Item 1.01. Entry into a Material Definitive Agreement.
On July 14, 2020, Organovo Holdings, Inc., a Delaware corporation (the "Company"
or "Organovo"), entered into a Cooperation Agreement (the "Cooperation
Agreement") with Keith E. Murphy.
Pursuant to the Cooperation Agreement, the Board of Directors of the Company
(the "Board") appointed Mr. Murphy and Adam K. Stern to the Board as Class III
directors, with terms expiring at the Company's 2020 Annual Meeting of
Stockholders (the "2020 Annual Meeting"). In connection with the appointment of
Messrs. Murphy and Stern, two of the Company's existing directors, Richard
Maroun and David Shapiro, resigned from the Board and from each Board committee
on which they serve, effective immediately. Additional information regarding
Messrs. Murphy and Stern, their appointment to the Board and the resignations of
Mr. Maroun and Dr. Shapiro, is discussed in Item 5.02 below.
The Board also agreed to nominate, recommend, support and solicit proxies for
the re-election of Messrs. Murphy and Stern at the 2020 Annual Meeting. The
Board also agreed to nominate, recommend, support and solicit proxies for an
advisory stockholder vote (the "Advisory Proposal") at the 2020 Annual Meeting
to appoint three individuals, Douglas Jay Cohen, David Gobel and Alison Tjosvold
Milhous (collectively, the "Advisory Nominees"), to the Board. Mr. Murphy
identified each of the Advisory Nominees. The Board has evaluated and
interviewed each of the Advisory Nominees, and determined that each individual
satisfies the criteria set forth in the Cooperation Agreement and the Company's
corporate governance guidelines for selection as an Advisory Nominee and for
service on the Board. The Company's Proxy Statement for the 2020 Annual Meeting
will contain background information on each of the Advisory Nominees.
If the final vote tabulation for the Advisory Proposal receives more votes cast
"FOR" than "AGAINST" its approval, the Board has approved the appointment of the
Advisory Nominees, to be automatically effective immediately following the final
adjournment of the 2020 Annual Meeting. In addition, immediately following the
appointment of the Advisory Nominees, each of Company's existing directors
(other than Messrs. Murphy and Stern) will resign from the Board, which will
result in Messrs. Murphy and Stern and the Advisory Nominees constituting the
full membership of the Board.
If the Advisory Proposal receives more votes cast "AGAINST" than "FOR" its
approval at the 2020 Annual Meeting, the Advisory Nominees will not be appointed
to the Board and the Company's existing directors will continue to serve on the
Board. In addition, Messrs. Murphy and Stern have each agreed to resign from the
Board immediately following the final adjournment of the 2020 Annual Meeting if
they individually receive more "WITHHOLD" votes than "FOR" votes cast for their
election at the 2020 Annual Meeting.
The Company's Proxy Statement for the 2020 Annual Meeting will identify and
provide details about each of the Advisory Nominees subject to the Advisory
Proposal. The Proxy Statement will also provide information regarding the
anticipated business direction for Organovo assuming the Advisory Nominees are
appointed to the Board based on stockholder voting results at the 2020 Annual
Meeting.
Pursuant to the Cooperation Agreement, Mr. Murphy agreed to withdraw his
nomination of a candidate for election at the 2020 Annual Meeting and to
withdraw his Section 220 demand under Delaware General Corporation Law
requesting a list of the Company's stockholders and other corporate records.
Mr. Murphy also agreed to certain standstill provisions with respect to his
actions with regard to the Company and its Common Stock for the duration of the
Standstill Period, which is defined in the Cooperation Agreement as the period
commencing on the date of the Agreement and ending thirty (30) calendar days
prior to the expiration of the advance notice period for the submission by
stockholders of director nominations for consideration at the 2021 Annual
Meeting (as set forth in the advance notice provisions of the Company's Amended
and Restated Bylaws).
Mr. Murphy also entered into Release Agreements (the "Release Agreements"), in
which he agreed (on his behalf and on behalf of his affiliates) to a general
release of claims in favor of each of the Company's directors and officers
through the date of Cooperation Agreement and to a covenant not to sue.
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The Cooperation Agreement also provides for the Company to enter into a
Separation and Mutual Release Agreement (the "Director Agreements") with each of
the Company's existing directors who resign in connection with the Cooperation
Agreement or who resign following the final adjournment of the 2020 Annual
Meeting as a result of the Advisory Nominees being appointed to the Board
resulting from the stockholder vote on the Advisory Proposal. Pursuant to the
Director Agreements, the Company will release each resigning director, and each
resigning director will release the Company, from any and all claims that such
party may have against the other for acts or omissions that occurred on or
before the date of the respective Director Agreement. The resigning directors
also agreed to certain standstill provisions and cooperation services. In the
Director Agreements, the Company agreed to purchase a six-year director and
officer liability insurance tail policy and clarified that any existing director
resignations as contemplated by the Director Agreements would constitute a
"change in control" pursuant to the terms of the respective equity award
agreements and the Company's 2012 Equity Incentive Plan, as amended, which
results in the acceleration of any unvested equity awards held by the resigning
directors.
The Cooperation Agreement also provides that the Company will enter into a
Separation Agreement and Mutual Release (the "Officer Agreements") with each
officer who resigns from the Company following the final adjournment of the 2020
Annual Meeting. Pursuant to the Officer Agreements, the Company will release
each resigning officer, and each resigning officer will release the Company,
from any and all claims that such party may have against the other for acts or
omissions that occurred on or before the date of the respective Officer
Agreement. It also clarifies that the appointment of the Advisory Nominees to
the Board will constitute a "change in control" under the Company's Severance
and Change in Control Plan, as amended (the "Plan"), which will entitle each
resigning officer to the severance benefits set forth in the Plan. Pursuant to
the terms of the Plan, each of the executive officers is entitled to receive a
cash severance payment equal to two times such executive officer's base salary,
paid in a lump sum, plus a pro-rated target bonus for 2021 fiscal year, health
benefit continuation for up to 18 months, and outplacement assistance for 18
months. Each executive officer will also receive full accelerated vesting of all
outstanding equity awards and a one-year time period to exercise any stock
options. Such resigning officers each also agreed to certain standstill
provisions in the Officer Agreement.
The foregoing summary of the Cooperation Agreement, the Release Agreements, the
Director Agreements, the Officer Agreements, the 2012 Equity Incentive Plan and
the Plan does not purport to be complete and is qualified in its entirety by
reference to the full text of such agreements. A copy of the Cooperation
Agreement, the form of Release Agreement, the form of Director Agreement and the
form of Officer Agreement are attached hereto as Exhibits 10.1, 10.2, 10.3
and 10.4, respectively, and are incorporated herein by reference. The Company's
2012 Equity Incentive Plan was filed with the Securities and Exchange Commission
(the "SEC") on February 13, 2012 as Exhibit 10.15 to the Company's Current
Report on Form 8-K and is incorporated herein by reference. The Company's Plan
was filed with the SEC on November 9, 2015 as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q and is incorporated herein by reference. The
Company's Amendment to the Plan was filed with the SEC on May 20, 2020 as
Exhibit 10.1 to the Company's Current Report on Form 8-K and is incorporated
herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The information set forth in Item 1.01 of this Current Report is incorporated
herein by reference.
New Director Appointments
Pursuant to the terms of the Cooperation Agreement described above in Item 1.01,
on July 14, 2020, the Board of Directors appointed Keith Murphy, age 48, and
Adam K. Stern, age 56 (together, the "Murphy Appointees"), to serve as Class III
directors of the Company with terms expiring at the 2020 Annual Meeting or until
their resignation or removal. The Board also appointed Mr. Stern as a member of
the Company's Audit Committee and as a member of the Company's Compensation
Committee. The Board determined that Mr. Stern qualifies as an independent
director pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the listing standards of the Nasdaq Stock Market, meets the further
audit committee standards required by SEC Rule 10A-3, and is an audit committee
financial expert within the meaning of Item 407(d) of Regulation S-K of the
Securities Act.
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Mr. Murphy currently serves as the Chief Executive Officer and President of
Viscient Biosciences ("Viscient"), a private company that he founded in 2017
that is focused on drug discovery and development utilizing 3D tissue technology
and multi-omics (genomics, transcriptomics, metabolomics). Mr. Murphy previously
served as the President and Chief Executive Officer of Organovo from February
2012 through April 2017, and as Chairman from February 2012 through August 2017.
Mr. Murphy also previously served as President, Chief Executive Officer, and
Chairman of Organovo, Inc., Organovo's primary operating company prior to its
going-public transaction, from July 2007 to February 2012. Prior to founding
Organovo, Mr. Murphy served in various roles at Amgen, Inc. from August 1997 to
July 2007, including serving in Product Strategy and Director of Process
Development. At Amgen, Mr. Murphy worked on the development of several novel
formulation and device products, including the osteoporosis/bone cancer drug
Prolia/Xgeva (denosumab). Prior to joining Amgen, Mr. Murphy served at Alkermes,
Inc., a biotechnology company, from July 1993 to July 1997, where he played a
role on the development team for their first approved product, Nutropin (hGH)
Depot. He holds a BS in Chemical Engineering from MIT, and is an alumnus of the
UCLA Anderson School of Management.
Mr. Stern currently serves as the head of Private Equity Banking at Aegis
Capital Corp., full-service investment banking firm, and CEO of SternAegis
Ventures, the management team within Aegis Capital Corp. responsible for venture
capital and private equity financing, positions he has held since December 2012.
Prior to joining Aegis, Mr. Stern served as Senior Managing Director at Spencer
Trask Ventures, Inc., a private equity and venture firm, from 1997 to 2012,
where he managed the structured finance group focusing primarily on the
technology and life science sectors. From 1989 to 1997, Mr. Stern was at
Josephthal & Co., Inc., members of the New York Stock Exchange, where he served
as Head of Private Equity and as Managing Director. He has been a FINRA licensed
securities broker since 1987 and a General Securities Principal since 1991.
Mr. Stern previously served as a director of Organovo from February 2012 to June
2013. Mr. Stern is a current director of Matinas Biopharma Holdings, Inc. (NYSE
MKT: MTNB) and DarioHealth Corp. (NASDAQ Capital Market: DRIO) and is a former
director of InVivo Therapeutics, (NASDAQ Global Market: NVIV), and PROLOR
Biotech, prior to its sale in 2013 to Opko Health, Inc. (NASDAQ Global Market:
OPK) for approximately $600 million. Mr. Stern graduated with a Bachelor of Arts
degree from The University of South Florida in 1987.
Messrs. Murphy and Stern will each be eligible to participate in the Company's
non-employeedirector compensation program (the "Non-Employee Director Program").
The Non-Employee Director Program provides for an annual cash retainer of
$50,000 for services on the Board, payable in four equal quarterly installments,
and on a pro-rata basis for service during any portion of a fiscal quarter.
Although Non-EmployeeDirector Program additionally has provided for an annual
grant of Restricted Stock Awards, pursuant to the terms of the Cooperation
Agreement, Messrs. Murphy and Stern have agreed to forego their receipt of an
equity award through the date of the 2020 Annual Meeting.
The Company also entered into an Indemnification Agreement with each of
Mr. Murphy and Mr. Stern in the same form as applicable to the existing
Directors. The Indemnification Agreements provide for indemnification and
advancement of litigation and other expenses to each of Mr. Murphy and Mr. Stern
to the fullest extent permitted by law for claims relating to their service to
the Company or its subsidiaries. The Company's form of indemnification agreement
was filed with the SEC on February 13, 2012 as Exhibit 10.17 to the Company's
Current Report on Form 8-K and is incorporated herein by reference.
There are no family relationships between either Mr. Murphy or Mr. Stern and any
of the Company's directors or executive officers.
In November 2017, the Company entered into a collaboration agreement with
Viscient to develop a custom research platform for studying liver disease. Under
this agreement, its amendments and research services quotes, the Company
provided research services to Viscient in exchange for cash payments. The
Company recognized revenue of approximately $358,000, $44,050 and $107,000 for
research services provided to Viscient during fiscal years 2018, 2019 and 2020,
respectively. In addition to these research services, Viscient purchased an
aggregate of approximately $237,000 in primary human cell-based products from
the Company's subsidiary, Samsara, during fiscal years 2018, 2019 and 2020. In
November 2019, the Company entered into an agreement with Viscient to sell
certain bioprinting equipment and a non-exclusive license to certain
intellectual property for $171,500. There was approximately $111,000 of accounts
receivable outstanding from Viscient as of March 31, 2020.
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The Board has determined that Mr. Murphy does not qualify as an independent
director under the listing standards of the Nasdaq Stock Market as a result of
the Company's contractual relationships with Viscient. As discussed above,
Mr. Murphy is the Chief Executive Officer, President, Chairman and Founder of
Viscient. Mr. Stern has a minor investment in Viscient, but does not serve as an
employee, officer or director of Viscient.
Director Resignations
Pursuant to the terms of the Cooperation Agreement described in Item 1.01 and in
connection with, and effective upon, the appointment of the Murphy Appointees,
Richard Maroun, J.D. and David Shapiro, M.D. each resigned as members of the
Board of Directors and as members of the Company's Compensation Committee.
Mr. Shapiro also resigned as a member of the Company's Audit Committee. Their
respective resignations were not the result of any disagreement with the Company
with respect to its operations, polices or practices but to provide for the
appointment of Messrs. Murphy and Stern as set forth in the Cooperation
Agreement.
New Board Committee Assignments
In addition to the appointment of Mr. Stern as a member of the Audit Committee
and the Compensation Committee, the Board also appointed Mark Kessel as a member
of the Company's Compensation Committee. With these appointments, there are
three independent directors serving on each of the Company's three standing
Board Committees.
Important Information and Where to Find It
This communication may be deemed to be solicitation material in respect to the
solicitation of proxies from the Company's stockholders in connection with
matters to be considered at its 2020 Annual Meeting. The Company intends to file
a proxy statement and accompanying proxy card with the SEC in connection with
the solicitation of proxies from its stockholders in connection with the matters
to be considered at the 2020 Annual Meeting. BEFORE MAKING ANY VOTING DECISION,
THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT IN ITS ENTIRETY
WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN
CONNECTION WITH THE 2020 ANNUAL MEETING OR INCORPORATED BY REFERENCE IN THE
PROXY STATEMENT BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE 2020
ANNUAL MEETING AND THE PARTIES RELATED THERETO. The Company's stockholders will
be able to obtain the proxy statement, any amendments or supplements to the
proxy statement, the accompanying proxy card, and other documents filed by the
Company with the SEC free of charge at the SEC's website at www.sec.gov. Copies
will also be available free of charge on the investor relations section of the
Company's website at ir.organovo.com.
The Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of Organovo in
connection with matters to be considered at the 2020 Annual Meeting. Information
regarding the special interests of these directors and executive officers will
be included in the proxy statement referred to above.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
10.1 Cooperation Agreement, dated July 14, 2020, between the Company and
Keith Murphy.
10.2 Form of Release Agreement by Keith Murphy in favor of the Company's
directors and officers.
10.3 Form of Separation and Mutual Release Agreement with the Company's
directors.
10.4 Form of Separation Agreement and Release with the Company's
officers.
10.5 Organovo Holdings, Inc. 2012 Equity Incentive Plan (incorporated by
reference from Exhibit 10.15 to the Company's Current Report on Form
8-K, as filed with the SEC on February 13, 2012).
10.6 Organovo Holdings, Inc. Severance and Change in Control Plan
(incorporated by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q, as filed with the SEC on November 9, 2015).
10.7 Amendment to the Organovo Holdings, Inc. Severance and Change in
Control Plan (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, as filed with the SEC on May 20,
2020).
10.8 Form of Indemnification Agreement (incorporated by reference from
Exhibit 10.17 to the Company's Current Report on Form 8-K, as filed
with the SEC on February 13, 2012).
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