Schedule 14A


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NameSchedule 14A
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(page 120)

Certain stockholders, directors and officers of Tokai, who as of December 31, 2016 collectively owned approximately 36.3% of outstanding Tokai common stock, have agreed to vote in favor of the issuance of Tokai common stock in the Otic Transaction and against any “acquisition proposal.”

Interests of Tokai’s Directors and Executive Officers

(pages 88-91)

In considering the recommendation of the Tokai board of directors with respect to the issuance of shares of Tokai common stock pursuant to the Share Purchase Agreement and the other matters to be voted upon by Tokai stockholders at the Tokai special meeting, Tokai stockholders should be aware that certain members of the Tokai board of directors and the executive officers of Tokai have interests in the Otic Transaction that may be different from, or in addition to, interests they have as Tokai stockholders, including:

 

 



 

each of Tokai’s executive officers is party to an employment agreement that provides for severance benefits in the event of a qualifying termination of employment during the period of time commencing on the closing of the Otic Transaction and ending one year following the closing of the Otic Transaction;

 

 



 

the stock option agreements evidencing the stock options held by each of Tokai’s executive officers provide that upon a qualifying termination of employment during the period of time commencing on the closing of the Otic Transaction and ending one year following the closing of the Otic Transaction, the stock options will vest in full;

 

 



 

the stock option agreements evidencing the stock options held by each of Tokai’s non-employee directors provide that upon the closing of the Otic Transaction, the stock options will vest in full; and

 

 



 

under the Share Purchase Agreement, Tokai’s directors and executive officers are entitled to continued indemnification, expense advancement and insurance coverage.

 

 

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Executive Officers and Directors Following the Otic Transaction

(pages 104, 169-173)

Immediately following the completion of the Otic Transaction, the executive management team of the combined company is expected to be composed of the current executive team of Otic: Gregory J. Flesher, President and Chief Executive Officer; Christine G. Ocampo, Chief Financial and Compliance Officer; and Dr. Catherine C. Turkel, Chief Development Officer.

The combined company’s board of directors will initially be fixed at seven members, consisting of (i) four members designated by Otic: Keith A. Katkin as Chairman, Gregory J. Flesher, Gary A. Lyons and Erez Chimovits and (ii) three board members designated by Tokai: Cheryl L. Cohen, John S. McBride and Jodie P. Morrison.

Regulatory Approvals

(pages 100, 118)

Neither Tokai nor Otic is required to make any filings or to obtain approvals or clearances from any regulatory authorities in the United States or other countries to consummate the Otic Transaction contemplated by the Share Purchase Agreement. In Israel, Otic is required to prepare, file and receive all Israeli tax rulings with respect to the Otic Transaction, and Tokai is required to deliver to Otic an executed copy of an undertaking in the standard form required by the Office of the Chief Scientist ( “OCS” ) from non-Israeli residents investing in Israeli companies which have received support from the OCS. In the United States, Tokai must comply with applicable federal and state securities laws and NASDAQ rules and regulations in connection with the issuance of shares of Tokai common stock in the Otic Transaction and the related issuance of shares of Tokai common stock in the Equity Financing, including the filing with the SEC of this proxy statement.

Material U.S. Federal Income Tax Consequences of the Transaction to Tokai Stockholders

(page 100)

Neither the Otic Transaction nor the related Equity Financing will result in any taxable gain or loss for U.S. federal income tax purposes to any Tokai stockholder in his, her or its capacity as a Tokai stockholder.

Risk Factors

(pages 30-64)

The Otic Transaction involves a number of risks. In addition, both Tokai and Otic are subject to various risks associated with their businesses and their industries that will be implicated in the case of Tokai if the Otic Transaction is not consummated and in the case of Otic if the Otic Transaction is consummated. You should consider all the information contained in this proxy statement in deciding how to vote for the proposals presented in this proxy statement, including the possibility that the Otic Transaction may not be completed. These risks are discussed in greater detail under the section entitled “ Risk Factors ,” beginning on page 30 of this proxy statement. Tokai encourages you to read and consider all of these risks carefully.

NASDAQ Global Market Listing

(pages 28, 126)

The Share Purchase Agreement requires Tokai to use its commercially reasonable efforts to maintain its existing listing on NASDAQ, to obtain approval of the listing of the combined company on NASDAQ and to cause the shares of Tokai common stock being issued in the Otic Transaction to be approved for listing, subject to notice of issuance, on NASDAQ at or prior to the consummation of the Otic Transaction. Tokai, with

 

 

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cooperation from Otic has filed an initial listing application with NASDAQ, in satisfaction of Tokai’s obligations under the Share Purchase Agreement, and toward fulfillment of one of the conditions to the consummation of the Otic Transaction under the Share Purchase Agreement (which is more fully described in the section of this proxy statement entitled, “ Terms of the Share Purchase Agreement—Conditions to the Consummation of the Otic Transaction ”).

Anticipated Accounting Treatment

(pages 100-101)

Because Otic has been determined to be the accounting acquirer in the Otic Transaction, but not the legal acquirer, the Otic Transaction will be treated by Tokai as a reverse acquisition under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States ( “GAAP” ). For accounting purposes, Otic is considered to be acquiring Tokai in the Otic Transaction.

As a result, upon consummation of the Otic Transaction, (1) the historical financial statements of Otic will become the historical financial statements of the combined company and (2) Otic will record the business combination in its financial statements and will apply the acquisition method to account for the acquired assets and assumed liabilities of the Tokai as of the closing date of the transaction. Applying the acquisition method includes recording the identifiable assets acquired and liabilities assumed at their fair values, and recording goodwill for the excess of the purchase price over the aggregate fair value of the identifiable assets acquired and liabilities assumed, if any, or recording a bargain purchase gain if the aggregate fair value of the identifiable assets acquired and liabilities assumed exceeds the purchase price for the acquisition.

No Appraisal Rights

(pages 70, 101)

Holders of Tokai common stock will not be entitled to any dissenters’ rights or appraisal rights with respect to any of the proposals to be voted on at the special meeting.

Equity Financing

(page 120)

In connection with the Otic Transaction, Tokai has entered into the Tokai Stock Purchase Agreement, dated January 31, 2017, with certain purchasers set forth therein pursuant to which the purchasers have agreed to purchase 3,603,601 shares of Tokai common stock at a price of $1.11 per share. All of the purchasers under the Tokai Stock Purchase Agreement are either existing shareholders or employees of Otic. The Tokai Stock Purchase Agreement provides that the purchase and sale of the Tokai common stock will occur immediately following the closing of the Otic Transaction.

Reverse Stock Split

(pages 125-131)

Under the Share Purchase Agreement, Tokai has agreed to seek stockholder approval of a reverse stock split with the specific terms to be proposed by Tokai and approved by Otic to the extent necessary in order to maintain Tokai’s listing on NASDAQ. Based on information currently available to Tokai, Tokai anticipates that it will be unable to meet the $4.00 minimum bid price initial listing requirement at the closing of the Otic Transaction unless it effects a reverse stock split.

 

 

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QUESTIONS AND ANSWERS ABOUT

THE SPECIAL MEETING AND THE OTIC TRANSACTION

The following section provides answers to frequently asked questions about the Otic Transaction. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

 

Q:

When and where is the special meeting of the Tokai stockholders being held?

 

A:

The special meeting will be held on May 9, 2017 at 9:00 am local time, at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109. For more information see the section entitled “ Information About the Special Meeting ,” beginning on page 66 of this proxy statement.

 

Q:

Why did I receive these proxy materials?

 

A:

Tokai’s board of directors has made these materials available to you in connection with the solicitation of proxies for use at its special meeting of stockholders to be held on May 9, 2017. As a holder of common stock, you are invited to attend the special meeting and are requested to vote on the items of business described in this proxy statement. This proxy statement includes information that we are required to provide to you under SEC rules and that is designed to assist you in voting your shares. For more information see the section entitled “ Information About the Special Meeting ,” beginning on page 66 of this proxy statement.

 

Q:

Who can vote at the special meeting?

 

A:

To be entitled to vote, you must have been a stockholder of record at the close of business on April 3, 2017, the record date for Tokai’s special meeting. There were 22,641,651 shares of Tokai’s common stock outstanding and entitled to vote at the special meeting as of the record date.

 

Q:

How many votes do I have?

 

A:

Each share of Tokai common stock that you own as of the record date will entitle you to one vote on each matter considered at the special meeting.

 

Q:

How do I vote?

 

A:

If you are the “record holder” of your shares, meaning that your shares are registered in your name in the records of Tokai’s transfer agent, Continental Stock Transfer & Trust Company, you may vote your shares at the meeting in person or by proxy as follows:

 

 

1.

Over the Internet: To vote over the Internet, please go to the following website: www.proxypush.com/tkai, and follow the instructions at that site for submitting your proxy electronically. If you vote over the Internet, you do not need to complete and mail your proxy card or vote your proxy by telephone. You must specify how you want your shares voted or your Internet vote cannot be completed, and you will receive an error message. You must submit your Internet proxy before 11:59 p.m., Eastern Time, on May 8, 2017, the day before the special meeting, for your proxy to be valid and your vote to count.

 

 

2.

By Telephone: To vote by telephone, please call (866) 206-4382 and follow the instructions provided on the proxy card. If you vote by telephone, you do not need to complete and mail your proxy card or vote your proxy over the Internet. You must specify how you want your shares voted and confirm your vote at the end of the call or your telephone vote cannot be completed. You must submit your telephonic proxy before 11:59 p.m., Eastern Time, on May 8, 2017, the day before the special meeting, for your proxy to be valid and your vote to count.
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