directors for their travel, lodging and other reasonable expenses incurred in attending meetings of our Board of Directors and committees of our Board of Directors.
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The following includes a summary of transactions since January 1, 2020 to which we have been a party, in which the amount involved in the transaction exceeded $120,000 or, if less, 1% of the average of our total assets as of December 31, 2020 and 2021, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive and Director Compensation” above.
Convertible Preferred Stock Financings
From June 2020 to July 2020, pursuant to a Series E preferred stock purchase agreement, we issued and sold an aggregate of 2,289,899 shares of our Series E-1 convertible preferred stock and 11,187,189 shares of our Series E-2 convertible preferred stock, each at a purchase price of $7.42 per share, and received gross proceeds of approximately $100.0 million.
During the fourth quarter of 2020, pursuant to a Series F preferred stock purchase agreement, we issued and sold an aggregate of 4,859,897 shares of our Series F-1 convertible preferred stock and 9,958,539 shares of our Series F-2 convertible preferred stock, each at a purchase price of $8.55 per share, and received gross proceeds of approximately $126.7 million.
The participants in our convertible preferred stock financing included entities affiliated with members of our board of directors and holders of more than 5% of our capital stock. The following table sets forth the aggregate number of shares of convertible preferred stock issued to these related persons.
Name of stockholder |
|
Series E-1 |
|
|
Series E-2 |
|
|
Series F-1 |
|
|
Series F-2 |
|
|
Aggregate |
|
|||||
Entities affiliated with Baker Bros. Advisors LP(1) |
|
|
3,304 |
|
|
|
11,187,189 |
|
|
|
— |
|
|
|
9,958,539 |
|
|
$ |
208,234,402 |
|
Entities affiliated with ArrowMark Fundamental Opportunity Fund, LP(2) |
|
|
1,020,631 |
|
|
|
— |
|
|
|
994,150 |
|
|
|
— |
|
|
$ |
21,096,142 |
|
Randal Scott, Ph.D.(4) |
|
|
534,402 |
|
|
|
— |
|
|
|
432,749 |
|
|
|
— |
|
|
$ |
10,615,369 |
|
Kimberly J. Popovits(5) |
|
|
431,642 |
|
|
|
— |
|
|
|
128,655 |
|
|
|
— |
|
|
$ |
4,302,784 |
|
Investor Agreements
In connection with our Series F convertible preferred stock financing, in October 2020 we entered into an amended and restated investor rights agreement, amended and restated voting agreement and amended and restated right of first refusal and co-sale agreement containing registration rights, information rights, voting rights and rights of first refusal and co-sale, among other things, with certain of our stockholders. The foregoing agreements were terminated upon the closing of our initial public offering, except for the registration rights set forth in the amended and restated investor rights agreement which are described below.
Stockholder Registration Rights
Pursuant to the amended and restated investor rights agreement, holders of shares of our common stock, including certain holders of five percent of our capital stock and entities affiliated with certain of our directors, are entitled to certain registration rights with respect to their registrable securities. The registration of shares of our common stock pursuant to the exercise of such registration rights would enable the holders to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We are required to pay the registration expenses, other than underwriting discounts and selling commissions, of the shares registered pursuant to the demand, piggyback and Form S-3 registrations described below.
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Generally, in an underwritten offering, the Company, based on consultation with the underwriter, if any, may, subject to specified conditions, limit the number of shares the holders may include. The demand, piggyback and Form S-3 registration rights described below will terminate upon the earlier of (i) a deemed “Liquidation Event” (as defined in our amended and restated certificate of incorporation) and (ii) with respect to any particular holder, at such time that such holder can sell its registrable securities under Rule 144 of the Securities Act without restrictions on volume of shares sold and frequency of sales or compliance with Rule 144(c)(1) of the Securities Act during any 90 day period.
Demand Registration Rights
Following October 30, 2022, holders of at least 75% of the registrable securities then outstanding may make a written request that we register all or a portion of their registrable securities, subject to certain specified exceptions. Such request for registration must cover a majority of the registrable securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $10 million). We are not obligated to effect more than one demand registration.
Piggyback Registration Rights
In the event that we propose to register any of our securities under the Securities Act in an offering, either for our own account or for the account of other security holders, the holders of registrable securities will be entitled to certain “piggyback” registration rights allowing them to include their registrable securities in such registration, subject to specified conditions and limitations.
Form S-3 Registration Rights
The holders of at least 30% of the registrable securities then outstanding can make a written request that we register all or a portion of their registrable securities on Form S-3 if we are qualified to file a registration statement on Form S-3, subject to certain specified exceptions. Such registration on Form S-3 must cover securities with an aggregate offering price to the public of at least $5 million. We are not obligated to effect more than two registrations on Form S-3.
Consulting Arrangements
In January 2019, we entered into a consulting agreement, as amended in December 2020, with Rustem F. Ismagilov, one of our co-founders and a member of our Board of Directors, pursuant to which Dr. Ismagilov provides general scientific, and strategic consulting regarding our development and commercialization efforts and service on our Scientific Advisory Board (“SAB”). Pursuant to his amended consulting agreement, Dr. Ismagilov receives a consulting fee of $75,000 per year for services rendered, as requested from time to time and for his service on the SAB. Further, pursuant to his amended consulting agreement, Dr. Ismagilov, during a partial sabbatical from Caltech from August 2020 through December 2020, devoted three days per week to support our efforts to complete development of our Talis One system and is entitled to an option to purchase shares of our common stock with a value of $300,000, which option was granted in September 2020. Unless terminated earlier, the amended consulting agreement will expire on December 31, 2022.
In August 2021, we entered into the Separation Agreement with Mr. Coe, our former President, Chief Executive Officer and member of our Board of Directors, pursuant to which he provided certain consulting services to us. See “Executive and Director Compensation—Summary Compensation Table—Narrative to Summary Compensation Table—Employment Agreements with our Named Executive Officers” for the terms of the Separation Agreement.
Transactions with Members of our Board of Directors
In 2021, we granted equity awards and paid compensation to members of our Board of Directors as further described in “Executive and Director Compensation—Director Compensation.”
In 2020, we granted the equity awards and paid the compensation to members of our Board of Directors set forth below.
In February 2016, we entered into letter agreements with each of Mr. Posard and Dr. Scott confirming their appointment to our Board of Directors, pursuant to which each is entitled to a stipend of $24,000 per year, which was paid on a quarterly basis. In 2020, we paid $24,000 to each of Mr. Posard and Dr. Scott pursuant to such letter agreements. The stipends provided for in such letter agreements were superseded by our non-employee director compensation policy that was adopted in February 2021.
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In February 2020, our Board of Directors granted options to purchase 290,306 shares to Dr. Ismagilov, 82,788 shares to Mr. Posard and 82,788 shares to Mr. Scott, each with an exercise price per share of $1.51. The options vest monthly over four years beginning on November 1, 2019, subject to the director’s continued services to us. In addition, the options provide for “single trigger” vesting acceleration if a change in control occurs and the director remains in service immediately prior to the change in control.
In March 2020, we entered into a letter agreement with Ms. Popovits confirming her appointment to our Board of Directors, that provides for an annual stipend of $24,000, to be paid on a quarterly basis, and an option to purchase shares of our common stock equal to 0.35% of the Company on a fully diluted basis. In May 2020, we granted Ms. Popovits an option to purchase 84,615 shares of our common stock in connection with her commencement of services with us as a director at an exercise price per share of $1.51. The option vests as follows: 25% of the shares vest on March 19, 2021, and the balance vests in 36 equal monthly installments thereafter, subject to Ms. Popovits’ continued services to us. The option also provides for “single trigger” vesting acceleration if a change in control occurs and the director remains in service immediately prior to the change in control. The annual stipend paid to Ms. Popovits in 2020 was $12,818. The annual stipend provided for in her letter agreement was superseded by our non-employee director compensation policy that was adopted in February 2021.
In addition, in March 2020, we amended certain outstanding underwater options held by Mr. Posard and Dr. Scott. The amendment reduced the exercise price per share of such options to $1.51, the fair market value of our common stock as determined by our Board of Directors on the date of the repricing.
In August 2020, our Board of Directors granted options to purchase 47,011 shares to Mr. Posard, 47,011 shares to Dr. Scott, 41,106 shares to Ms. Popovits and 141,032 shares to Dr. Ismagilov, each at an exercise price per share of $6.25. The options vest as follows: 25% of the shares vest on August 4, 2021, and the balance vests in 36 equal monthly installments thereafter, subject to the director’s continued services to us. The option also provides for “single trigger” vesting acceleration if a change in control occurs and the director remains in service immediately prior to the change in control.
In September 2020, our Board of Directors granted an option to purchase 79,963 shares to Dr. Ismagilov at an exercise price per share of $6.25. The option vests as follows: one-sixth of the shares vest on September 1, 2020, and the balance vests in five equal monthly installments thereafter, subject to Dr. Ismagilov’s continued services to us.
In December 2020, we entered into a letter agreement with Dr. Gilliam confirming her appointment to our Board of Directors, pursuant to which Dr. Gilliam was entitled to a stipend of $40,000 per year, to be paid on a quarterly basis, and an option to purchase 62,937 shares of our common stock. In December 2020, our Board of Directors granted an option to purchase 62,937 shares to Dr. Gilliam at an exercise price per share of $8.67. The option vests as follows: 25% of the shares vest on December 15, 2021, and the balance vests in 36 equal monthly installments thereafter, subject to Dr. Gilliam’s continued services to us. In addition, the option provides for “single trigger” vesting acceleration if a change in control occurs and the director remains in service immediately prior to the change in control. We did not pay an annual stipend paid to Dr. Gilliam in 2020 and the annual stipend provided for in her letter agreement was superseded by our non-employee director compensation policy that was adopted in February 2021.
Agreements with Baker Brothers
Nominating Agreement
On November 1, 2019, we entered into a nominating agreement (the “Nominating Agreement”), with Baker Brothers Life Sciences, L.P. and 667, L.P. (together, “Baker Brothers”). Pursuant to the Nominating Agreement, during the period beginning at the closing our initial public offering until such time as Baker Brothers no longer beneficially owns at least 5,317,097 shares (subject to adjustment for stock splits, combinations, recapitalizations and similar transactions) of our common stock (the “Initial Period”), we will have the obligation to support the nomination of, and to cause our Board of Directors to include in the slate of nominees recommended to our stockholders for election, two individuals designated by Baker Brothers (each, a “Baker Designee”) and during the period beginning at the closing of our initial public offering until such time as Baker Brothers no longer beneficially owns at least 1,993,911 shares (subject to adjustment for stock splits, combinations, recapitalizations and similar transactions) of our common stock (together with the Initial Period, the “Nominating Period”), we will have the obligation to support the nomination of, and to cause our Board of Directors to include in the slate of nominees recommended to our stockholders for election one Baker Designee, unless a majority of our disinterested directors reasonably and in good faith determines that such Baker Designee would not be qualified to serve as our director under law, rules of the stock exchange on which our shares are listed, our Bylaws, or any of our company policies. In such case, we would notify Baker Brothers sufficiently in advance of the date on which the proxy materials related to such Baker Designee are to be mailed to enable Baker Brothers to propose a replacement Baker Designee. If a Baker Designee resigns his or her seat on our Board of Directors
56
or is removed or does not become a director for any reason, the vacancy will be filled by the election or appointment of another Baker Designee as soon as reasonably practicable, subject to compliance with applicable laws, rules and regulations.
Furthermore, during the Nominating Period, we will have the obligation to invite one Board of Directors observer designee of Baker Brothers, to attend all meetings of our Board of Directors and all meetings of the committees of our Board of Directors as a nonvoting observer. The Nominating Agreement automatically terminates upon the earlier of (i) such time as Baker Brothers, together with its affiliates, no longer beneficially owns at least 1,329,274 shares (subject to adjustment for stock splits, combinations, recapitalizations and similar transactions) of our common stock, (ii) the consummation of an “Acquisition” as defined in our fourth amended and restated certificate of incorporation (as in effect on the date of the Nominating Agreement) and (iii) mutual consent of the parties.
Baker Bros Registration Rights Agreement
On March 26, 2021, we entered into a registration rights agreement (the “Baker Bros Registration Rights Agreement”) with Baker Brothers (each, an “Investor”), pursuant to which each Investor is entitled to certain resale registration rights with respect to certain registrable securities held by such Investor. Following a request by any Investor made after February 1, 2022, we are obligated to file a resale registration statement on Form S-3, or other appropriate form, covering the registrable securities held by Baker Brothers, subject to certain specified exceptions. Baker Brothers also has the right to one underwritten offering per calendar year, but no more than three underwritten offerings in total and no more than two underwritten offerings or block trades in any twelve-month period, to effect the sale or distribution of their registrable securities, subject to specified exceptions, conditions and limitations. We are required to pay the registration expenses, other than underwriting discounts and selling commissions, incurred in connection with the registrations described above. The Baker Bros Registration Rights Agreement also includes customary indemnification obligations in connection with registrations described above. The agreement will automatically terminate once all registrable securities cease to be registrable securities pursuant to the terms of the agreement.
Indemnification Agreements
Our amended and restated certificate of incorporation contains provisions limiting the liability of directors, and our Bylaws provide that we will indemnify each of our directors and officers to the extent not prohibited by the Delaware General Corporation Law or other applicable law, subject to certain exceptions. Our amended and restated certificate of incorporation and Bylaws also provide us with discretion to indemnify our employees and other agents to the fullest extent permitted by applicable law.
We have also entered, and intend to continue to enter, into separate indemnification agreements with each of our directors, officers and certain employees and other agents. The indemnification agreements provide, among other things, that we will indemnify such director, officer, employee or other agent, under the circumstances and to the extent provided for in the agreement, against any and all expenses and liabilities incurred by such director, officer, employee or other agent in any actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer, employee or other agent of the Company, and otherwise to the fullest extent permitted by law. In addition, the indemnification agreements provide that, to the fullest extent permitted by law, we will advance all expenses incurred by such director, officer, employee or other agent in connection with any such action or proceeding.
Policies and Procedures for Transactions with Related Persons
We have adopted a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and oversight of “related-person transactions.” For purposes of our policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are, were or will be participants involving an amount that exceeds $120,000 or, if less, 1% of the average of our total assets at year-end for the prior two completed fiscal years. Transactions involving compensation for services provided to us as an employee, consultant or director are not considered related-person transactions under this policy. A related person is any executive officer, director, nominee to become a director or a holder of more than five percent of our voting securities, including any of their immediate family members and affiliates, including entities owned or controlled by such persons.
Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to our Audit Committee (or, where review by our Audit Committee would be inappropriate, to another independent body of our Board of Directors) for review. The presentation must include a description of, among other things, all of the parties thereto, the direct and indirect interests of the related persons, the purpose of the transaction, the material facts, the benefits of the transaction to us and whether any alternative transactions are available, an assessment of whether the terms are
57
comparable to the terms available from unrelated third parties and management’s recommendation. To identify related-person transactions in advance, we rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related-person transactions, our audit committee or another independent body of our board of directors takes into account the relevant available facts and circumstances including, but not limited to:
In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval. All of the transactions described in this section occurred prior to the adoption of this policy.
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Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are our stockholders will be “householding” our proxy materials. A single Notice of Internet Availability of Proxy Materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice of Internet Availability of Proxy Materials, please notify your broker or us. Direct your written request to Talis Biomedical Corporation, Attn: Gillian Green, Corporate Secretary at 1375 West Fulton Market, Suite 700, Chicago, Illinois 60607 or contact Emily Faucette, Senior Vice President, Communications and IR at 855-956-3594. Stockholders who currently receive multiple copies of the Notices of Internet Availability of Proxy Materials at their addresses and would like to request “householding” of their communications should contact their brokers.
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Other Matters
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Gillian Green
Gillian Green
Secretary
April 26, 2022
A copy of the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 2021 is available without charge upon written request to: Corporate Secretary, Talis Biomedical Corporation, 230 Constitution Drive, Menlo Park, California.
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Appendix A
Talis Biomedical Corporation
2021 Equity Incentive Plan
Adopted by the Board of Directors: February 5, 2021
Approved by the Stockholders: February 5, 2021
IPO Date: February 11, 2021
Amendment Adopted by the Board of Directors: March 7, 2022
Amendment Adopted by the Stockholders: [ ], 2022
1.General.
2.Shares Subject to the Plan.
3.Eligibility and Limitations.
4.Options and Stock Appreciation Rights.
5.Awards Other Than Options and Stock Appreciation Rights.
6.Adjustments upon Changes in Common Stock; Other Corporate Events.
7.Administration.
8.Tax Withholding
9.Miscellaneous.
10.Covenants of the Company.
11.Additional Rules for Awards Subject to Section 409A.
12.Severability.
13.Termination of the Plan.
14.Definitions.
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In addition, subject to any adjustments as necessary to implement any Capitalization Adjustments, such aggregate number of shares of Common Stock will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 4.0% of the total number of shares of Common Stock plus Series Preferred outstanding on December 31 of the preceding year; provided, however that the Board may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of Common Stock.
62
Each Option and SAR will have such terms and conditions as determined by the Board. Each Option will be designated in writing as an Incentive Stock Option or Nonstatutory Stock Option at the time of grant; provided, however, that if an Option is not so designated, then such Option will be a Nonstatutory Stock Option, and the shares purchased upon exercise of each type of Option will be separately accounted for. Each SAR will be denominated in shares of Common Stock equivalents. The terms and conditions of separate Options and SARs need not be identical; provided, however, that each Option Agreement and SAR Agreement will conform (through incorporation of provisions hereof by reference in the Award Agreement or otherwise) to the substance of each of the following provisions:
63
64
Following the date of such termination, to the extent the Participant does not exercise such Award within the applicable Post-Termination Exercise Period (or, if earlier, prior to the expiration of the maximum term of such Award), such unexercised portion of the Award will terminate, and the Participant will have no further right, title or interest in the terminated Award, the shares of Common Stock subject to the terminated Award, or any consideration in respect of the terminated Award.
5. Awards Other Than Options and Stock Appreciation Rights.
65
66
6. Adjustments upon Changes in Common Stock; Other Corporate Events.
67
7. Administration.
68
69
70
71
72
73
74
75
If all or any part of the Plan or any Award Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of the Plan or such Award Agreement not declared to be unlawful or invalid. Any Section of the Plan or any Award Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
The Board may suspend or terminate the Plan at any time.
No Incentive Stock Options may be granted after the tenth anniversary of the earlier of: (i) the Adoption Date, or (ii) the date the Plan is approved by the Company’s stockholders.
No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
As used in the Plan, the following definitions apply to the capitalized terms indicated below:
76
Notwithstanding the foregoing or any other provision of this Plan, (A) the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the
77
domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.
78
79
80
81
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Appendix b
Talis Biomedical Corporation
2021 Employee Stock Purchase Plan
Adopted by the Board of Directors: February 5, 2021
Approved by the Stockholders: February 5, 2021
IPO Date: February 11, 2021
Amendment Adopted by the Board of Directors: March 7, 2022
Amendment Adopted by the Stockholders: [ ], 2022
83
84
85
86
87
The Company will seek to obtain from each U.S. federal or state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder unless the Company determines, in its sole discretion, that doing so would cause the Company to incur costs that are unreasonable. If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.
Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment,
88
suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment. To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code with respect to the 423 Component or with respect to other Applicable Laws. Notwithstanding anything in the Plan or any Offering Document to the contrary, the Board will be entitled to: (i) establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars; (ii) permit Contributions in excess of the amount designated by a Participant in order to adjust for mistakes in the Company’s processing of properly completed Contribution elections; (iii) establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Contributions; (iv) amend any outstanding Purchase Rights or clarify any ambiguities regarding the terms of any Offering to enable the Purchase Rights to qualify under and/or comply with Section 423 of the Code with respect to the 423 Component; and (v) establish other limitations or procedures as the Board determines in its sole discretion advisable that are consistent with the Plan. The actions of the Board pursuant to this paragraph will not be considered to alter or impair any Purchase Rights granted under an Offering as they are part of the initial terms of each Offering and the Purchase Rights granted under each Offering.
The Plan will become effective immediately prior to and contingent upon the IPO Date. No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.
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As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
90
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY D81551-P72820 1b. Melissa Gilliam, M.D., M.P.H. Nominees: 1a. Felix Baker, Ph.D. 3. Approval of an Amendment to the Talis Biomedical Corporation 2021 Employee Stock Purchase Plan. 1c. Matthew L. Posard 2. Approval of an Amendment to the Talis Biomedical Corporation 2021 Equity Incentive Plan. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. 4. Ratification of the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2022. NOTE: In their discretion, the proxyholders are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. 1. Election of Directors For Withhold ! ! For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! TALIS BIOMEDICAL CORPORATION The Board of Directors recommends you vote FOR the following proposals: TALIS BIOMEDICAL CORPORATION C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS P.O. BOX 1342 BRENTWOOD, NY 11717 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on June 9, 2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/TLIS2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on June 9, 2022. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTE w
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com. D81552-P72820 TALIS BIOMEDICAL CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS 2022 ANNUAL MEETING OF STOCKHOLDERS JUNE 10, 2022 The stockholder(s) hereby appoint(s) Robert J. Kelley and J. Roger Moody, Jr., or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock and/or Series 1 Convertible Preferred Stock of Talis Biomedical Corporation that the stockholder(s) is/are entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the 2022 Annual Meeting of Stockholders (the “Meeting”) to be held at 7:30 a.m., Pacific Time on Friday, June 10, 2022, through a live webcast at www.virtualshareholdermeeting.com/TLIS2022 and any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the meeting. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED ON THE REVERSE SIDE OF THIS BALLOT AND FOR PROPOSALS 2, 3 AND 4. IN THEIR DISCRETION, THE PROXIES OF THE UNDERSIGNED ARE AUTHORIZED TO VOTE UPON ANY AND ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE Continued and to be signed on reverse side