Schedule 14A


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NameSchedule 14A
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3.

By Mail: To vote by mail, you must mark, sign and date the proxy card and then mail the proxy card in accordance with the instructions on the proxy card. If you vote by mail, you do not need to

 

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vote your proxy over the Internet or by telephone. Mediant Communications, Inc. must receive the proxy card not later than May 8, 2017, the day before the special meeting, for your proxy to be valid and your vote to count. If you return your proxy card but do not specify how you want your shares voted on any particular matter, they will be voted in accordance with the recommendations of our board of directors.

 

 

4.

In Person at the Meeting: If you attend the special meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which Tokai will provide to you at the meeting.

If your shares are held in “street name,” meaning they are held for your account by an intermediary, such as a broker, then you are deemed to be the beneficial owner of your shares and the broker that actually holds the shares for you is the record holder and is required to vote the shares it holds on your behalf according to your instructions. The proxy materials, as well as voting and revocation instructions, should have been forwarded to you by the broker that holds your shares. In order to vote your shares, you will need to follow the instructions that your broker provides you. Many brokers solicit voting instructions over the Internet or by telephone.

If you do not give instructions to your broker, your broker will not be able to vote your shares with respect to “non-discretionary” items. Each of the Share Issuance Proposal, the Equity Financing Proposal, the Reverse Stock Split Proposal and the Adjournment Proposal are “non-discretionary” items. Accordingly, if you do not give your broker voting instructions on any of these proposals, your broker may not vote your shares with respect to such matter and your shares will be counted as “broker non-votes” with respect to such proposal. A “broker non-vote” occurs when shares held by a broker are not voted with respect to a particular proposal because the broker does not have or did not exercise discretionary authority to vote on the matter and has not received voting instructions from its clients.

Regardless of whether your shares are held in street name, you are welcome to attend the meeting. You may not vote shares held in street name in person at the meeting, however, unless you obtain a legal proxy, executed in your favor, from the holder of record (i.e., your broker). A legal proxy is not the form of proxy included with this proxy statement.

 

Q:

Can I change my vote?

 

A:

If your shares are registered directly in your name, you may revoke your proxy and change your vote at any time before the vote is taken at the special meeting. To do so, you must do one of the following:

 

 

1.

Vote over the Internet or by telephone as instructed above. Only your latest Internet or telephone vote is counted.

 

 

2.

Sign and return a new proxy card. Only your latest dated and timely received proxy card will be counted.

 

 

3.

Attend the special meeting and vote in person as instructed above. Attending the special meeting will not alone revoke your Internet vote, telephone vote or proxy card submitted by mail, as the case may be.

 

 

4.

Give Tokai’s corporate secretary written notice before or at the meeting that you want to revoke your proxy.

If your shares are held in “street name,” you may submit new voting instructions by contacting your broker or other nominee. You may also vote in person at the special meeting if you obtain a legal proxy as described in the answer above.

 

Q:

How many shares must be represented to have a quorum and hold the special meeting?

 

A:

A majority of Tokai’s shares of common stock outstanding at the record date must be present in person or represented by proxy to hold the special meeting. This is called a quorum. For purposes of determining whether a quorum exists, Tokai counts as present any shares that are voted over the

 

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Internet, by telephone, by completing and submitting a proxy card by mail or that are represented in person at the meeting. Further, for purposes of establishing a quorum, Tokai will count as present shares that a stockholder holds even if the stockholder votes to abstain or only votes on one of the proposals. In addition, Tokai will count as present shares held in “street name” by brokers who indicate on their proxies that they do not have authority to vote those shares. If a quorum is not present, Tokai expects to adjourn the special meeting until it obtains a quorum.

 

Q:

What vote is required to approve each matter and how are votes counted?

 

A:

Proposal 1—Share Issuance Proposal

Approval of the Share Issuance Proposal requires the affirmative vote of a majority of the shares of Tokai common stock, present in person or represented by proxy and entitled to vote on the subject matter (excluding broker non-votes and abstentions).

Certain Tokai stockholders and directors and officers, who as of December 31, 2016 in the aggregate own approximately 36.3% of the outstanding shares of Tokai common stock, are parties to a Support Agreement with Tokai and Otic, under which such stockholders have agreed to vote in favor of the issuance of Tokai common stock in the Otic Transaction and against any “acquisition proposal.” For a more complete description of the Support Agreement, Tokai urges you to read the section entitled “ Agreements Related to the Share Purchase Agreement—Support Agreement ,” beginning on page 120 of this proxy statement.

Proposal 2—Equity Financing Proposal

Approval of the Equity Financing Proposal requires the affirmative vote of a majority of the shares of Tokai common stock, present in person or represented by proxy and entitled to vote on the subject matter (excluding broker non-votes and abstentions).

Proposal 3—Reverse Stock Split Proposal

Approval of the Reverse Stock Split Proposal requires the affirmative vote of a majority of the shares of Tokai common stock outstanding and entitled to vote at the special meeting (broker non-votes and abstentions will have the same effect as voting against the Reverse Stock Split Proposal).

Proposal 4—Adjournment Proposal

Approval of the Adjournment Proposal requires the affirmative vote of a majority of the shares of Tokai common stock, present in person or represented by proxy and entitled to vote on the subject matter (excluding broker non-votes and abstentions).

 

Q:

Who will count the vote?

 

A:

The votes will be counted, tabulated and certified by Mediant Communications, Inc.

 

Q:

Where can I find the voting results?

 

A:

Tokai plans to announce preliminary voting results at the special meeting and will report final voting results in a Current Report on Form 8-K filed with the SEC within four business days following the date of the special meeting.

 

Q:

Who will bear the costs of soliciting these proxies?

 

A:

Tokai will bear the cost of soliciting proxies. In addition to solicitation by mail, Tokai’s directors, officers and employees may solicit proxies by telephone, e-mail, facsimile, and in person without additional compensation. Tokai may reimburse brokers or persons holding stock in their names, or in the names of their nominees, for their expenses in sending proxies and proxy material to beneficial owners.

 

Q:

What is the Otic Transaction?

Tokai, Otic and the Sellers have entered into a Share Purchase Agreement, as amended and restated on March 2, 2017. Under the Share Purchase Agreement, Tokai will acquire all of the ordinary and

 

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preferred shares of Otic in exchange for the issuance to the Sellers of a specified number of shares of Tokai common stock and will assume all outstanding share options and warrants of Otic. Accordingly, following the Otic Transaction, Otic will be a wholly owned subsidiary of Tokai.

Under the Share Purchase Agreement, Tokai agreed to issue up to an aggregate of 36,911,631 shares of its common stock to the Sellers and to the holders of warrants and options of Otic upon the exercise of such options and warrants, which shares shall be allocated among the Otic equityholders in accordance with the Articles of Association of Otic and the share incentive plan of Otic based on the average closing price of the Tokai common stock on the NASDAQ Global Market over the twenty trading days ending the third trading day prior to the closing of the Otic Transaction. If all of Otic’s outstanding options and warrants are exercised prior to closing, then following the closing, the 36,911,631 shares of Tokai common stock the shareholders of Otic would receive represents approximately 62% of the outstanding shares of Tokai common stock, excluding for this purpose the effect on ownership of the issuance of shares in the Equity Financing. Based on the warrants to purchase shares of Otic and the conversion of certain outstanding debt facilities of Otic into shares of Otic that are expected to be exercised or converted prior to closing, and assuming a Tokai common stock price of $1.05 per share at the time of the closing (which was the average closing price of the Tokai common stock on the NASDAQ Global Market over the twenty trading days ending on December 21, 2016), Tokai would issue to the Otic shareholders 34,653,770 shares of Tokai common stock at the closing (or 60.5% of the outstanding shares of Tokai common stock, excluding for this purpose the effect on ownership of the issuance of shares in the Equity Financing). The relative percentage was derived using a stipulated value of Otic of approximately $50.0 million and of Tokai of approximately $33.0 million. After giving effect to the issuance of 3,603,601 shares of Tokai common stock in the Equity Financing, if all of Otic’s outstanding options, warrants and convertible debt facilities are exercised or converted prior to closing, the shareholders of Otic would hold approximately 64% of the Tokai common stock.

After the Otic Transaction, Tokai will change its corporate name to “Novus Therapeutics, Inc.”

 

Q:

Why are the two companies proposing the transaction?

 

A:

The Otic Transaction will result in a pharmaceutical company focused on the development and commercialization of products for ENT disorders, including Otic’s lead candidate, which is a nasally-administered, combination drug product (OP-02) intended to address the underlying cause of otitis media and Eustachian tube dysfunction (“ OM/ETD ”). For a discussion of Tokai’s reasons for the Otic Transaction, Tokai urges you to read the section entitled “ The Otic Transaction—Reasons for the Otic Transaction ,” beginning on page 86 of this proxy statement.

 

Q:

What is the consideration to be paid by Tokai in the transaction?
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