Schedule 14A


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OTIC

 

 

 

 

 

 

 

  

As of or for

the Year

Ended

December 31,

2016

 

  Historical Per Ordinary Share Data:

  

 

 

 

  Basic and diluted net loss per share

  

$

(1.31



  Book value per share

  

$

(3.65



  Cash dividends declared per share

  

 

—  

 

 

  

 

 

 

  Pro Forma Equivalent Common Share Data:

  

 

 

 

  Basic and diluted net loss per share

  

$

(0.31



  Book value per share

  

$

(0.86



  Cash dividends declared per share

  

 

—  

 

 

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UNAUDITED PRO FORMA COMBINED

 

 

 

 

 

 

 

  

As of or for

the Year

Ended

December 31,

2016

 

  Pro Forma Per Common Share Data:

  

 

 

 

  Basic and diluted net loss per share

  

$

(0.71



  Book value per share

  

$

0.47

 

  Cash dividends declared per share

  

 

—  

 

 

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DESCRIPTION OF TOKAI COMMON STOCK

The following description of Tokai’s capital stock is intended as a summary only and therefore is not a complete description of Tokai’s capital stock. This description is based upon, and is qualified by reference to, Tokai’s certificate of incorporation, Tokai’s by-laws and applicable provisions of Delaware corporate law. You should read Tokai’s certificate of incorporation and by-laws for the provisions that are important to you.

Tokai’s authorized capital stock consists of 200,000,000 shares of common stock and 5,000,000 shares of preferred stock. As of April 3, 2017, 22,641,651 shares of common stock were outstanding and no shares of preferred stock were outstanding.

Common Stock

Annual Meeting

Annual meetings of Tokai’s stockholders are held on the date designated in accordance with Tokai’s by-laws. Written notice must be mailed to each stockholder entitled to vote not less than ten nor more than 60 days before the date of the meeting. The presence in person or by proxy of the holders of record of a majority of Tokai’s issued and outstanding shares entitled to vote at such meeting constitutes a quorum for the transaction of business at meetings of the stockholders. Special meetings of the stockholders may be called for any purpose only by the board of directors, and business transacted at any special meetings of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of such meeting. Except as may be otherwise provided by applicable law, Tokai’s certificate of incorporation or Tokai’s by-laws, all elections shall be decided by a plurality, and all other questions shall be decided by a majority of the votes cast by stockholders entitled to vote thereon at a duly held meeting of stockholders at which a quorum is present.

Voting Rights

Each holder of common stock is entitled to one vote for each share held on all matters to be voted upon by stockholders.

Dividends

The holders of common stock, after any preferences of holders of any preferred stock, are entitled to receive dividends when and if declared by the board of directors out of legally available funds.

Liquidation and Dissolution

If Tokai is liquidated or dissolved, the holders of the common stock will be entitled to share in Tokai’s assets available for distribution to stockholders in proportion to the amount of common stock they own. The amount available for common stockholders is calculated after payment of liabilities. Holders of any preferred stock will receive a preferential share of Tokai’s assets before the holders of the common stock receive any assets.

Other Rights

Holders of common stock have no right to:

 

 



 

convert the stock into any other security;

 

 



 

have the stock redeemed;

 

 



 

purchase additional stock; or

 

 



 

maintain their proportionate ownership interest.

 

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The common stock does not have cumulative voting rights. Holders of shares of the common stock are not required to make additional capital contributions.

Transfer Agent and Registrar

Continental Stock Transfer & Trust Company is transfer agent and registrar for the common stock.

Preferred Stock

Under the terms of Tokai’s certificate of incorporation, Tokai’s board of directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. Tokai’s board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.

The purpose of authorizing Tokai’s board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of Tokai’s outstanding voting stock. There are no shares of preferred stock outstanding, and Tokai has no present plans to issue any shares of preferred stock.

Stock Options

As of March 31, 2017, there were options to purchase a total of 1,855,741 shares of Tokai common stock outstanding at a weighted average exercise price of $6.54 per share.

Provisions of Tokai’s Certificate of Incorporation and By-laws and Delaware Law That May Have Anti-Takeover Effects

Staggered Board; Removal of Directors

Tokai’s certificate of incorporation and by-laws divide its board of directors into three classes with staggered three-year terms. In addition, a director is only able to be removed for cause and only by the affirmative vote of the holders of at least 75% of the votes that all of Tokai stockholders would be entitled to cast in an annual election of directors. Any vacancy on the Tokai board of directors, including a vacancy resulting from an enlargement of the board of directors, may only be filled by vote of a majority of the directors then in office. The classification of the board of directors and the limitations on the removal of directors and filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of Tokai.

Stockholder Action by Written Consent; Special Meetings

Tokai’s certificate of incorporation provides that any action required or permitted to be taken by its stockholders must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Tokai’s certificate of incorporation and by-laws also provide that, except as otherwise required by law, special meetings of Tokai’s stockholders can only be called by the board of directors.

Advance Notice Requirements for Stockholder Proposals

Tokai’s by-laws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election to the board of directors. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder of record on the

 

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record date for the meeting who is entitled to vote at the meeting and who has delivered timely written notice in proper form to Tokai’s secretary of the stockholder’s intention to bring such business before the meeting. These provisions could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a majority of Tokai’s outstanding voting securities.

Delaware Business Combination Statute

Tokai is subject to Section 203 of the Delaware General Corporate Law (“DGCL”). Subject to certain exceptions, Section 203 prevents a publicly-held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status with the approval of the board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger or consolidation involving Tokai and the “interested stockholder” and the sale of more than 10% of Tokai’s assets. In general, an “interested stockholder” is any entity or person beneficially owning 15% or more of Tokai’s outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.

Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions: before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; upon closing of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or by-laws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares. Tokai has not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of Tokai may be discouraged or prevented. However, on December 21, 2016, the Tokai board of directors approved the transaction contemplated by the Share Purchase Agreement, rendering Section 203 inapplicable to the Otic Transaction to the fullest extent permitted by applicable law.

Amendment of Certificate of Incorporation and By-laws

The DGCL provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or by-laws, unless a corporation’s certificate of incorporation or by-laws, as the case may be, requires a greater percentage. Tokai’s by-laws may be amended or repealed by a majority vote of its board of directors or by the affirmative vote of the holders of at least 75% of the votes that all of Tokai’s stockholders would be entitled to cast in any annual election of directors. In addition, the affirmative vote of the holders of at least 75% of the votes that all of Tokai’s stockholders would be entitled to cast in any annual election of directors is required to amend or repeal or to adopt any provisions inconsistent with any of the provisions of Tokai’s certificate of incorporation described above under “ —Staggered Board; Removal of Directors ” and “ —Stockholder Action by Written Consent; Special Meetings .”

 

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