Schedule 14A


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NameSchedule 14A
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A:

At the closing of the transaction, all of the outstanding ordinary and preferred shares of Otic immediately prior to the closing of the Otic Transaction will be exchanged for a specified number of shares of Tokai common stock, and Tokai will assume all outstanding share options and warrants of Otic. 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. The consideration that each Seller will receive at closing depends on an allocation schedule that Otic will deliver to Tokai prior to closing, which reflects the consideration that each Seller is due upon closing of the Otic Transaction according to Otic’s organizational documents. See “ Terms of the Share Purchase Agreement—Exchange Ratio ,” beginning on page 103 of this proxy statement.

In connection with the Otic Transaction, each outstanding Otic option that is not exercised prior to the closing of the Otic Transaction will be assumed on the same terms and conditions as were applicable under the Otic share incentive plan, into an option to acquire such number of shares of Tokai common stock calculated pursuant to Otic’s Articles of Association and Otic’s share incentive plan, at a correspondingly adjusted exercise price.

In connection with the Otic Transaction, each outstanding warrant of Otic that is not exercised prior to the closing of the Otic Transaction will be assumed by Tokai on the same terms and conditions into a

 

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warrant to acquire shares of Tokai common stock as calculated pursuant to Otic’s Articles of Association at a correspondingly adjusted exercise price.

 

Q:

In addition to the requirement of obtaining Tokai stockholder approval, what else is required to consummate the Otic Transaction?

 

A:

In addition to the requirement of obtaining Tokai stockholder approval, each of the following closing conditions set forth in the Share Purchase Agreement must be satisfied, including:

 

 



 

the filing, obtainment or occurrence of all authorizations and consents, including Israeli tax rulings described in the Share Purchase Agreement;

 

 



 

the absence of any order, executive order, stay, decree, judgment or injunction (preliminary or permanent) or statute, rule, or regulation prohibiting consummation of the Otic Transaction; and

 

 



 

the approval of an initial listing application on The NASDAQ Global Market with respect to the shares of Tokai common stock to be issued in the Otic Transaction.

Further, each of the following closing conditions set forth in the Share Purchase Agreement must be satisfied or waived, including:

 

 



 

the accuracy of representations and warranties, subject to customary materiality standards;

 

 



 

the performance of covenants in all material respects;

 

 



 

the absence of any continuing Tokai or Otic material adverse effect; and

 

 



 

resignations of the directors of Tokai who will not continue to serve as directors following closing of the Otic Transaction pursuant to the terms of the Share Purchase Agreement.

For a more complete description of the closing conditions under the Share Purchase Agreement, Tokai urges you to read the section entitled “ Terms of the Share Purchase Agreement—Conditions to the Consummation of the Otic Transaction ,” beginning on page 105 of this proxy statement.

 

Q:

Who will be the directors of Tokai following the Otic Transaction?

 

A:

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. For more information on the leadership of the combined company following the transaction, see the section entitled “ Executive Officers and Directors Following the Otic Transaction ,” beginning on page 169 of this proxy statement.

 

Q:

Who will be the executive officers of Tokai immediately following the Otic Transaction?

 

A:

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, serving as President and Chief Executive Officer, Christine G. Ocampo, serving as Chief Financial and Compliance Officer and Dr. Catherine C. Turkel, serving as Chief Development Officer. For more information on the leadership of the combined company following the transaction, see the section entitled “ Executive Officers and Directors Following the Otic Transaction ,” beginning on page 169 of this proxy statement.

 

Q:

What will happen to Tokai if, for any reason, the Otic Transaction does not close?

 

A:

If the Otic Transaction does not close for any reason, the Tokai board of directors may elect to, among other things, attempt to complete another strategic transaction, attempt to sell or otherwise dispose of the various assets of Tokai, dissolve or liquidate the assets of Tokai or seek to continue to operate the business of Tokai. If Tokai seeks another strategic transaction or attempts to sell or otherwise dispose of the various assets of Tokai, there is no assurance that Tokai will be able to do so, that the terms would

 

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be equal to or superior to the terms of the Otic Transaction or as to the timing of such transaction. If Tokai decides to dissolve and liquidate its assets, Tokai would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims, and there can be no assurances as to the amount or timing of available cash left to distribute to stockholders after paying the debts and other obligations of Tokai and setting aside funds for reserves.

If Tokai were to seek to continue its business, it would need to complete its assessment of its galeterone and ARDA programs to determine whether and how to continue one or both of these development programs or acquire one or more other product candidates. Tokai would also need to raise funds to support continued operations and reassess its workforce requirements in consideration of its reduced workforce.

For information on reasons that the Otic Transaction might not close, see the sections entitled “Terms of the Share Purchase Agreement—Conditions to the Consummation of the Otic Transaction ” and “ Terms of the Share Purchase Agreement—Termination of the Share Purchase Agreement,” beginning on pages 105 and 115, respectively. For more information on potential consequences for Tokai stockholders should the Otic Transaction not close, see the section entitled “Risk Factors,” beginning on page 30 of this proxy statement.

 

Q:

When do you expect the Otic Transaction to be consummated?

 

A:

Tokai anticipates that the closing of the Otic Transaction will occur sometime soon after the Tokai special meeting to be held on May 9, 2017, but Tokai cannot predict the exact timing. For more information, please see the sections entitled “ Terms of the Share Purchase Agreement—Conditions to the Consummation of the Otic Transaction ,” beginning on page 105, and “ The Otic Transaction—Expected Timing of the Otic Transaction ,” beginning on page 73, each in this proxy statement.

 

Q:

What are the material U.S. federal income tax consequences of the Otic Transaction to Tokai stockholders?

 

A:

Tokai stockholders will not recognize gain or loss in connection with the Otic Transaction or the related Equity Financing with respect to their shares of Tokai common stock. For more information on the material U.S. federal income tax consequences of the Otic Transaction and the related Equity Financing to Tokai stockholders, see the section entitled “ The Otic Transaction—Material U.S. Federal Income Tax Consequences to Tokai Stockholders ,” beginning on page 100 of this proxy statement.

 

Q:

What is the reverse stock split and why is it necessary?

 

A:

Pursuant to the Share Purchase Agreement, Tokai agreed with Otic to seek stockholder approval for 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. Therefore Tokai is seeking to effect a reverse stock split of Tokai’s issued and outstanding shares of common stock, pursuant to which any number of outstanding shares between and including one and ten would be combined and reclassified into one share of Tokai common stock, such number to be determined by the Tokai board of directors at any time within six months of the date of the special meeting with the agreement of Otic (the “ reverse stock split ”). The Tokai board of directors believes that the completion of the reverse stock split will cause the price of Tokai common stock to increase, which may encourage interest and trading in its common stock and may reduce the risk of a delisting of Tokai common stock from NASDAQ. There are no specified time restrictions on the reverse stock split. For more information on the reverse stock split, see the section entitled “ Reverse Stock Split Proposal ,” beginning on page 125 of this proxy statement.

 

Q:

As a Tokai stockholder, how does the Tokai board of directors recommend that I vote?

 

A:

The Tokai board of directors unanimously recommends that you vote (1) “FOR” the Share Issuance Proposal; (2) “FOR” the Equity Financing Proposal; (3) “FOR” the Reverse Stock Split Proposal; and

 

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(4) “FOR” the Adjournment Proposal. The approval by Tokai stockholders of the Share Issuance Proposal is required to complete the Otic Transaction described in this proxy statement. For more information on the Tokai board of directors’ recommendations to Tokai stockholders regarding the proposals to be voted on at the special stockholder meeting, see the section entitled “ The Otic Transaction—Recommendation of the Tokai Board of Directors ,” beginning on page 85 of this proxy statement.
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