ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
On February 19, 2021, the Board of Directors (the “Board”) of the Company approved, effective as of March 1, 2021, an increase in the size of the Board from nine to eleven directors and the appointment of Carey O’Connor Kolaja and Olivia C. Ware to fill the newly created directorships. Ms. Kolaja has been designated as a Class III director, whose term will expire at the Company’s annual meeting of stockholders in 2023, and Ms. Ware has been designated as a Class I director, whose term will expire at the Company’s annual meeting of stockholders in 2021 (the “2021 annual meeting”).
The appointments of Ms. Kolaja and Ms. Ware were recommended to the Board by its Nominating and Corporate Governance Committee. The Board has determined that each of Ms. Kolaja and Ms. Ware satisfies all of the other independence criteria set forth in the Nasdaq rules, and is therefore “independent” for purposes of serving on the Board. Effective on the date of the 2021 annual meeting, Ms. Kolaja is expected to serve as a member of the Brand Strategy Committee and the Compensation Committee, and Ms. Ware is expected to serve as a member of the Nominating and Corporate Governance Committee, and the Science and Technology Committee.
In accordance with the Company’s Amended and Restated Non-Employee Director Compensation Policy, as recently amended (the “Policy”), each of Ms. Kolaja and Ms. Ware is entitled to receive a $50,000 annual retainer for service as a Board member. Following the effectiveness of their appointment to Board committees: (1) Ms. Kolaja will be entitled to receive an additional $7,500 annual retainer for service as a member of the Brand Strategy Committee and an additional $7,500 annual retainer for service as a member of the Compensation Committee; and (2) Ms. Ware will be entitled to receive an additional $7,500 annual retainer for service as a member of the Nominating and Corporate Governance Committee and an additional $7,500 annual retainer as a member of the Science and Technology Committee.
On the effective dates of their appointments, each of Ms. Kolaja and Ms. Ware will be granted an initial equity award with a target total equity value of $350,000, which amount reflects the initial equity grant value under the Policy, delivered half in the form of a nonstatutory stock option and half in the form of a restricted stock award. The number of shares of common stock underlying the option will be calculated in accordance with the Black-Scholes option pricing model utilizing the thirty-day trailing average closing stock price of our common stock preceding the date of grant (the “Thirty-Day Trailing Average”). The number of shares of common stock underlying the restricted stock award will be determined by dividing the applicable grant value by the Thirty-Day Trailing Average. The exercise price of the options will equal the fair market value of our common stock on the date of grant, and the option and restricted stock awards will vest on the one-year anniversary of the date of grant, subject to each director’s continued service as a director through the vesting date.
On the date of the 2021 annual meeting, Ms. Kolaja and Ms. Ware will also receive an annual equity grant, which amount reflects the annual equity grant value under the Policy of $225,000, prorated for the number of months served until the date of the 2021 annual meeting. The annual equity grant will be delivered half in the form of a nonstatutory stock option and half in the form of a restricted stock award, and the number of shares of common stock subject to the awards will be determined in the same manner as the initial equity grants. The exercise price of the options will equal the fair market value of our common stock on the date of grant, and the options and restricted stock awards will vest on the one-year anniversary of the date of grant, subject to each director’s continued service as a director through the vesting date.
The Company also expects to enter into the Company’s standard form of indemnification agreement with each of Ms. Kolaja and Ms. Ware. The indemnification agreement provides, among other things, that the Company will indemnify each director for certain expenses which she may be required to pay in connection with certain claims to which she may be made a party by reason of her position as a director of the Company, and otherwise to the fullest extent permitted under Delaware law and the Company’s Amended and Restated Bylaws. The form of indemnification agreement was previously filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (No. 333-193154), as amended, as filed on January 27, 2014, and is incorporated herein by reference.
There are no arrangements or understandings between Ms. Kolaja or Ms. Ware and any other persons pursuant to which she was elected as a director of the Company. There are no family relationships between Ms. Kolaja and Ms. Ware and any director, executive officer, or any person nominated or chosen by the Company to become a director or executive officer. There are no related person transactions (within the meaning of Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission) between Ms. Kolaja or Ms. Ware and the Company.
Additionally, on February 18, 2021, Phyllis Gardner and Robert Byrnes informed the Board of such director’s intention to retire from the Board effective on the date of the 2021 annual meeting, which, for Dr. Gardner, is the end of her current term. The Board size will be reduced to nine directors effective immediately prior to the 2021 annual meeting. Dr. Gardner and Mr. Byrnes are retiring in connection with the Company’s 12-year director tenure policy and not as a result of any disagreement on any matter relating to the Company’s operations, policies, or practices.
A copy of the Company’s press release dated February 22, 2021 announcing the appointment of Ms. Kolaja and Ms. Ware to the Board is attached hereto as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.