UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.           )

 

Filed by the Registrant 

 

Filed by a Party other than the Registrant 

 

 

Check the appropriate box:

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under §240.14a-12

Iterum Therapeutics plc

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

1)

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2)

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Total fee paid:

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

1)

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PRELIMINARY COPY – Subject to Completion

May [   ], 2020

Dear Iterum Therapeutics plc Shareholder,

You are cordially invited to the 2020 Annual General Meeting of Shareholders to be held at Block 2, Floor 3, Harcourt Centre, Harcourt Street, Dublin 2, Ireland on June 10, 2020 at 3.00 p.m., Irish time (10.00 a.m., Eastern Time). The enclosed notice of Annual General Meeting of Shareholders sets forth the proposals that will be presented at the meeting, which are described in more detail in the proxy statement.  

At this year’s Annual General Meeting, we will ask shareholders to:

 

1.

elect, by separate resolutions, the three nominees for Class II directors named herein, each to serve for a three-year term expiring at the 2023 annual general meeting of shareholders;

 

2.

approve an amendment and restatement of the Company’s 2018 Equity Incentive Plan increasing by 2,250,000 to 4,437,298 the number of ordinary shares, par value $0.01 per share (“ordinary shares”) authorized for issuance under the plan and certain other amendments;

 

3.

ratify, in a non-binding vote, the appointment of KPMG as our independent registered public accounting firm for our fiscal year ending December 31, 2020, and to authorize the board of directors, acting through the audit committee, to set the independent registered public accounting firm’s remuneration;

 

4.

approve an increase in the authorized share capital of the Company from $1,500,000 to $2,500,000 by the creation of an additional 100,000,000 ordinary shares, which proposal we refer to as the authorized share capital increase proposal;

 

5.

if the authorized share capital increase proposal (Proposal No. 4) is approved, grant the board of directors an updated authority under Irish law to allot and issue shares, warrants, convertible instruments and options, which proposal we refer to as the directors’ allotment authority proposal;

 

6.

if the directors’ allotment authority proposal (Proposal No. 5) is approved, grant the board of directors an updated authority under Irish law to issue shares for cash without first offering those shares to existing shareholders under pre-emptive rights that would otherwise apply to the issuance, which proposal we refer to as the pre-emption rights dis-application proposal;

 

7.

if the authorized share capital increase proposal (Proposal No. 4), directors’ allotment authority proposal (Proposal No. 5), and pre-emption rights dis-application proposal (Proposal No. 6) are approved, approve, in accordance with applicable rules of the Nasdaq Stock Market, the issuance by us of our ordinary shares in settlement of the potential future exchange in full of $51.6 million aggregate principal amount of, plus accrued and unpaid interest on, 6.500% Exchangeable Senior Subordinated Notes due 2025 issued pursuant to the Exchangeable Notes Indenture, dated as of January 21, 2020, among us, Iterum Therapeutics Bermuda Limited, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited, Iterum Therapeutics US Holding Limited and U.S. Bank National Association as trustee and the Securities Purchase Agreement, dated as of January 16, 2020, among us, Iterum Therapeutics Bermuda Limited, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited and Iterum Therapeutics US Holding Limited and the accredited investors named therein;

 

8.

approve an acquisition by investment funds managed and controlled by Sarissa Capital Management LP of up to 60% of our issued ordinary share capital solely as a result of the potential future exchange of the 15,000 6.500% Exchangeable Senior Subordinated Notes due 2025 held by such funds without incurring a mandatory offer obligation under Rule 9 of the Irish Takeover Panel Act, 1997, Takeover Rules, 2013;

 

9.

receive and consider the Company's Irish Statutory Financial Statements for the fiscal year ended December 31, 2019 and the reports of the directors and auditors thereon, and review the affairs of the Company; and

 


 

 

10.

consider any other business properly brought before the 2020 Annual General Meeting of Shareholders or any adjournment or postponement thereof.

Our board of directors unanimously recommends a vote “FOR” Proposal Nos. 1 to 8 as set forth in the proxy statement.

We hope that you will participate in the meeting by voting through acceptable means as described in this proxy statement as promptly as possible. Your vote is important – so please exercise your right.

 

Sincerely,

 

 

 

Corey N. Fishman

President and Chief Executive Officer

 

 

 

This proxy statement, the enclosed proxy card, our 2019 annual report to shareholders and our Irish Statutory Financial Statements for the fiscal year ended December 31, 2019 are being made available to shareholders on or about May [   ], 2020.

 


 

PRELIMINARY COPY – Subject to Completion

 

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own financial advice immediately from an independent financial adviser being, if you are resident in Ireland, an organisation or firm authorised under the European Communities (Markets in Financial Instruments) Regulations (Nos. 1 to 3) 2007 or, if you are not so resident, from another appropriately authorised independent financial adviser.

 

ITERUM THERAPEUTICS PLC

Block 2 Floor 3 Harcourt Centre

Harcourt Street

Dublin 2

Ireland

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

to be held on June 10 2020

 

INCLUDING  

 

PROPOSED APPROVAL OF A POTENTIAL ACQUISITION BY INVESTMENT FUNDS MANAGED AND CONTROLLED BY SARISSA CAPITAL MANAGEMENT LP (“SARISSA” OR THE “SARISSA FUNDS”) OF OUR ISSUED ORDINARY SHARES, SOLELY AS A RESULT OF THE POTENTIAL FUTURE EXCHANGE OF 15,000 6.500% EXCHANGEABLE SENIOR SUBORDINATED NOTES ISSUED TO CERTAIN OF THE SARISSA FUNDS ON JANUARY 21, 2020 PURSUANT TO THE EXCHANGEABLE NOTES INDENTURE, dated as of January 21, 2020, AND THE SECURITIES PURCHASE AGREEMENT, DATED AS OF JANUARY 16, 2020, WITHOUT INCURRING A MANDATORY OFFER OBLIGATION UNDER RULE 9 OF THE IRISH TAKEOVER PANEL ACT, 1997, TAKEOVER RULES, 2013 (THE “IRISH TAKEOVER RULES”) WHICH APPROVAL IS SUBJECT TO A CAP OF 60% OF OUR ISSUED ORDINARY SHARES.

The 2020 Annual General Meeting of Shareholders (the “AGM”) of Iterum Therapeutics plc, an Irish public limited company (the “Company”), will be held on June 10, 2020, beginning at 3.00 p.m., Irish time (10.00 a.m., Eastern Time), at Block 2, Floor 3, Harcourt Centre, Harcourt Street, Dublin 2, Ireland to consider and act upon the following matters:

 

1.

To elect, by separate resolutions, the three nominees for Class II directors named herein, each to serve for a three-year term expiring at the 2023 annual general meeting of shareholders (Proposal No. 1).

 

2.

To approve an amendment and restatement of the Company’s 2018 Equity Incentive Plan increasing by 2,250,000 to 4,437,298 the number of ordinary shares of the Company, par value $0.01 per share (“ordinary shares”) authorized for issuance under the plan and certain other amendments (Proposal No. 2).

 

3.

To ratify, in a non-binding vote, the appointment of KPMG as our independent registered public accounting firm for our fiscal year ending December 31, 2020, and to authorize the board of directors, acting through the audit committee, to set the independent registered public accounting firm’s remuneration (Proposal No. 3).

 

4.

To approve an increase in the authorized share capital of the Company from $1,500,000 to $2,500,000 by the creation of an additional 100,000,000 ordinary shares. We refer to this proposal as the authorized share capital increase proposal (Proposal No. 4).

 

5.

If the authorized share capital increase proposal (Proposal No. 4) is approved, to grant the board of directors an updated authority under Irish law to allot and issue shares, warrants, convertible instruments and options. We refer to this proposal as the directors’ allotment authority proposal (Proposal No. 5).

 

6.

If the directors’ allotment authority proposal (Proposal No. 5) is approved, to grant the board of directors an updated authority under Irish law to issue shares for cash without first offering those shares to existing shareholders under pre-emptive rights that would otherwise apply to the issuance. We refer to this proposal as the pre-emption rights dis-

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application proposal (Proposal No. 6). We refer to the authorized share capital increase proposal (Proposal No. 4), the directors’ allotment authority proposal (Proposal No. 5) and the pre-emption rights dis-application proposal (Proposal No. 6) collectively as the additional share capital proposals.

 

7.

If the authorized share capital increase proposal (Proposal No. 4), directors’ allotment authority proposal (Proposal No. 5), and pre-emption rights dis-application proposal (Proposal No. 6) are approved, to approve, in accordance with applicable rules of the Nasdaq Stock Market, the issuance by us of our ordinary shares in settlement of the potential future exchange in full of $51.6 million aggregate principal amount of, plus accrued and unpaid interest on, 6.500% Exchangeable Senior Subordinated Notes due 2025 issued pursuant to the Exchangeable Notes Indenture, dated as of January 21, 2020, among us, Iterum Therapeutics Bermuda Limited, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited, Iterum Therapeutics US Holding Limited and U.S. Bank National Association as trustee and the Securities Purchase Agreement, dated as of January 16, 2020, among us, Iterum Therapeutics Bermuda Limited, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited and Iterum Therapeutics US Holding Limited and the accredited investors named therein. We refer to this proposal as the share issuance proposal (Proposal No. 7).

 

8.

To approve an acquisition by investment funds managed and controlled by Sarissa Capital Management LP of up to 60% of the issued ordinary share capital of the Company solely as a result of the potential future exchange of the 15,000 6.500% Exchangeable Senior Subordinated Notes due 2025 held by such funds without incurring a mandatory offer obligation under Rule 9 of the Irish Takeover Rules (Proposal No. 8).

 

9.

To receive and consider the Company's Irish Statutory Financial Statements for the fiscal year ended December 31, 2019 and the reports of the directors and auditors thereon, and to review the affairs of the Company.

 

10.

To conduct any other business properly brought before the AGM or any adjournment or postponement thereof.

Proposal Nos. 1, 2, 3, 4, 5 and 7 above are ordinary resolutions requiring a simple majority of the votes cast at the meeting to be approved. Proposal No. 8 requires a simple majority of the votes cast at the meeting by independent shareholders. Proposal No. 6 above is a special resolution requiring at least 75% of the votes cast at the meeting to be approved. All proposals are more fully described in this proxy statement. There is no requirement under Irish law that the Company's Irish Statutory Financial Statements for the fiscal year ended December 31, 2019, or the directors' and auditor's reports thereon be approved by the shareholders, and no such approval will be sought at the AGM.

Shareholders of record at the close of business on April 15, 2020 will be entitled to notice of and to vote at the AGM or any adjournment or postponement thereof.  This proxy statement is being mailed to shareholders on or about May [   ], 2020.

Special Precautions Due to COVID-19 Concerns

In light of public health concerns related to COVID-19, the Company would like to emphasize that we consider the health of our shareholders, employees and other attendees a top priority. We are monitoring guidance issued by the Irish Health Service Executive ("HSE"), the Irish government, the U.S. Center for Disease Control and Prevention and the World Health Organization and we have implemented, and will continue to implement the measures advised by the HSE to minimize the spread of COVID-19.

Based on latest available public health guidance, we expect that the AGM will proceed under very constrained circumstances given current restrictions on public gatherings.

Shareholders’ contributions at the AGM are valued, however, shareholders are strongly encouraged to vote their shares by proxy as the preferred means of fully and safely exercising their rights. Personal attendance at the AGM may present a health risk to shareholders and others. In particular, we advise that shareholders who are experiencing any COVID-19 symptoms or anyone who has been in contact with any person experiencing any COVID-19 symptoms should not attend the AGM in person.

The Company may take additional procedures or limitations on meeting attendees, including limiting seating, requiring health screenings and other reasonable or required measures in order to enter the building.

In the event that a change of venue is necessitated due to public health recommendations regarding containment of COVID-19, which may include the closure of or restrictions on access to the meeting venue, we will communicate this to shareholders with as much notice as possible by an announcement, which will be published on the investor relations page of the Company’s website found

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at https://ir.iterumtx.com/ and which we will also file with the Securities and Exchange Commission. We advise shareholders to monitor the page regularly, as circumstances may change at short notice. We recommend that shareholders keep up-to-date with latest public health guidance regarding travel, self-isolation and health and safety precautions.

 

 

By order of the Board of Directors,

 

/s/ Louise Barrett

Louise Barrett

Secretary

 

Dublin, Ireland

May [   ], 2020

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YOU MAY OBTAIN ADMISSION TO THE AGM BY IDENTIFYING YOURSELF AT THE AGM AS A SHAREHOLDER AS OF THE RECORD DATE. IF YOU ARE A RECORD OWNER, POSSESSION OF A COPY OF A PROXY CARD WILL BE ADEQUATE IDENTIFICATION. IF YOU ARE A BENEFICIAL (BUT NOT RECORD) OWNER, A COPY OF AN ACCOUNT STATEMENT FROM YOUR BANK, BROKER OR OTHER NOMINEE SHOWING SHARES HELD FOR YOUR BENEFIT ON APRIL 15, 2020 WILL BE ADEQUATE IDENTIFICATION. IN LIGHT OF PUBLIC HEALTH CONCERNS RELATED TO COVID-19 AND PROTOCOLS RECOMMENDED OR REQUIRED BY GOVERNMENTAL AUTHORITIES, THE COMPANY MAY IMPOSE ADDITIONAL RESTRICTIONS ON YOUR ABILITY TO ATTEND THE AGM IN PERSON, INCLUDING LIMITING SEATING, REQUIRING HEALTH SCREENINGS AND OTHER REASONABLE OR REQUIRED MEASURES IN ORDER TO ENTER THE BUILDING.

WHETHER OR NOT YOU EXPECT TO ATTEND THE AGM, PLEASE SUBMIT YOUR VOTING INSTRUCTIONS VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS SET FORTH ON THE ENCLOSED PROXY CARD OR, IF YOU RECEIVED A PRINTED COPY OF THE PROXY MATERIALS, BY COMPLETING, DATING AND SIGNING THE ENCLOSED PROXY CARD AND MAILING IT PROMPTLY IN THE PROVIDED ENVELOPE. TO HELP ENSURE REPRESENTATION OF YOUR SHARES AT THE AGM, NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.

A SHAREHOLDER ENTITLED TO ATTEND AND VOTE AT THE AGM IS ENTITLED, USING THE PROXY CARD PROVIDED (OR IN THE FORM IN SECTION 184 OF THE IRISH COMPANIES ACT 2014), TO APPOINT ONE OR MORE PROXIES TO ATTEND, SPEAK AND VOTE INSTEAD OF HIM OR HER AT THE AGM. A PROXY NEED NOT BE A SHAREHOLDER OF RECORD.

 

 

 

 

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TABLE OF CONTENTS

 

 

1

 


 

PRELIMINARY COPY – Subject to Completion

 

ITERUM THERAPEUTICS PLC

Block 2 Floor 3 Harcourt Centre

Harcourt Street

Dublin 2

Ireland

PROXY STATEMENT FOR THE ANNUAL GENERAL MEETING OF SHAREHOLDERS

to be held on [June 10], 2020 AT Block 2, Floor 3, Harcourt Centre, Harcourt Street, Dublin 2, Ireland

Important Notice Regarding the Availability of Proxy Materials

for the Annual General Meeting of Shareholders

to be held on June 10, 2020

This proxy statement, our 2019 annual report to shareholders

and our Irish Statutory Financial Statements for the year ended December 31, 2019 are available at

www.proxyvote.com

for viewing, downloading and printing.

This proxy statement, with a copy of our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission, or SEC, except for exhibits, a copy of our Irish Statutory Financial Statements for the year ended December 31, 2019, and a form of proxy, is being mailed on or about May [   ], 2020 to holders of record as of the close of business on April 15, 2020.


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information ABOUT THE annual general meeting and voting

This proxy statement is furnished in connection with the solicitation of proxies by the board of directors (the "board of directors" or the "board") of Iterum Therapeutics plc (the "Company," "Iterum" "we" or "us") for use at the 2020 Annual General Meeting of Shareholders (the "AGM") to be held on June 10, 2020, beginning at 3.00 p.m., Irish time (10.00 a.m., Eastern Time), at our offices at Block 2, Floor 3, Harcourt Centre, Harcourt Street, Dublin 2, Ireland and at any adjournment or postponement thereof. On April 15, 2020, the record date for the determination of shareholders entitled to vote at the AGM, there were issued, outstanding and entitled to vote an aggregate of 14,868,973 of our ordinary shares, par value $0.01 per share ("ordinary shares"). Each ordinary share entitles the record holder thereof to one vote on each of the matters to be voted on at the AGM.

Your vote is important no matter how many shares you own.    Please take the time to vote. Take a moment to read the instructions below. Choose the way to vote that is easiest and most convenient for you and cast your vote as soon as possible.

If you are the "record holder" of your shares, meaning that you own your shares in your own name and not through a bank, broker or other nominee, you may vote in one of four ways:

 

(1)

You may vote over the Internet.    You may vote your shares by following the "Online" instructions on the enclosed proxy card. If you vote over the Internet, you do not need to vote by telephone or complete and mail your proxy card. The internet voting facilities for eligible shareholders of record will close at 6:00 a.m., Irish time (1:00 a.m., Eastern Time), the day of the AGM.

 

(2)

You may vote by telephone.    You may vote your shares by following the "Phone" instructions on the enclosed proxy card. If you vote by telephone, you do not need to vote over the Internet or complete and mail your proxy card. If you vote by telephone, your use of that telephone system, and specifically the entry of your pin number/other unique identifier, will be deemed to constitute your appointment, in writing and under hand, and for all purposes of the Irish Companies Act 2014, of each of Corey N. Fishman, Judith M. Matthews and David G. Kelly as your proxy to vote your shares on your behalf in accordance with your telephone instructions. The telephone voting facilities for eligible shareholders of record will close at 6:00 a.m., Irish time (1:00 a.m., Eastern Time), the day of the AGM.

 

(3)

You may vote by mail.    You can vote by completing, dating and signing the proxy card provided to you and promptly mailing it in the provided postage-paid envelope. If you vote by mail, you do not need to vote over the Internet or by telephone. We must receive the completed proxy card by 5:00 p.m., Irish time (12:00 p.m., Eastern Time), on June 9, 2020.

 

(4)

You may vote in person.    If you attend the AGM, you may vote by delivering your completed proxy card in person or you may vote by completing a ballot at the AGM. Ballots will be available at the AGM. You may obtain directions to the location of the AGM by requesting them in writing or by telephone as follows: c/o Secretary, Iterum Therapeutics plc, Block 2 Floor 3 Harcourt Centre, Harcourt Street, Dublin 2, Ireland, Phone: +353 1 9038354.

 

 

 

Please bear in mind that the Company encourages Shareholders to submit proxy materials, rather than attend the AGM in person. Please refer to the Section entitled "Special Precautions Due to COVID-19 Concerns" contained in the Notice of Annual General Meeting of Shareholders section of this proxy statement for more information.

All proxies that are executed and delivered by mail or in person or are otherwise submitted over the Internet or by telephone will be voted on the matters set forth in the accompanying Notice of Annual General Meeting of Shareholders in accordance with the shareholders' instructions. However, if no choice is specified on a proxy as to one or more of the proposals, the proxy will be voted in accordance with the board of directors' recommendations on such proposals as set forth in this proxy statement. All proxies will be forwarded to the Company's registered office electronically.

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After you have submitted a proxy, you may still change your vote and revoke your proxy prior to the AGM by doing any one of the following things:

 

submitting a new proxy by following the "Online" or " Phone" instructions on the enclosed proxy card at a date later than your previous vote but prior to the voting deadline (which is 6:00 a.m., Irish time (1:00 a.m., Eastern Time), the day of the AGM);

 

signing another proxy card and either arranging for delivery of that proxy card by mail to the registered office of the Company prior to the start of the AGM, or by delivering that signed proxy card in person at the AGM;

 

giving our Secretary a written notice before or at the AGM that you want to revoke your proxy; or

 

voting in person at the AGM.

Your attendance at the AGM alone will not revoke your proxy.

If the shares you own are held in "street name" by a bank, broker or other nominee record holder, which we collectively refer to in this proxy statement as "brokerage firms," your brokerage firm, as the record holder of your shares, is required to vote your shares according to your instructions. To vote your shares, you will need to follow the directions your brokerage firm provides you. Many brokerage firms also offer the option of voting over the Internet or by telephone, instructions for which, if available, would be provided by your brokerage firm on the voting instruction form that it delivers to you. Because most brokerage firms are member organizations of the New York Stock Exchange, or NYSE, the rules of the NYSE will likely govern how your brokerage firm would be permitted to vote your shares in the absence of instruction from you.   Under the current rules of the NYSE, if you do not give instructions to your brokerage firm, it will still be able to vote your shares with respect to certain "discretionary" items but will not be allowed to vote your shares with respect to certain “non-discretionary” items.   The ratification of the appointment of KPMG as our independent registered public accounting firm and the authorization of the board of directors, acting through the audit committee, to set the independent registered public accounting firm’s remuneration (Proposal No. 3) is a discretionary item under the NYSE rules and your brokerage firm will be able to vote on that item even if it does not receive instruction from you, so long as it holds your shares in its name.  The remaining Proposals (Proposal No. 1, Proposal No. 2 and Proposal Nos. 4 to 8) are “non-discretionary” item, meaning that if you do not instruct your brokerage firm on how to vote with respect to these Proposals, your brokerage firm will not vote with respect to that proposal and your shares will be counted as “broker non-votes”. “Broker non-votes” are shares that are held in “street name” by a brokerage firm that indicates in its proxy that it does not have or did not exercise discretionary authority to vote on a particular matter.   

If your shares are held in street name, you must bring an account statement from your brokerage firm showing that you are the beneficial owner of the shares as of the record date (April 15, 2020) to be admitted to the AGM. To be able to vote your shares held in street name at the AGM, you will need to obtain a proxy card from the holder of record.

Votes Required

The holders of a majority of our ordinary shares issued and outstanding and entitled to vote at the AGM will constitute a quorum for the transaction of business at the AGM. Ordinary shares represented in person or by proxy (including “broker non-votes” (as described above) and shares which abstain or do not vote with respect to one or more of the matters presented for shareholder approval) will be counted for purposes of determining whether a quorum is present at the AGM. The following votes are required for approval of the proposals being presented at the AGM:

Proposal No. 1: To elect the Class II directors.    The affirmative vote of the holders of ordinary shares representing a majority of the votes cast on the matter and voting affirmatively or negatively is required for the election of a director nominee.

Proposal No. 2: To approve an amendment and restatement of the Company’s 2018 Equity Incentive Plan.    The affirmative vote of the holders of ordinary shares representing a majority of the votes cast on the matter

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and voting affirmatively or negatively is required to approve an amendment and restatement of the Company’s 2018 Equity Incentive Plan, or the 2018 Plan.

Proposal No. 3: To ratify, in a non-binding vote, the appointment of KPMG to serve as our independent registered public accounting firm for the fiscal year ended December 31, 2020 and to authorize the board of directors, acting through the audit committee, to set the independent registered public accounting firm’s remuneration.     The affirmative vote of the holders of ordinary shares representing a majority of the votes cast on the matter and voting affirmatively or negatively is required for the ratification of the appointment of KPMG as our independent registered public accounting firm for the current fiscal year and to authorize the board of directors, acting through the audit committee, to set the independent registered public accounting firm’s remuneration.

Proposal No. 4: To approve an increase in the authorized share capital of the Company from $1,500,000 to $2,500,000 by the creation of an additional 100,000,000 ordinary shares. The affirmative vote of the holders of ordinary shares representing a majority of the votes cast on the matter and voting affirmatively or negatively is required for the approval of an increase in the authorized share capital of the Company from $1,500,000 to $2,500,000 by the creation of an additional 100,000,000 ordinary shares.

Proposal No. 5: If Proposal No. 4 is approved, to grant the board of directors an updated authority under Irish law to allot and issue shares, warrants, convertible instruments and options. The affirmative vote of the holders of ordinary shares representing a majority of the votes cast on the matter and voting affirmatively or negatively is required in order to grant the board of directors an updated authority under Irish law to allot and issue shares, warrants, convertible instruments and options.

Proposal No. 6: If Proposal No. 5 is approved, to grant the board of directors an updated authority under Irish law to issue shares for cash without first offering those shares to existing shareholders under pre-emptive rights that would otherwise apply to the issuance. The affirmative vote of the holders of ordinary shares representing at least 75% of the votes cast on the matter and voting affirmatively or negatively is required in order to grant the board of directors an updated authority under Irish law to issue shares for cash without first offering those shares to existing shareholders under pre-emptive rights that would otherwise apply to the issuance.

Proposal No. 7: If Proposal Nos. 4 to 6 are approved, to approve, in accordance with applicable rules of the Nasdaq Stock Market, the issuance by us of our ordinary shares in settlement of the potential future exchange in full of $51.6 million aggregate principal amount of, plus accrued and unpaid interest on, 6.500% Exchangeable Senior Subordinated Notes due 2025 (the “Exchangeable Notes”) issued pursuant to the Exchangeable Notes Indenture, dated as of January 21, 2020, among us, Iterum Therapeutics Bermuda Limited (“Iterum Bermuda”), Iterum Therapeutics International Limited, Iterum Therapeutics US Limited, Iterum Therapeutics US Holding Limited (collectively, the “Guarantors”) and U.S. Bank National Association as trustee (the “Exchangeable Notes Indenture”) and the Securities Purchase Agreement, dated as of January 16, 2020, among us, Iterum Bermuda, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited and Iterum Therapeutics US Holding Limited and the accredited investors named therein. The affirmative vote of the holders of ordinary shares representing a majority of the votes cast on the matter and voting affirmatively or negatively is required in order to approve the issuance of ordinary shares in settlement of a potential future exchange in full of the Exchangeable Notes.

Proposal No. 8: To approve an acquisition by investment funds managed and controlled by Sarissa Capital Management LP (“Sarissa” or the “Sarissa Funds”) of up to 60% of the issued ordinary share capital of the Company solely as a result of the potential future exchange of the 15,000 6.500% Exchangeable Senior Subordinated Notes due 2025 held by Sarissa without incurring a mandatory offer obligation under Rule 9 of the Irish Takeover Rules. The affirmative vote of ordinary shares representing a majority of the votes cast by independent shareholders on the matter and voting affirmatively or negatively is required in order to approve the acquisition by Sarissa of up to 60% of the issued ordinary share capital of the Company on the potential future exchange of the 15,000 6.500% Exchangeable Senior Subordinated Notes due 2025 held by Sarissa without incurring a mandatory offer obligation under Rule 9 of the Irish Takeover Rules. Shares that abstain from voting as to a particular matter and shares held in “street name”  by brokerage firms who indicate on their proxies that they do not have discretionary authority to vote as to a particular matter will not be counted as votes in favor of such matter and will also not be counted as shares voting on such matter.  Accordingly, abstentions and “broker non-votes” will have no effect on the voting on the proposals referenced above. 


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share ownership of certain beneficial owners and management

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of [April 20/May [  ],] 2020 by:

 

(a)

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our ordinary shares;

 

 

(b)

each of our named executive officers;

 

 

(c)

each of our directors; and

 

 

(d)

all of our executive officers and directors as a group.

 


Beneficial ownership is determined according to the rules of the Securities and Exchange Commission (the “SEC”) and generally means that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power of that security, including share options that are exercisable within 60 days of [April 20/May [  ],] 2020 and shares that are issuable pursuant to restricted share units vesting within 60 days of [April 20/May [  ],] 2020. Our ordinary shares issuable pursuant to share options and restricted share units are deemed outstanding for computing the percentage of the person holding such options and restricted share units and the percentage of any group of which the person is a member but are not deemed outstanding for computing the percentage of any other person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all ordinary shares shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose, including for purposes of Section 13(d) and 13(g) of the Securities Act of 1933, as amended.  Percentage ownership is based on [14,868,973] ordinary shares outstanding on [April 20/May [  ],] 2020. Except as otherwise set forth below, the address of the beneficial owner is c/o Iterum Therapeutics plc, Block 2 Floor 3 Harcourt Centre, Harcourt Street, Dublin 2, Ireland.

 

 

Number of Shares Beneficially Owned

 

 

Percentage of Shares Beneficially Owned

 

Principal Shareholders

 

 

 

 

 

 

 

Entities affiliated with Advent Life Sciences(1)

 

868,161

 

 

 

[5.8

%]

Entities affiliated with Arix Bioscience(2)

 

1,089,903

 

 

 

[7.3

%]

Entities affiliated with Canaan Partners(3)

 

1,733,170

 

 

 

[11.7

%]

Entities affiliated with Frazier Healthcare(4)

 

1,538,316

 

 

 

[10.3

%]

Entities affiliated with New Leaf Ventures(5)

 

1,456,303

 

 

 

[9.8

%]

Entities affiliated with Pivotal bioVenture Partners(6)

 

945,086

 

 

 

[6.4

%]

Entities affiliated with Sofinnova Venture Partners(7)

 

1,726,514

 

 

 

[11.6

%]

Directors and Named Executive Officers:

 

 

 

 

 

 

 

Corey N. Fishman(8)

 

[398,534

]

 

 

[2.7

%]

Michael Dunne, MD(9)

 

[244,665

]

 

 

1.6

%

Judith M. Matthews(10)

 

[86,233

]

 

[*

]

Brenton K. Ahrens(11)

 

[11,071

]

 

[*

]

Mark Chin(2)(12)

 

[1,101,760

]

 

 

[7.4

%]

Patrick J. Heron(4)(13)

 

[1,549,781

]

 

 

[10.4

%]

Ronald M. Hunt(5)(14)

 

[1,473,247

]

 

 

[9.9

%]

David G. Kelly(15)

 

[39,984

]

 

[*

]

Shahzad Malik, M.D.(1)(16)

 

[884,319

]

 

 

[5.9

%]

All current executive officers and directors as a group (9 persons)(1)(2)(4)(5)(17)

 

[5,789,594 ]

 

 

 

[38.0

%]

 

 

 

 

 

 

 

 

* less than 1%

 

 

 

 

 

 

 

 

6

 


 

 

(1)

Consists of 868,161 shares reported as beneficially owned by Advent Life Sciences LLP, Advent Life Sciences Fund

II LP and Shahzad Malik, M.D., of which each such reporting person reports sole voting power with respect to zero of these shares, shared voting power with respect to all 868,161 of these shares, sole dispositive power with respect to zero of these shares and shared dispositive power with respect to all 868,161 of these shares. Advent Life Sciences LLP is the general partner of Advent Life Sciences Fund II LP. Dr. Malik, a member of our board of directors, is a general partner of Advent Life Sciences LLP. The address for each of the reporting persons is 158-160 North Gower Street, London, NW1 2ND, United Kingdom. We obtained the information regarding beneficial ownership of these shares solely from Schedule 13D/A that was filed with the SEC on January 29, 2020.

 

 

(2)

Consists of 1,089,903 shares beneficially owned by Arix Bioscience Plc, Arix Bioscience Holdings Limited and Mark Chin, of which each such reporting person reports sole voting power with respect to zero of these shares, shared voting power with respect to all 1,089,903 of these shares, sole dispositive power with respect to zero of these shares and shared dispositive power with respect to all 1,089,903 of these shares. The shares are held directly by Arix Bioscience Holdings Limited.  Prior to 7 April, 2020, Mr. Chin, a member of our board of directors, was an investment director of Arix Bioscience Plc, which is the sole owner and parent of Arix Bioscience Holdings Limited. Mr. Chin stepped down as investment director as of April 7, 2020. The address for each of the reporting persons is 20 Berkeley Square, Mayfair, London W1J 6EQ, United Kingdom.  We obtained the information regarding beneficial ownership of these shares solely from Schedule 13D/A that was filed with the SEC on January 27, 2020.

 

 

(3)

Consists of 1,733,170 shares reported as beneficially owned by Canaan X L.P. and Canaan Partners X LLC, of which each such entity reports sole voting power with respect to 1,733,170 shares, shared voting power with respect to zero shares, sole dispositive power with respect to 1,733,170 shares and shared dispositive power with respect to zero shares. The shares are directly held by Canaan X L.P. Canaan Partners X LLC is the general partner of Canaan X L.P. and may be deemed to beneficially own the shares held by Canaan X L.P. Brenton K. Ahrens, Stephen M. Bloch, Daniel T. Ciporin, Wende S. Hutton, Maha S. Ibrahim, Deepak Kamra, Nina Kjellson, Guy M. Russo, Timothy Shannon and Hrach Simonian are the managing members of Canaan Partners X LLC. Investment, voting and dispositive decisions with respect to the shares held by Canaan X L.P. are made by the managers of Canaan Partners X LLC, collectively. Mr. Ahrens, a member of our board of directors, is a managing member of Canaan Partners X LLC. No manager or member of Canaan Partners X LLC has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act) of any shares held by Canaan X L.P. The address for each of the reporting persons is 285 Riverside Avenue, Suite 250, Westport, Connecticut 06880. We obtained the information regarding beneficial ownership of these shares solely from Schedule 13G that was filed with the SEC on February 6, 2019.

 

 

(4)

Consists of (a) 1,197,161 shares reported as beneficially owned by Frazier Healthcare VII, L.P., of which such entity reports sole voting power with respect to zero shares, shared voting power with respect to 1,197,161 shares, sole dispositive power with respect to zero shares and shared dispositive power with respect to 1,197,161 shares, and (b) 341,155 shares held directly by Frazier Healthcare VII-A, L.P. of which such entity reports sole voting power with respect to zero shares, shared voting power with respect to 341,155 shares, sole dispositive power with respect to zero shares and shared dispositive power with respect to 341,155 shares. The general partner of Frazier Healthcare VII, L.P. and Frazier Healthcare VII-A, L.P. is FHM VII, L.P., a Delaware limited partnership, and the general partner of FHM VII, L.P. is FHM VII, L.L.C., a Delaware limited liability company, each of which are reported as the beneficial owner of 1,538,316 shares, of which each such entity reports sole voting power with respect to zero shares, shared voting power with respect to 1,538,316 shares, sole dispositive power with respect to zero shares and shared dispositive power with respect to 1,538,316 shares. Mr. Heron, a member of our board of directors, Alan Frazier, Nader Naini, Nathan Every, Brian Morfitt, and James Topper are members of FHM VII, L.L.C. and may be deemed to share voting and investment power with respect to the shares held by FHM VII, L.L.C. The address for each of the reporting persons is c/o Frazier Healthcare Partners, 601 Union Street, Suite 3200, Seattle WA 98101. We obtained the information regarding beneficial ownership of these shares solely from Schedule 13D/A that was filed with the SEC on January 27, 2020.

 

7

 


 

 

(5)

Consists of (a) 1,071,688 shares reported as beneficially owned by New Leaf Venture III, L.P. (“NLV-III”), New Leaf Venture Associates III, L.P. (“NLVA-III LP”) and New Leaf Venture Management III, L.L.C. (“NLVM-III LLC”), of which each such entity reports sole voting power with respect to 1,071,688 shares, shared voting power with respect to zero shares, sole dispositive power with respect to 1,071,688 shares and shared dispositive power with respect to zero shares, and (b) 384,615 shares held by New Leaf Biopharma Opportunities II, L.P. (“NBPO-II”), New Leaf BPO Associates II, L.P. (“NBPO-IIA”) and New Leaf BPO Management II, L.L.C. (“NBPO-IIM”), of which each such entity reports sole voting power with respect to 384,615 shares, shared voting power with respect to zero shares, sole dispositive power with respect to 384,615 shares and shared dispositive power with respect to zero shares.  NLVA-III LP is the general partner of NLV-III and NLVM-III LLC is the general partner of NLVA-III LP. NBPO-IIA is the general partner of NBPO-II and NBPO-IIM is the general partner of NBPO-IIA. Mr. Hunt, a member of our board of directors and Vijay K. Lathi are individual managers of NLVM-III LLC and individual managers of NPBO-IIM, and as a result may be deemed to have shared power to vote and dispose of these shares.  The address for each of the reporting persons other than Vijay K. Lathi is c/o New Leaf Venture Partners,

420 Lexington Avenue, Suite 408, New York, NY 10170. The address for Vijay K. Lathi is c/o New Leaf Venture Partners, 2730 Sand Hill Road, Suite 110, Menlo Park, CA 94025. We obtained the information regarding beneficial ownership of these shares solely from Schedule 13D/A that was filed with the SEC on January 27, 2020.

 

 

(6)

Consists of 945,086 shares reported as beneficially owned by Pivotal bioVenture Partners Fund I, L.P., Pivotal bioVenture Partners Fund I G.P., L.P. and Pivotal bioVenture Partners Fund I U.G.P., Ltd., of which each such entity reports sole voting power with respect to zero shares, shared voting power with respect to 945,086 shares, sole dispositive power with respect to zero shares and shared dispositive power with respect to 945,086 shares. The shares are held directly by Pivotal bioVenture Partners Fund I, L.P. Pivotal bioVenture Partners Fund I G.P., L.P. is the general partner of Pivotal bioVenture Partners Fund I, L.P. and Pivotal bioVenture Partners Fund I U.G.P., Ltd is the general partner of Pivotal bioVenture Partners Fund I, G.P., L.P. The board of directors of Pivotal bioVenture Partners Fund I U.G.P., Ltd retains ultimate voting and investment control and power over the shares owned by Pivotal bioVenture Partners Fund I, L.P. The address for each of the reporting persons is 1700 Owens Street, Suite 595, San Francisco, CA 94158. We obtained the information regarding beneficial ownership of these shares solely from Schedule 13G that was filed with the SEC on December 24, 2018.

 

 

(7)

Consists of 1,726,514 shares reported as beneficially owned by Sofinnova Venture Partners IX, L.P. (“SVP IX”), Sofinnova Management IX, L.L.C. (“SM IX”), Dr. Michael F. Powell and Dr. James I. Healy, with respect to which SVP IX and SM IX report sole voting power and sole dispositive power, and Dr. Michael F. Powell and Dr. James I. Healy report shared voting power and shared dispositive power. SM IX is the general partner of SVP IX. Each of Dr. Healy and Michael Powell is a managing member of SM IX. The address for each of the reporting persons is c/o Sofinnova Ventures, 3000 Sand Hill Road, Bldg. 4, Suite 250, Menlo Park, CA 94025. We obtained the information regarding beneficial ownership of these shares solely from Schedule 13D/A that was filed with the SEC on January 24, 2020.

 

 

(8)

Consists of (a) 239,953 shares held directly by Mr. Fishman, and (b) [158,581] shares issuable to Mr. Fishman pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020.

 

 

(9)

Consists of (a) 147,958 shares held directly by Dr. Dunne, and (b) [96,707] shares issuable to Dr. Dunne pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020.

 

 

(10)

Consists of (a) 56,130 shares held directly by Ms. Matthews, and (b) [30,103] shares issuable to Ms. Matthews pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020.

 

 

(11)

Consists of (a) 6,154 shares beneficially owned by Mr. Ahrens, and (b) [4,917] shares issuable to Mr. Ahrens pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020.

 

 

(12)

Includes (a) 6,154 shares beneficially owned by Mr. Chin, and (b) [5,703] shares issuable to Mr. Chin pursuant to restricted share units vesting within 60 days of [April 20/May [  ],] 2020.

 

 

(13)

Includes (a) 6,154 shares held directly by Mr. Heron, (b) [2,459] shares issuable to Mr. Heron pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020, and (c) [2,852] shares issuable to Mr. Heron pursuant to restricted share units vesting within 60 days of [April 20/May [  ],] 2020.

 

 

(14)

Includes (a) 11,241 shares issuable to Mr. Hunt pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020, and (b) [5,703] shares issuable to Mr. Hunt pursuant to restricted share units vesting within 60 days of [April 20/May [  ],] 2020.

 

 

(15)

Consists of (a) 25,702 shares beneficially owned by Mr. Kelly, (b) [2,876] shares issuable to Mr. Kelly pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020, and (c) [11,406] shares issuable to Mr. Kelly pursuant to restricted share units vesting within 60 days of [April 20/May [  ],] 2020.

 

 

(16)

Includes (a) 11,241 shares issuable to Dr. Malik pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020, and (b) [4,917] shares issuable to Dr. Malik pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020.

 

 

(17)

Includes (a) 488,205 shares held by the current directors and executive officers, (b) [323,042] shares issuable to the current directors and executive officers pursuant to share options exercisable within 60 days of [April 20/May [  ],] 2020, and (c) [25,664] shares issuable to the current directors pursuant to restricted share units vesting within 60 days of [April 20/May [  ],] 2020.

 


8

 


 

Management and CORPORATE GOVERNANCE matters

Board of Directors

Our business and affairs are managed under the direction of our board of directors.  Our Articles of Association (the “Articles of Association”) provide that the number of directors shall not be less than two (2) or more than thirteen (13), with the exact number to be determined by the board.  Our board currently consists of seven (7) members divided among three classes with staggered three-year terms as follows:

 

(1)

Class I, whose members are Mark Chin and David G. Kelly. The terms of the Class I directors will expire at our 2022 annual meeting of shareholders;

 

 

(2)

Class II, whose members are Patrick J. Heron, Shahzad Malik, M.D. and Brenton K. Ahrens. The terms of the Class II directors will expire at the AGM; and

 

 

(3)

Class III, whose members are Corey N. Fishman, and Ronald M. Hunt. The terms of the Class III directors will expire at our 2021 annual meeting of shareholders.

On March 11, 2020, our board of directors accepted the recommendation of the nominating and corporate governance committee and voted to nominate Patrick J. Heron, Shahzad Malik, M.D. and Brenton K. Ahrens for election at the AGM for a term of three years to serve until the 2023 annual meeting of shareholders subject to their earlier death, resignation, retirement, disqualification or removal.

We are also party to an Investor Rights Agreement, dated as of January 21, 2020 (the “2020 Investor Rights Agreement”), that we and the Private Placement Investors (defined below) entered into in connection with the closing of the Private Placement (defined below).  Pursuant to the 2020 Investor Rights Agreement, Sarissa has the ability to designate up to two designees to our board of directors and we have agreed to cause our board of directors to increase by one or two members, as applicable, and  cause the board of directors to consist of no more than 10 members without the prior written consent of Sarissa, subject to the terms and conditions set forth in the agreement. Pursuant to the terms of the 2020 Investor Rights Agreement, the Private Placement Investors, subject to specified exceptions, agreed with us to vote in favor of the election of the designees, and we agreed to cause the designees to be named in any relevant proxy statement.  As of the date hereof, Sarissa has not exercised its board designation rights. For a description of the 2020 Investor Rights Agreement, see section titled “Certain Relationships and Related Party TransactionsParticipation in Private Placement”.

Continuing Members of and Current Members who are Nominated for Election to our Board of Directors

Set forth below are the names of each continuing member of, and current members who are nominated for election to, our board of directors, their ages, their principal occupation and business experience for at least the past five years and the names of other public companies of which each director has served as a director during the past five years in each case as of [April 20/May [  ],] 2020.  Additionally, set forth below is information about the specific experiences, qualifications, attributes or skills that led our board of directors to the conclusion on suitability of each person to serve as a director.

 

Name

 

Age

 

Position

 

Corey N. Fishman

 

55

 

Director, Chief Executive Officer

 

Brenton K. Ahrens(2)

 

57

 

Director, Interim Chairman of the Board

Mark Chin(1)(2)

 

38

 

Director

Patrick J. Heron(3)

 

49

 

Director

Ronald M. Hunt(1)(3)

 

55

 

Director

David G. Kelly(2)(3)

 

59

 

Director

Shahzad Malik, M.D.(1)(3)

 

53

 

Director

 

 

(1)

Member of the compensation committee.

 

9

 


 

 

(2)

Member of the audit committee.

 

 

(3)

Member of the nominating and corporate governance committee.

Corey N. Fishman has served as our Chief Executive Officer and member of our board of directors since November 2015. From August 2010 to February 2015, Mr. Fishman served as chief operating officer of Durata Therapeutics, Inc., a pharmaceutical company acquired by Actavis plc, a pharmaceutical company, and he also served as chief financial officer of Durata Therapeutics, Inc., from June 2012 to February 2015. From 2008 to 2010, Mr. Fishman served as chief financial officer of GANIC Pharmaceuticals, Inc., a pharmaceutical company. From 2002 to 2008, Mr. Fishman served in a variety of roles at MedPointe Healthcare, Inc., a specialty pharmaceutical company acquired by Meda AB, including as chief financial officer from 2006 to 2008. Mr. Fishman currently serves as a member of the boards of directors of Momenta Pharmaceuticals, Inc., a biotechnology company and BioSpecifics Technology Corporation, a biopharmaceutical company. Mr. Fishman holds a B.A. in economics from the University of Illinois at Urbana-Champaign and an M.S.M. in finance from the Krannert School of Management at Purdue University. We believe Mr. Fishman is qualified to serve on our board of directors due to his role as a founder of our Company, his deep knowledge of our Company and his extensive background in the pharmaceutical industry.

Brenton K. Ahrens has served as a member of our board of directors since November 2015. Since 1999, Mr. Ahrens has served as a general partner with Canaan Partners LLP, a venture capital firm. Prior to joining Canaan Partners, Mr. Ahrens worked in both commercial and technical roles at General Surgical Innovations, a biotechnology company, Ethicon (J&J), a medical device company, and IAP Research, an engineering company. Mr. Ahrens previously served on the board of directors of Durata Therapeutics, Inc., and continues to serve on a number of other private pharmaceutical and healthcare company boards. Mr. Ahrens holds a B.S. and an M.S. in mechanical engineering from the University of Dayton and an M.B.A. from the Tuck School of Business at Dartmouth College. We believe Mr. Ahrens is qualified to serve on our board of directors due to his investment experience, including service on the boards of directors of other healthcare companies.

Mark Chin has served as a member of our board of directors since May 2017. From August 2016 to April 2020, Mr. Chin served as an investment manager at Arix Bioscience plc, a life science investment company. From September 2012 to July 2016, Mr. Chin served as a principal at Longitude Capital LLC, a healthcare venture capital firm. From January 2011 to September 2012, Mr. Chin served as a consultant with the Boston Consulting Group. Mr. Chin currently serves on the board of Harpoon Therapeutics, Inc., a clinical-stage immunotherapy company and Imara, Inc., a biopharmaceutical company.  Mr. Chin has a B.S. in management science from the University of California at San Diego, an M.B.A. from the Wharton School at the University of Pennsylvania and an M.S. in biotechnology from the University of Pennsylvania. We believe Mr. Chin is qualified to serve on our board of directors due to his investment experience in biotechnology and medical technology industries.

Patrick J. Heron has served as a member of our board of directors since November 2015. Since 1999, Mr. Heron has served as a general partner with Frazier Healthcare Partners, a venture capital firm. Prior to joining Frazier Healthcare Partners, Mr. Heron worked at the management consulting firm McKinsey & Company. Before McKinsey, Mr. Heron held positions with Massachusetts General Hospital and biotechnology firm Cetus Corporation. Mr. Heron previously served on the boards of directors of pharmaceutical companies Tobira Therapeutics, Inc., Cidara Therapeutics, Inc., Silvergate Pharmaceutical, Inc., Recida Therapeutics, Inc. and Collegium Pharmaceuticals, Inc. and continues to serve on the boards of directors of the following biotechnology companies:  Imago BioSciences, Amunix Therapeutics, SutroVax, Inc., Arcutis Biotherapeutics, Inc., Scout Bio, Inc., Passage Bio, Inc. and Mirum Pharmaceuticals, Inc. Mr. Heron holds a B.A. in political science from the University of North Carolina at Chapel Hill and received an M.B.A. from Harvard Business School. We believe Mr. Heron is qualified to serve on our board of directors due to his extensive business experience, his experience in investing, and his experience in the life sciences industry.

Ronald M. Hunt has served as a member of our board of directors since November 2015. Since 2005, Mr. Hunt has served as a managing director and member of New Leaf Venture Partners, L.L.C., a venture capital firm. Previously, Mr. Hunt served at the Sprout Group, a venture capital firm and was a consultant with consulting firms Coopers & Lybrand Consulting and The Health Care Group. Mr. Hunt also previously served in various sales and marketing positions at Johnson & Johnson and SmithKline Beecham Pharmaceuticals. Mr. Hunt currently serves as a board

10

 


 

member of Harpoon Therapeutics, Inc., a clinical-stage immunotherapy company and on the boards of a number of private pharmaceutical and healthcare companies.  Mr. Hunt previously served on the board of directors of Durata Therapeutics, Inc., Relypsa, and Neuronetics, Inc. Mr. Hunt holds a B.S. from Cornell University and an M.B.A. from the Wharton School of the University of Pennsylvania. We believe Mr. Hunt is qualified to serve on our board of directors due to his investment experience, his experience in the pharmaceuticals industry and his service on the boards of directors of other biopharmaceutical companies.

David G. Kelly has served as a member of our board of directors since August 2016. From September 2014 to January 2020, Mr. Kelly served as the executive vice president, Ireland of Horizon Therapeutics, plc, a biopharmaceutical company. Mr. Kelly served as managing director, Ireland of Horizon Therapeutics, plc until July 2018. From February 2012 to September 2014, Mr. Kelly served as chief financial officer of Vidara Therapeutics Inc., a pharmaceutical company. From May 2005 to January 2012, Mr. Kelly served as chief financial officer of AGI Therapeutics plc, a pharmaceutical company. Mr. Kelly also served as senior vice president, finance and planning of Warner Chilcott plc (formerly Galen Holdings plc), a pharmaceutical company listed on the London Stock Exchange (LSE). In addition, Mr. Kelly held roles at Elan Corporation, a pharmaceutical company, and KPMG.  Mr. Kelly holds a B.A. in economics from Trinity College, Dublin and is also a member of the Institute of Chartered Accountants in Ireland (ACA). We believe Mr. Kelly is qualified to serve on our board of directors due to his experience as a senior executive, particularly within the life science industry, including his experience in finance.

Shahzad Malik, M.D. has served as a member of our board of directors since May 2017. Since 1999, Dr. Malik has served as a general partner at Advent Life Sciences LLP, a venture capital firm. Prior to joining Advent, Dr. Malik spent six years practicing medicine before joining the London office of McKinsey & Company, a management consulting firm. Dr. Malik previously served on the boards of directors of Conatus Pharmaceuticals Inc., a pharmaceutical company, Agenus Inc., a biotechnology company, Aravive, Inc. (formerly Versartis, Inc.), a biopharmaceutical company, and Axonics Modulation Technologies, Inc., a medical technology company. Dr. Malik continues to serve on the boards of directors of a number of other private pharmaceutical and healthcare company boards. Dr. Malik holds an M.A. from Oxford University and an M.D. from Cambridge University. He subsequently specialized in interventional cardiology while also pursuing research interests in heart muscle disorders both in the clinic and basic science laboratory. We believe Dr. Malik is qualified to serve on our board of directors due to his experience practicing medicine and his investment experience.

Non-Continuing Members and Former Members of our Board of Directors

James I. Healy, M.D., Ph.D. served as a member of our board of directors from November 2015 to February 12, 2020 and as a member of our compensation committee from February 2016 to February 12, 2020, when he stepped down as a director due to commitments outside of our Company.

Paul R. Edick served as a member of our board of directors from November 2015 into June 2019 and as a member of our compensation and nominating and corporate governance committees from February 2016 and September 2017 respectively, to June 2019, when he stepped down as a director due to commitments outside of our Company at the end of his tenure at the 2019 annual meeting of shareholders.

Composition of the Board of Directors and Meetings

 

As outlined above, our Articles of Association provide that the number of directors shall not be less than two (2) or more than thirteen (13), with the exact number to be determined by the board, currently seven (7).  

 

Under the Irish Companies Act 2014, and notwithstanding anything contained in our Articles of Association or in any agreement between us and any director, our shareholders may, by an ordinary resolution, remove a director from office before the expiration of his term, at a meeting held on no less than 28 days' notice and at which the director is entitled to be heard.  Our Articles of Association also provide that the office of a director will be vacated in certain circumstances including if the director resigns his office by notice in writing or is requested to resign in writing by not less than a majority of the other directors.    Under our Articles of Association, our board of directors has the authority to appoint directors to the board either to fill a vacancy or as an additional director. If the board fills a

11

 


 

vacancy, the director will hold this position as a director for a term that will coincide with the remaining term of the relevant class of director.

 

Board Determination of Independence

 

Applicable rules of The Nasdaq Stock Market, or Nasdaq, require a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq rules require that within one year of the date of the completion of an initial public offering, all the members of a listed company’s audit, compensation and nominating and corporate governance committees be independent under the Securities Exchange Act of 1934, as amended, or the Exchange Act.  Under applicable Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of the listed company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries.

 

In order to be considered independent for purposes of Rule 10C-1 under the Exchange Act, the board must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director's ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by such company to the director; and (2) whether the director is affiliated with the company or any of its subsidiaries or affiliates.

 

In March 2020, our board of directors undertook a review of the composition of our board of directors and its committees and the independence of each director.  Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that none of Mr. Ahrens, Mr. Chin, Mr. Heron, Mr. Hunt, Mr. Kelly or Dr. Malik, representing six of our seven current directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under Rule 5605(a)(2) of the Nasdaq Listing Rules.  Mr. Fishman is not an independent director under Rule 5605(a)(2) because he is our President and Chief Executive Officer. Our board of directors has also determined that Messrs. Kelly, Ahrens and Chin, who comprise our audit committee, Messrs. Hunt and Chin and Dr. Malik, who comprise our compensation committee, and Messrs. Heron, Hunt and Kelly and Dr. Malik, who comprise our nominating and corporate governance committee, satisfy the independence standards for such committees established by the SEC and Nasdaq.  In making such determination, our board of directors considered the relationships that each such non-employee director has with our Company, including the transactions described below in “Certain Relationships and Related Party Transactions”,  and all other facts and circumstances that our board of directors deemed relevant in determining his or her independence, including the beneficial ownership of our shares by each non-employee director as described above in “Share Ownership of Certain Beneficial Owners and Management”.

Meetings of the Board of Directors

Our board holds at least four regular meetings each year.  Directors are expected to attend all meetings of the board and any committees on which they serve.  

Our Articles of Association provide that each director and the auditors are entitled to attend and speak at any general meetings of shareholders of the Company.  Six (6) of our directors attended our annual general meeting of shareholders in 2019.  

 

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Our board of directors met six (6) times during 2019 and acted by written consent one (1) time.  During 2019, no incumbent directors attended less than 75% of the aggregate of (i) the total number of meetings of the board and (ii) the total number of meetings of committees of the board on which he served, if any, except that Mr. Heron did not attend two telephone meetings of the board of directors that were called on short notice and held in the same week, period December 20 – December 27, 2019. Mr. Heron has been consistently available to our board and company management for regular consultations on matters and the board believes that Mr. Heron’s contributions to the board and the Company have been significant and that his re-election to the board is in the best interests of the Company and its shareholders.

Board Leadership Structure

 

Brenton Ahrens, an independent director under applicable Nasdaq rules, currently serves as interim chairman of our board.  Mr. Ahrens’ duties as interim chairman of the board include determining the frequency and length of board meetings, recommending when special meetings of the board should be held, preparing or approving the agenda for each board meeting, chairing meetings of the board and of our independent directors, meeting with any director who is not adequately performing his or her duties as a member of the board or any committee of the board, facilitating communications between management and board of directors, and assisting with other corporate governance matters.  Our board of directors believes that separating the duties of the chairman of the board from the duties of our chief executive officer enhances the board’s oversight of, and independence from, management, while also allowing our chief executive officer to focus on our day-to-day business operations instead of board administration.

 

We intend to appoint an independent chairman of the board in due course.  

Committees of our Board of Directors

Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which operates under a charter that has been approved by our board of directors.  The charters for each of these committees are available on our website at www.iterumtx.com.

Audit Committee

Our audit committee consists of David G. Kelly (Chairman), Brenton K. Ahrens and Mark Chin. The chairperson of our audit committee is Mr. Kelly. The primary purpose of the audit committee is to discharge the responsibilities of our board of directors with respect to our accounting, financial, and other reporting and internal control practices and to oversee our independent registered accounting firm. Specific responsibilities of our audit committee include:

 

recommending a qualified firm to serve as the independent registered public accounting firm to audit our financial statements to the board of directors;

 

 

helping to ensure the independence and performance of the independent registered public accounting firm;

 

 

discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;

 

 

reviewing, upon completion of the audit, the Irish Statutory Financial Statements proposed to be filed with our annual return at the Irish Companies Registration Office;

 

 

developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

 

 

reviewing related party transactions;

 

 

coordinating the board of directors’ oversight of our internal controls over financial reporting, including discussing with management and the independent registered public accounting firm the integrity of our financial reporting processes and internal controls;

 

 

approving (or, as permitted, pre-approving) all audit and all permissible non-audit services to be performed by the independent registered public accounting firm; and

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supporting the board in minimizing the risks related to invested capital and ensuring that management administer the Company’s investment portfolio in accordance with the guidelines set out in the corporate investment policy.

 

Our board of directors has determined that Messrs. Kelly, Ahrens and Chin each satisfy the independence standards for such committees established by the SEC and the Nasdaq Stock Market.  

Our board of directors has determined that Mr. Kelly is an “audit committee financial expert” within the meaning of SEC regulations. Our board of directors has also determined that each member of our audit committee has the requisite financial expertise required under the applicable requirements of the Nasdaq Stock Market. In arriving at this determination, the board of directors has examined each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector.

Our audit committee met six (6) times in 2019.

Compensation Committee

Our compensation committee consists of Ronald M. Hunt (Chairman), Mark Chin and Shahzad Malik, M.D. The chairperson of our compensation committee is Mr. Hunt. James I. Healy, M.D., Ph.D. was a member of our compensation committee until he stepped down as a director in February 2020 due to commitments outside of our Company.

The primary purpose of our compensation committee is to discharge the responsibilities of our board of directors to oversee our compensation policies, plans and programs and to review and determine the compensation to be paid to our executive officers, directors and other senior management, as appropriate. Specific responsibilities of our compensation committee include:

 

reviewing and approving, or recommending that our board of directors approve, the compensation of our executive officers;

 

 

reviewing and recommending to our board of directors the compensation of our directors;

 

 

reviewing and approving, or recommending that our board of directors approve, the terms of compensatory arrangements with our executive officers;

 

 

administering our share and equity incentive plans and delegating authority to subcommittees;

 

 

selecting independent compensation consultants, legal counsel or other advisors;

 

 

reviewing and approving, or recommending that our board of directors approve, incentive compensation and equity plans, severance agreements, change-of-control protections and any other compensatory arrangements for our executive officers; and

 

 

reviewing and making recommendations to our board of directors regarding incentive compensation and equity plans.

Our compensation committee met three (3) times and acted by written consent one (1) time in 2019.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Patrick J. Heron, Ronald M. Hunt, David G. Kelly and Shahzad Malik, M.D. The chairperson of our nominating and corporate governance committee is Mr. Heron.

Specific responsibilities of our nominating and corporate governance committee include:

 

reviewing periodically and evaluating director performance on our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement;

 

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interviewing, evaluating, nominating and recommending individuals for membership on our board of directors;

 

 

administering the process outlined in our Articles of Association concerning shareholder nominations for director candidates;

 

 

reviewing developments in corporate governance practices;

 

 

overseeing and reviewing our processes and procedures to provide information to our board of directors and its committees;

 

 

overseeing succession planning for senior executives; and

 

 

reviewing and recommending to our board of directors any amendments to our corporate governance policies.

Our nominating and corporate governance committee met one (1) time in 2019.

Board Processes

Oversight of Risk

Our board of directors oversees our risk management processes directly and through its committees.  Our management is responsible for risk management on a day-to-day basis.  The role of our board and its committees is to oversee the risk management activities of management.  They fulfil this duty by discussing with management the policies and practices utilized by management in assessing and managing risks and providing input on those policies and practices.  In general, our board oversees risk management activities relating to business strategy, acquisitions, capital raising and allocation, organizational structure and certain operations risks; our audit committee oversees risk management activities related to financial controls and legal and compliance risks; our nominating and corporate governance committee oversees risk management activities relating to board composition; and our compensation committee oversees risk management activities relating to our compensation policies and practices and management succession planning.  Each committee reports to the full board on a regular basis, including reports with respect to the committee’s risk oversight activities as appropriate.  In addition, since risk issues often overlap, committees from time to time request that the full board discuss such risks.

Director Nomination Process

Generally, the board will be responsible for nominating directors for election to the board by the Company’s shareholders at the annual meeting of shareholders and the persons to be elected by the board to fill any vacancies on the board. The nominating and corporate governance committee is responsible for identifying, reviewing and evaluating and recommending to the board candidates to serve as directors of the Company, in accordance with its charter and consistent with the criteria set by the board in our corporate governance guidelines described below under “Corporate Governance Guidelines”.  In making such recommendations, the nominating and corporate governance committee shall consider candidates proposed by the Company’s shareholders and shall review and evaluate information available to it regarding such candidates and shall apply the same criteria and shall follow substantially the same process in considering them, as it does in considering other candidates.    Shareholders may nominate individuals as potential director candidates by submitting their names, together with appropriate biographical information and background materials, and information with respect to the shareholder or group of shareholders making the nomination, including the number of ordinary shares owned by such shareholder or group of shareholders, in writing to the nominating and governance committee, c/o Secretary, Iterum Therapeutics plc, Block 2 Floor 3 Harcourt Centre, Harcourt Street, Dublin 2, Ireland.    The nominating and corporate governance committee will evaluate shareholder-recommended candidates by following substantially the same process outlined above.

The nominating and corporate governance committee shall also administer the process outlined in our Articles of Association concerning shareholder nominations for director candidates.  Shareholders must follow the formal procedures described in our Articles of Association and in “Shareholder Proposals for 2021 Annual General Meeting of Shareholders” below in connection with any such nomination.  

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The nominating and corporate governance committee has not adopted a formal diversity policy but will consider issues of diversity among its members in identifying and considering nominees for director as well as age, skill and such other factors as it deems appropriate given the current needs of the board and the Company, to maintain a balance of knowledge, experience and capability.  

Corporate Governance Guidelines

Our board of directors has adopted corporate governance guidelines to assist in the exercise of its duties and responsibilities and to serve the best interest of our Company and shareholders.  The guidelines provide that:

 

the core responsibility of our board is to provide oversight of, and strategic guidance to management;

 

 

the board will be composed of not less than a majority of independent directors, subject to any exceptions permitted by Nasdaq listing standards;

 

 

the independent directors of the board will meet periodically in executive session at least two times per year or such greater number as required by the Nasdaq listing standards;

 

 

board members have complete and open access to our management; and

 

 

the nominating and corporate governance committee will conduct an annual self-evaluation to determine whether the board and its committees are functioning effectively.

A copy of the Corporate Governance Guidelines is publicly available on our website at www.iterumtx.com.

Shareholder Communications to the Board of Directors

Shareholders who have questions or concerns should contact our Investor Relations department at +1 312 778 6073 or by email to IR@iterumtx.com.   Shareholders who wish to address questions regarding our business directly with the board of directors, or any individual director, should direct his or her questions in writing to Board of Directors c/o Secretary, Iterum Therapeutics plc, Block 2 Floor 3 Harcourt Centre, Harcourt Street, Dublin 2. Communications will be distributed to the board of directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications.  Communications will be forwarded to other directors if they relate to substantive matters that the chairman of our board, in consultation with legal counsel, considers appropriate for attention by the other directors. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances or matters as to which we receive repetitive or duplicative communications.

Compensation Committee Interlocks and Insider Participation

During 2019, the members of our compensation committee were Ronald M. Hunt (Chairman), Mark Chin, Paul R. Edick (into June 2019), James I. Healy, M.D., Ph.D., and Shahzad Malik, M.D. No member of our compensation committee is, or has ever been, an officer or employee of our Company. None of our executive officers serve, or have served during the last year, as a member of the board of directors, compensation committee, or other board committee performing equivalent functions of any other entity that has one or more executive officers serving as one of our directors or on our compensation committee.

 

Executive Officers

The following table sets forth information regarding our executive officers as of [April 20/May [  ],] 2020:

Name

Age

Position

Corey N. Fishman

55

Director, Chief Executive Officer

Michael W. Dunne

60

Chief Scientific Officer

Judith M. Matthews

50

Chief Financial Officer

 

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In addition to the biographical information for Mr. Fishman, which is set forth above, set forth below is certain biographical information about Dr. Dunne and Ms. Matthews:

Michael W. Dunne, M.D. has served as our Chief Scientific Officer since November 2015. From November 2014 until September 2015, Dr. Dunne was vice president research and development at Actavis. From September 2010 to October 2014, Dr. Dunne served as chief medical officer of Durata Therapeutics, Inc., where he previously served as acting chief medical officer on a consulting basis from December 2009 to September 2010. From 1992 to 2009, Dr. Dunne served in a variety of roles in connection with the clinical development of numerous infectious disease compounds at Pfizer Inc., a biopharmaceutical company, including as the vice president, therapeutic head of development for infectious disease from 2001 to 2009. Dr. Dunne holds a B.A. in economics from Northwestern University and an M.D. from the State University of New York Health Sciences Center. He completed his internal medicine residency and fellowships in infectious diseases and pulmonary medicine at Yale University School of Medicine.

Judith M. Matthews has served as our Chief Financial Officer since November 2015. From 2012 to February 2015, Ms. Matthews served as vice president of finance at Durata Therapeutics, Inc. From 2009 to 2012, Ms. Matthews served as head of financial planning & analysis at Bally Total Fitness Corporation, a fitness club chain. From 2004 to 2008, Ms. Matthews served as vice president of finance for the Sterno Group, a subsidiary of Blyth, Inc., a home products company. Ms. Matthews holds a B.A. in accounting from the University of Illinois at Urbana-Champaign and a Master of Management in finance and marketing from the Kellogg School of Management at Northwestern University.


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executive officer and director compensation

The following discussion provides details of the compensation and other benefits paid by us and our subsidiaries to certain executive officers for services provided for the years ended December 31, 2019 and 2018 and to the members of our board of directors for services provided for the year ended December 31, 2019.

Executive and Director Compensation Processes

Our executive compensation program is administered by our compensation committee, subject to oversight by our board of directors.  Our compensation committee reviews our executive compensation practices on an annual basis and approves, or recommends for approval by the board, the compensation of the Company’s executives.  

Our compensation committee periodically reviews and makes recommendations to the board of directors with respect to director compensation.

For the years ended December 31, 2019 and 2018, at the direction of our compensation committee, our Company retained Frederic W. Cook & Co., Inc, or FW Cook, as an independent compensation consultant to provide comparative data on executive compensation practices in our industry and to provide advice to the compensation committee in relation to our executive compensation program generally, including advice and recommendations on the amounts and forms of executive compensation. While FW Cook provides advice to the company and the compensation committee in relation to such compensation practices, the compensation committee ultimately makes its own decisions with regard to our executive and director compensation programs.  

The compensation committee reviewed information regarding the independence and potential conflicts of interest of FW Cook, taking into account, among other things (i) the provision of other services to the Company by FW Cook; (ii) the amount of fees received by FW Cook from the Company as a percentage of its total revenue; (iii) FW Cook’s policies and procedures to prevent conflicts of interest; (iv) any business or personal relationships that FW Cook has with any member of the compensation committee; (v) any shares held by FW Cook in the Company; and (vi) any business or personal relationship FW Cook or FW Cook employees have with any executive officers of the Company.  Based on this review, the compensation committee concluded that the engagement did not raise any conflict of interest.

Executive Officer Summary Compensation Table

The following table provides details of the compensation and other benefits paid or accrued by us and our subsidiaries to our President and Chief Executive Officer and our two next most highly compensated executive officers, Mr. Michael W. Dunne M.D., our Chief Scientific Officer, and Ms. Judith M. Matthews, our Chief Financial Officer for services provided for the years ended December 31, 2019 and 2018:

 

Name and Principal Position

Year Ended December 31,

Salary

($)

Share Awards(1)

($)

Option Awards(1)

($)

Non-Equity Incentive Plan Compensation(2)

($)

All Other Compensation(3)

($)

Total

($)

Corey N. Fishman

2019

551,138

123,150

561,000

151,841

4,902

1,392,031

President and Chief Executive Officer

2018

494,546

953,529

305,910

2,622

1,756,607

Michael W. Dunne, M.D.

2019

402,794

73,890

317,900

81,000

7,524

883,108

Chief Scientific Officer

2018

377,606

595,957

166,551

4,902

1,145,016

Judith M. Matthews

2019

356,417

32,840

112,200

62,475

1,161

565,093

Chief Financial Officer

2018

305,707

178,786

126,175

995

611,663

 

 

 

 

 

 

 

 

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(1) The amounts reported do not reflect the amounts actually received by our executive officers. Instead, these amounts reflect the aggregate grant date fair values of performance restricted share units and share options granted to our executive officers during the years ended December 31, 2019 and 2018, respectively, as computed in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 718. Assumptions used in the calculation of these

amounts are included in Note 10 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Our executive officers who have received options will only realize compensation with regard to these options to the extent the trading price of our ordinary shares is greater than the exercise price of such options.

(2) Amount represents cash bonuses earned for the 12-month periods ending December 31, 2019 and 2018, respectively. Amounts disclosed for the year ended December 31, 2019 exclude payments made in 2019 for 2018 bonuses. Amounts disclosed for the year ended December 31, 2018 exclude payments made in 2018 for 2017 bonuses.

(3) Includes the dollar value of life insurance premiums paid by the company for the benefit of such executive.

 

Narrative Disclosure to Executive Officer Summary Compensation Table

Base Salary

During the year ended December 31, 2019, we paid base salaries of $551,138 to Mr. Fishman, $402,794 to Dr. Dunne and $356,417 to Ms. Matthews. During the year ended December 31, 2018, we paid base salaries of $494,546 to Mr. Fishman, $377,606 to Dr. Dunne and $305,707 to Ms. Matthews.

In February 2020, our compensation committee approved, consistent with the recommendations of the compensation committee’s independent compensation consultant which, in 2020, was CODA Advisors, LLC, an increase to the base salaries of Mr. Fishman, Dr. Dunne and Ms. Matthews as follows: $561,813 for Mr. Fishman, $412,088 for Dr. Dunne and $363,248 for Ms. Matthews.

None of the named executive officers are currently party to any employment arrangements that provide for automatic or scheduled increases in base salary.  

Non-Equity Incentive Plan Compensation

Our named executive officers participate in a cash bonus program which is tied to the achievement of strategic and corporate goals of the Company, which are approved annually by our compensation committee.   Our compensation committee determines the amount of these bonuses, if any, based on its assessment of the named executive officers’ performance and that of the Company against goals established annually.

Under their respective employment agreements, the annual target bonus for Mr. Fishman is 55% of his current base salary, the annual target bonus for Dr. Dunne is 40% of his current base salary and the annual target bonus for Ms. Matthews is 35% of her current base salary.

At the beginning of each year, our compensation committee reviews the accomplishments of the named executive officers as measured against the previous year’s goals, whether each goal had been achieved and the relative weight that should be given to each goal in determining the cash bonus payment for that year.  Based on its review, the compensation committee recommended cash bonus payments of $151,841 to Mr. Fishman, $81,000 to Dr. Dunne and $62,475 to Ms. Matthews with respect to the year ended December 31, 2019. The compensation committee recommended cash bonus payments of $305,910 to Mr. Fishman, $166,551 to Dr. Dunne and $126,175 to Ms. Matthews with respect to the year ended December 31, 2018.  

Equity Incentive Awards

We believe that our ability to grant equity-based awards is a valuable and necessary compensation tool that aligns the long-term financial interests of our executive officers and our shareholders.  In addition, we believe that our ability to grant options and other equity-based awards helps us to attract, retain and motivate our executive officers and encourages them to devote their best efforts to our business and financial success.

In February 2020, pursuant to powers delegated to it by the board of directors, our compensation committee approved the grant of performance restricted stock units, or PSUs, under our 2018 Plan to our named executive officers which are subject to certain performance-based vesting conditions. The following number of PSUs were granted to the executive officers: 335,000 to Mr. Fishman, 160,000 to Dr. Dunne and 125,000 to Ms. Matthews. These PSUs shall vest in the following proportions: (i) 50% upon board certification of the acceptance by the United States Food and Drug Administration, or the FDA, of a New Drug Application, or NDA, provided such event occurs on or before December 31, 2021; and (ii) 50% on the date which is the initial deadline set by the FDA to complete

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its review of such NDA in accordance with the Prescription Drug User Fee Act, provided such event occurs on or before December 31, 2021 and in each case such executive remains in continued service with us.

 

In January 2019, our compensation committee approved the grant of share options under the 2018 Plan to the named executive officers to purchase the following number of shares, effective on February 15, 2019: 150,000 to Mr. Fishman, 85,000 to Dr. Dunne and 30,000 to Ms. Matthews. 25% of each option vested on February 15, 2020 based on each named executive officer’s continued service with us through that date and the remaining 75% is scheduled to vest in equal monthly instalments thereafter until February 15, 2023 subject to each named executive officer’s continued provision of services to us on each vesting date. Each of the option awards has an exercise price of $5.80 per share, being the closing price on the Nasdaq Global Market on the date of grant.

 

In January 2019, the compensation committee also approved the grant of PSUs under our 2018 Plan to our named executive officers effective on February 15, 2019 and which are subject to certain performance-based vesting conditions. The following number of PSUs were granted to the executive officers: 15,000 to Mr. Fishman, 9,000 to Dr. Dunne and 4,000 to Ms. Matthews. The vesting of these PSUs is subject to approval of an NDA of ours by the FDA and achievement of our ordinary shares on the Nasdaq Global Market of an average closing price that equals or exceeds $13 over any 20 consecutive trading days (from the period beginning 19 days prior to receipt of NDA approval) at a point in time when the executive remains in continued service with us and provided such events occur on or before December 31, 2021.

 

In March 2018, the board of directors approved the grant of stock options under the 2018 Plan to the named executive officers to purchase the following number of shares, effective on our initial public offering: 127,307 to Mr. Fishman, 79,567 to Dr. Dunne and 23,870 to Ms. Matthews. 25% of the options vested on May 24, 2019 with the remaining 75% scheduled to vest in equal monthly instalments thereafter until May 24, 2022 subject to each named executive officer’s continued provision of services to us on each vesting date. Each of the option awards has an exercise price of $13.00 per share, being the closing price on the Nasdaq Global Market on the date of grant.  

Outstanding Equity Awards at December 31, 2019

The following table presents information regarding outstanding equity awards held by our named executive officers as of December 31, 2019. All equity awards were granted under our 2015 Equity Incentive Plan and our 2018 Plan.

 

 

Option Awards

 

Share Awards

Name

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable(1)

Option

Exercise

Price Per

Share(2)

Option

Expiration

Date

 

Equity incentive plan awards: Number of

unearned shares, units or other rights that have not vested(3) (#)

Equity incentive plan awards:  Market or payout value of unearned shares, units or other rights that have not vested ($)

Corey N. Fishman

36,759

28,592(4)

$3.30

09/11/2027

 

 

50,392

76,915(5)

13.00

05/23/2028

 

 

150,000(6)

5.80

02/14/2029

 

 

12/31/2021

 

15,000

67,500

Michael W. Dunne, M.D.

23,392

18,195 (4)

3.30

09/11/2027

 

 

31,495

48,072 (5)

13.00

05/23/2028

 

 

85,000 (6)

5.80

02/14/2029

 

 

12/31/2021

 

9,000

40,500

Judith M. Matthews

6,683

5,199 (4)

3.30

09/11/2027

 

 

9,448

14,422 (5)

13.00

05/23/2028

 

 

30,000 (6)

5.80

02/14/2029

 

 

12/31/2021

 

4,000

18,000

 

 

 

 

 

 

 

 

(1) Pursuant to the equity agreements between the named executive officer and us, the vesting of such named executive officer’s share and option awards will accelerate under certain circumstances as described under the section titled “—Potential Payments Upon Termination or Change in Control” below.

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(2) The exercise price per share of the stock options reflects the fair market value per ordinary share on the date of grant.

(3) The awards reported are performance restricted share units for which vesting is subject to approval of an NDA of ours by the FDA and achievement of our ordinary shares on the Nasdaq Global Market of an average closing price that equals or exceeds $13 over any 20 consecutive trading days (from the period beginning 19 days prior to receipt of NDA approval) at a point in time when the executive remains in continued service with us and provided that each such event occurs on or before December 31, 2021.

(4) Stock option that vested as to 1/4th of the shares underlying the option on September 12, 2018 with the remaining shares scheduled to vesting in equal monthly instalments thereafter until September 12, 2021, subject to continued service with us through each relevant vesting date.

(5) Stock option that vested as to 1/4th of the shares underlying the option on May 24, 2019 with the remaining shares scheduled to vesting in equal monthly instalments thereafter until May 24, 2022, subject to continued service with us through each relevant vesting date.

(6) Stock option that vested as to 1/4th of the shares underlying the option on February 15, 2020 with the remaining shares scheduled to vesting in equal monthly instalments thereafter until February 15, 2023, subject to continued service with us through each relevant vesting date.

Employment Agreements with Executive Officers

We have entered into offer letters with each of our named executive officers.  The offer letters generally provide for at-will employment and set forth the executive’s initial base salary, target variable compensation, eligibility for employee benefits, the terms of initial equity grants and in some cases severance benefits on a qualifying termination.  Each of our named executive officers has also executed our standard form proprietary information agreement.  Any potential payment and benefits due upon a termination of employment or change of control of us are further described below.

Corey N. Fishman serves as our President and Chief Executive Officer. On November 18, 2015, Mr. Fishman entered into an offer letter with Iterum Therapeutics US Limited, our indirect wholly owned subsidiary. The offer letter has no specific term and constitutes an at-will employment arrangement.  In 2017, Mr. Fishman’s base salary was $420,000.  On May 2, 2018, Mr. Fishman entered into an amended offer letter, which became effective upon the closing of our initial public offering pursuant to which Mr. Fishman’s base salary became $540,000, and his discretionary annual target performance bonus increased from 50% to 55% of his annual base salary. His base salary was reviewed in January 2019 and increased to $552,150, effective February 1, 2019. His base salary was reviewed in February 2020 and increased to $561,813, effective February 1, 2020.

Michael W. Dunne, M.D. serves as our Chief Scientific Officer. On November 18, 2015, Dr. Dunne entered into an offer letter with Iterum Therapeutics US Limited, our indirect wholly owned subsidiary. The offer letter has no specific term and constitutes an at-will employment arrangement. Dr. Dunne’s base salary pursuant to the offer letter was $350,000 and his discretionary annual target performance bonus is 40% of his annual base salary.  In 2017, Dr. Dunne’s base salary was $367,500 and in 2018 was $378,525. Dr. Dunne’s base salary was reviewed in January 2019 and was increased to $405,000, effective February 1, 2019.  His base salary was reviewed in February 2020 and increased to$412,088, effective February 1, 2020.

Judith M. Matthews serves as our Chief Financial Officer. On November 18, 2015, Ms. Matthews entered into an offer letter with Iterum Therapeutics US Limited, our indirect wholly owned subsidiary. The offer letter has no specific term and constitutes an at-will employment arrangement. In 2017, Ms. Matthew’s base salary was $236,250. Ms. Matthews entered into an amended offer letter, which became effective upon the closing of our initial public offering pursuant to which Ms. Matthews’ base salary became $350,000, and her discretionary annual target performance bonus increased from 25% to 35% of her annual base salary.  Ms. Matthew’s base salary was reviewed in January 2019 and increased to $357,000, effective February 1, 2019. Her base salary was reviewed in February 2020 and increased to $363,248, effective February 1, 2020.

Potential Payments Upon Termination or Change in Control

Our agreements with each of our named executive officers provide that upon the termination of his or her employment by us other than for cause, or by the named executive officer with good reason (each as defined in the offer letters), he or she will be entitled to receive the following severance benefits:

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cash severance equal to a fixed number of months of such executive’s base salary (twelve months in the

case of Mr. Fishman and nine months in the case of Dr. Dunne and Ms. Matthews); and

 

 

Company-paid COBRA premiums for up to 12 months following such executive’s termination date.

 

If such a qualifying termination occurs within the period beginning one month prior to and ending 12 months following a change of control of us, the cash severance payment entitlement described above will increase to twelve months of such executive’s then current base salary in the case of Dr. Dunne and Ms. Matthews, and to eighteen months of his then current base salary in the case of Mr. Fishman. The executives will also be entitled to an additional cash payment equal to a percentage of such executives’ target annual bonus for the year of termination, equal to 100% in the case of Dr. Dunne and Ms. Matthews and 150% in the case of Mr. Fishman. In addition, each of Mr. Fishman, Dr. Dunne and Ms. Matthews’ currently outstanding share awards will accelerate in full.

Each offer letter also contains a “better after-tax” provision, which provides that if any of the payments to such named executive officer constitutes a parachute payment under Section 280G of the Internal Revenue Code of 1986, as amended, or the Code, the payments will either be (i) reduced or (ii) provided in full to the executive, whichever results in the executive receiving the greater amount after taking into consideration the payment of all taxes, including the excise tax under Section 4999 of the Code, in each case based upon the highest marginal rate for the applicable tax.

Payment of any of the severance benefits described above is also conditioned on the named executive officer’s delivery and non-revocation of a general release of claims in our favor.

On March 11, 2020, on recommendation from the compensation committee, our board of directors approved the creation of a carve out plan to reward certain key employees including Mr. Fishman, Dr. Dunne and Ms. Matthews in the event of a change of control.   The aggregate amount payable under the plan will be calculated on a tiered basis based on the upfront consideration payable to us and our equityholders in connection with such change of control, with potential aggregate amounts payable under the plan falling within a range around approximately 2.5% of the upfront consideration.  The other terms of the plan and each executive’s entitlement to participate are to be determined at the time of the change of control transaction.

Director Compensation – Summary Compensation Table

The following table shows the total compensation paid or accrued by us and our subsidiaries during the year ended December 31, 2019 to each of our current and former non-employee directors. Directors who are employed by us are not compensated for their service on our board of directors.

  

Name

Fees Earned or Paid in Cash ($)

Share

Awards(1)(2) ($)

Option

Awards (1)(3) ($)

Other

Compensation(6) ($)

Total ($)

Brenton K. Ahrens

 

42,500

 

80,000

 

122,500

Mark Chin

48,500

40,000

40,000

128,500

Paul R. Edick(4)

38,250

38,250

James I. Healy M.D., Ph.D.(5)

 

41,000

 

40,000

 

 

40,000

 

121,000

Patrick J. Heron

39,000

20,000

40,000

20,000

119,000

Ronald M. Hunt

51,000

40,000

40,000

131,000

David G. Kelly

59,000

80,000

139,000

Shahzad Malik, M.D.

 

45,000

80,000

 

125,000

 

 

 

 

 

 

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(1) The amounts reported do not reflect the amounts actually received by our director. Instead, these amounts reflect the aggregate grant date fair values of restricted share units and stock options granted to our directors during the years ended December 31, 2019, as computed in accordance with FASB ASC 718. Assumptions used in the calculation of these amounts are included in Note 10 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. As required by SEC rules, the amounts shown exclude

the impact of estimated forfeitures related to service-based vesting conditions. Our directors who have received options will only realize compensation with regard to these options to the extent the trading price of our ordinary shares is greater than the exercise price of such options.

(2) The aggregate number of outstanding restricted share units held by each of our non-employee directors as of December 31, 2019 were as follows: Mr. Ahrens: 0; Mr. Chin: 5,703; Mr. Edick: 0; Dr. Healy: 5,703; Mr. Heron: 2,852; Mr. Hunt: 5,703; Mr. Kelly: 11,406; and Dr. Malik: 0.

(3) The aggregate number of shares subject to outstanding share options units held by each of our non-employee directors as of December 31, 2019 were as follows: Mr. Ahrens: 19,671; Mr. Chin: 0; Mr. Edick: 0; Dr. Healy: 0; Mr. Heron: 9,836; Mr. Hunt: 11,241; Mr. Kelly: 3,182; and Dr. Malik: 30,912.

(4)  Mr. Edick did not stand for re-election to our board of directors at our 2019 Annual General Meeting of Shareholders held on June 13, 2019 and his service as a director ceased on the date of such meeting.

(5)  Dr. Healy resigned as a member of our board of directors on February 12, 2020.

(6)  With respect to the portion of equity compensation to be made in restricted stock units, directors can elect for the award to be made in the form of a mixture of 50% cash and 50% shares on vesting. Other compensation represents that portion of the restricted stock units elected to be made in the form of cash.

 

On the expiry of Paul R. Edick’s term of office as director on June 13, 2019, pursuant to an ordinary share subscription deed dated as of October 14, 2015 between us and Mr. Edick, the compensation committee approved the acceleration of all remaining unvested ordinary shares issued thereunder, being 331 ordinary shares.  As a result, those ordinary shares were no longer subject to a right of repurchase by us.  In addition, the compensation committee approved the acceleration of 1,060 options over ordinary shares held by Mr. Edick at a price of $3.30 such that on the expiry of his term as director, those share options became exercisable in full.

Non-Employee Director Compensation Policy

Under our Non-Employee Director Compensation Policy each non-employee director is eligible to receive compensation for his or her service consisting of annual cash retainers and equity awards.  Each director receives an annual base cash retainer of $35,000 for such service, to be paid quarterly. The non-executive chairperson of our board of directors receives an additional annual base cash retainer of $27,500 for such service, to be paid quarterly.

The policy also provides that we compensate the members of our board of directors for service on our committees as follows:

 

The chairperson of our audit committee receives an annual cash retainer of $15,000 for such service, paid quarterly, and each of the other members of the audit committee receives an annual cash retainer of $7,500, paid quarterly.

 

 

The chairperson of our compensation committee receives an annual cash retainer of $12,000 for such service, paid quarterly, and each of the other members of the compensation committee receives an annual cash retainer of $6,000, paid quarterly.

 

 

The chairperson of our nominating and corporate governance committee receives an annual cash retainer of $8,000 for such service, paid quarterly, and each of the other members of the nominating and corporate governance committee receives an annual cash retainer of $4,000, paid quarterly.

 

The policy further provides for the grant of annual equity awards as follows:

 

Each director will receive annual equity awards with a fixed value of $80,000.

 

 

The equity awards will be granted as a mix of share options and restricted stock units, at such director’s discretion. Each director must determine their mix of equity awards no later than 30 days prior to the applicable grant date.

 

 

All equity awards will vest on the one-year anniversary of the grant date.

 

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The value of a share option to be granted under this policy will be determined using the same method we use to calculate the grant-date fair value of share options in our financial statements, except that no provision will be made for estimated forfeitures related to service-based vesting. The actual number of shares to be granted under a restricted stock unit award under this policy will be determined by dividing

the grant date value by a 30-day volume weighted average trading price (ending on the trading day immediately preceding the grant date).

We also reimburse our non-employee directors for reasonable travel and other expenses incurred in connection with attending our board of director and committee meetings.

For 2020, it was agreed that the right to receive an annual equity award would be waived by each of the non-executive directors with the exception of Mr. Kelly.

Risk Considerations in Our Compensation Program

Our compensation committee has reviewed and evaluated the philosophy and standards on which our compensation plans have been developed and implemented across our Company.  It is our belief that our compensation programs do not encourage inappropriate actions or risk taking by our executive officers.  We do not believe that any risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on our Company.  In addition, we do not believe that the mix and design of the components of our executive compensation program encourage management to assume excessive risks.

 


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equity compensation plans and other benefit plans

Equity Compensation Plan Information

 

The following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of December 31, 2019.  As of December 31, 2019, we had two equity compensation plans, the 2018 Equity Incentive Plan, or the 2018 Plan,  and the 2015 Equity Incentive Plan, or the 2015 Plan, each of which were approved by our shareholders.

 

Plan category

Number of securities to be issued upon exercise of outstanding options(1)

 

Weighted average exercise price of outstanding options(2)

 

Number of securities remaining for future issuance under equity compensation plan (excluding securities reflected in column (a))(3)

Equity compensation plans approved by shareholders

1,231,637

 

$7.92

 

537,631

Equity compensation plans not approved by shareholders

 

 

Total

1,231,637

 

$7.92

 

537,631

 

 

 

 

 

 

(1) This amount includes 31,367 shares subject to outstanding RSUs and 50,000 shares subject to outstanding PSUs, in each case as of December 31, 2019.

(2) The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the shares that will be issued upon the vesting of outstanding RSUs and PSUs, which have no exercise price.

(3) The amount disclosed does not reflect an additional 594,758 ordinary shares authorized for issuance under the 2018 Plan as of February 14, 2020, as an annual increase in accordance with the terms of such plan.

 

2018 Equity Incentive Plan

Our board of directors adopted our 2018 Plan in March 2018 and our shareholders approved the 2018 Plan in May 2018.   Our 2018 Plan authorizes the award of incentive stock options that may qualify for favorable tax treatment under U.S. tax laws to their recipients under Section 422 of the Code, or ISOs, nonstatutory stock options, or NSOs, stock appreciation rights, or SARs, restricted stock, restricted stock units, or RSUs, performance-based awards, and other stock awards, which are collectively referred to as awards. We may grant awards under the 2018 Plan to our employees, including our officers, and employees of our affiliates. A separate sub-plan to the 2018 Plan has been established for the purpose of granting awards to our non-employee directors and consultants and non-employee directors and consultants of our affiliates, which we refer to as the Sub-Plan. The provisions of the 2018 Plan apply in their entirety to any awards made under the Sub-Plan save for certain amendments set out in the Sub-Plan required in the context of awards to non-employee directors and consultants and non-employee directors and consultants of our affiliates, rather than employees,  including references to eligible participants under the Sub-Plan.

As of December 31, 2019, options to purchase 936,618 ordinary shares were outstanding under our 2018 Plan, with a weighted-average exercise price of $8.97 per share. As of December 31, 2019, there were 31,367 and 50,000 ordinary shares to be issued upon vesting of outstanding RSUs and PSUs, respectively. For a more detailed summary of our 2018 Plan, please refer to Proposal No. 2 of this proxy statement.

2015 Equity Incentive Plan

 

Our board of directors adopted, and our shareholders approved our 2015 Plan in November 2015. The 2015 Plan was amended most recently in May 2017. The 2015 Plan provides for the grant of ISOs, NSOs, restricted stock awards, RSUs, SARs, and other stock awards to our employees, directors and consultants.

 

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Since the 2018 Plan became effective, we no longer grant awards under the 2015 Plan. However, any outstanding awards granted under the 2015 Plan remain outstanding, subject to the terms of the 2015 Plan and stock option agreements, until such outstanding options are exercised or until they terminate or expire by their terms.

 

 

Authorized Shares. As of December 31, 2019, options to purchase 213,652 ordinary shares were outstanding under our 2015 Plan, with a weighted-average exercise price of $3.31 per share. As of December 31, 2018, options to purchase 233,607 ordinary shares were outstanding under our 2015 Plan, with a weighted-average exercise price of $3.32 per share.

 

 

Plan Administration. Our 2015 Plan may be administered by our board of directors or another duly authorized committee. Our 2015 Plan is currently administered by our compensation committee. Our board of directors or another duly authorized committee has the authority to construe and interpret our 2015 Plan, amend the plan and outstanding awards and make all other determinations necessary or advisable for the administration of the plan, including, but not limited to, repricing options or SARs without prior shareholder approval.

 

 

Corporate Transactions. Our 2015 Plan provides that in the event of a corporate transaction, each outstanding award will be treated as determined by our board of directors unless otherwise provided in an award agreement or other written agreement between us and the award holder. The board of directors may generally take the same actions as summarized above in connection with awards under the 2018 Plan, and the definition of a corporate transaction under the 2015 Plan is substantially the same as such defined term in the 2018 Plan.

 

 

Transferability. Awards granted under our 2015 Plan may not be transferred in any manner other than by will or by the laws of descent and distribution or as otherwise determined by our compensation committee or under the terms of our 2015 Plan or an applicable award agreement.

  

Plan Amendment or Termination. Our board of directors or another duly authorized committee has the authority to amend, suspend, or terminate our 2015 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our shareholders.

Health and Welfare Benefits

All of our named executive officers are eligible to participate in our employee benefit plans, including our medical, dental, and vision insurance plans, in each case on the same basis as all of our other full-time employees.

401(k) Plan

We maintain a defined contribution retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees may defer eligible compensation on a pre-tax basis, up to the statutorily prescribed annual limits on contributions under the Code. The Company is required to contribute a deferral rate of up to 3% to the 401(k) plan on behalf of certain employees. Employee contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participant’s directions. Employees are immediately and fully vested in their contributions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan.  The Company historically made discretionary contributions to the 401(k) Plan for the benefit of certain employees excluding executive officers.

Limitation on Liability and Indemnification of Directors and Officers

Our Articles of Association, and indemnification agreements with our board of directors and executive officers provide for indemnification for our directors and officers.

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Rule 10b5-1 Sales Plans

Our directors and officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell ordinary shares on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer generally may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may generally buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, subject to compliance with the terms of our insider trading policy.

 


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report of THE audit committee

In fulfilling its responsibilities for the financial statements for the fiscal year ended December 31, 2019, the audit committee took the following actions:

 

reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2019 with management and KPMG, our independent registered public accounting firm;

 

 

discussed with KPMG the matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”) in accordance with Auditing Standard No. 1301, Communications with Audit Committees;

 

 

received the written disclosures and the letter from KPMG regarding its independence as required by applicable requirements of the PCAOB regarding KPMG’s communications with the audit committee and has discussed with KPMG their independence; and

 

 

considered the status of other areas of oversight relating to the financial reporting and audit process that the audit committee determined appropriate.

Based on the foregoing, the audit committee recommended to the board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for filing with the SEC.

Audit Committee

David G. Kelly (Chairman)

Brenton K. Ahrens

Mark Chin 

 

 


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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions since January 1, 2018, to which we have been a party, in which the amount involved exceeds $120,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest. We refer to such transactions as “related party transactions” and such persons as “related parties.” With the approval of our board of directors, we have engaged in the related party transactions described below. We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, from unaffiliated third parties.

Participation in our Initial Public Offering

In May 2018, in our initial public offering, we issued an aggregate of 6,350,000 ordinary shares at a purchase price of $13.00 per share, which included 200,000 ordinary shares issued upon the exercise by the underwriters of their option to purchase additional shares. Certain of our existing shareholders and their affiliated entities, including affiliates of our directors, purchased an aggregate of approximately $42.9 million of our ordinary shares in our initial public offering at the initial public offering price. The table below sets forth the aggregate number of ordinary shares issued to our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member thereof, at the time of the transaction:

 

Name

Shares

Aggregate Purchase Price

Frazier Healthcare VII, L.P.  (1)

354,949

$       4,614,337

Frazier Healthcare VII-A, L.P. (1)

101,150

1,314,950

New Leaf Ventures III, L.P. (2)

278,062

3,614,806

New Leaf Biopharma Opportunities II, L.P. (2)

384,615

4,999,995

Canaan X, L.P. (3)

506,656

6,586,528

Sofinnova Venture Partners IX, L.P. (4)

500,000

6,500,000

Arix Bioscience Holdings Ltd. (5)

337,606

4,388,878

Pivotal bioVenture Partners Fund I, L.P. (6)

313,908

4,080,804

Domain Partners IX, L.P.

153,846

1,999,998

Advent Life Sciences LLP (7)

8,144

105,872

Advent Life Sciences Fund II LP (7)

228,840

2,974,920

Bay City Capital GF Xinde International Life Sciences USD Fund, L.P.

125,563

1,632,319

Corey Fishman

3,000

39,000

Michael Dunne

2,000

26,000

Judith M. Matthews

4,000

52,000

Total

3,302,339

$    42,930,407

 

(1)

Mr. Heron, a member of our board of directors, is a general partner of Frazier Healthcare Partners.

(2) Mr. Hunt, a member of our board of directors, is a managing partner of New Leaf Venture Partners.

(3) Mr. Ahrens, a member of our board of directors, is a general partner of Canaan.

(4 )Dr. Healy, a former member of our board of directors, is a general partner of Sofinnova Ventures.

(5) Mr. Chin, a member of our board of directors, was an investment director of Arix Bioscience at the time of our initial public offering.

(6) Dr. Hopfner, a former member of our board, is a managing partner of Pivotal bioVenture Partners.

(7 )Dr. Malik, a member of our board of directors, is a general partner of Advent Life Sciences.

 

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Participation in Private Placement

On January 16, 2020, we entered into a Securities Purchase Agreement by and among us, Iterum Bermuda, the Guarantors and a limited number of accredited investors (the “Private Placement Investors”) (the “Securities Purchase Agreement”) pursuant to which Iterum Bermuda sold and issued units in the aggregate original principal amount of $51.6 million, each unit consisting of (i) a 6.500% Exchangeable Senior Subordinated Notes due 2025, fully and unconditionally guaranteed on an unsecured senior subordinated basis by the Guarantors, in the original principal amount of $1,000.00 (the “Exchangeable Notes”), and (ii) 50 Limited Recourse Royalty-Linked Subordinated Notes, fully and unconditionally guaranteed on an unsecured senior subordinated basis by the Guarantors (the “Royalty-Linked Notes”, and together with the Exchangeable Notes, the “Units”), to the Private Placement Investors in a private placement (the “Private Placement”). The Private Placement Investors, including entities affiliated with Sarissa and RA Capital Management and entities affiliated with certain members of our board of directors, including Brenton Ahrens, Mark Chin, Patrick Heron, Ronald Hunt and Shahzad Malik and former members of our board of directors, including James Healy and Robert Hopfner, purchased an aggregate of 51,588 Units. The Units were sold at a price of $1,000 per Unit.

The Exchangeable Notes are exchangeable for our ordinary shares at an initial exchange rate of 1,000 shares per $1,000 of principal and interest on the Exchangeable Notes (equivalent to an initial exchange price of approximately $1.00 per ordinary share), subject to specified limitations. The Royalty-Linked Notes entitle holders to payments based on a percentage of our net revenues from potential U.S. sales of specified sulopenem products subject to the terms and conditions of the indenture governing the Royalty-Linked Notes (the “Royalty-Linked Notes Indenture”). Pursuant to the Royalty-Linked Notes Indenture, the payments on the Royalty-Linked Notes will be up to either 15% or 20% of net revenues from U.S. sales of such products, depending on the indication approved by the FDA. The aggregate amount of payments on each Royalty-Linked Note is capped at $160.00 (or 4,000 times the principal amount of such Royalty-Linked Note).

The table below sets forth the aggregate number of Units issued to our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member thereof, at the time of the transaction. For further information regarding the Securities Purchase Agreement and the Exchangeable Notes Indenture, see the section titled “Background Discussion on Proposal Nos. 4 to 7” below.

Name

Units Purchased (1)

Aggregate Purchase Price

Advent Life Sciences LLP (2)

53

              $53,000

Advent Life Sciences Fund II LP (2)

1,495

$1,495,000

Arix Bioscience Holdings Limited (3)

1,900

$1,900,000

Canaan X, L.P. (4)

2,000

$2,000,000

Frazier Healthcare VII, L.P. (5)

1,167

$1,167,000

Frazier Healthcare VII-A, L.P. (5)

333

$333,000

New Leaf Ventures III, L.P. (6)

2,208

$2,208,000

New Leaf Biopharma Opportunities II, L.P. (6)

792

$792,000

Sofinnova Venture Partners IX, L.P. (7)

1,750

$1,750,000

Domain Partners IX, L.P.

1,000

$1,000,000

Pivotal bioVenture Partners Fund I, LP

700

$700,000

Total

13,398

$       13,398,000

 

 

(1)

Each Unit consists of (i) one Exchangeable Note and (ii) 50 Royalty-Linked Notes

 

(2)

Dr. Malik, a member of our board of directors, is a general partner of Advent Life Sciences.

 

(3)

Mr. Chin, a member of our board of directors, was an investment director of Arix Bioscience at the time of the closing of the Private Placement.

 

(4)

Mr. Ahrens, a member of our board of directors, is a general partner of Canaan.

 

(5)

Mr. Heron, a member of our board of directors, is a general partner of Frazier Healthcare Partners.

 

(6)

Mr. Hunt, a member of our board of directors, is a managing partner of New Leaf Venture Partners.

 

(7)

Dr. Healy, a former member of our board of directors, is a general partner of Sofinnova Ventures.

 

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In connection with the Private Placement, we also entered into the 2020 Investor Rights Agreement with the Private Placement Investors (including certain of our directors and holders of more than 5% of our capital stock, or an affiliate or immediate family member thereof, as listed above) pursuant to which Iterum Bermuda and the Guarantors agreed to file a registration statement covering (a) in the case of a registration statement on Form S-1, the resale of the Exchangeable Notes, the ordinary shares issuable in connection with the exchange of the Exchangeable Notes (the Exchange Shares) and the Royalty-Linked Notes or (b) in the case of a registration statement on Form S-3, the Exchange Shares (the securities in (a) and (b) together, the Registrable Securities). Under the 2020 Investor Rights Agreement, we agreed to file an initial registration statement covering the resale by the Private Placement Investors of their Registrable Securities within 10 business days following the later of (x) the earlier of (I) the consummation of an offering of subscription rights to purchase additional Units on a pro rata basis to our other shareholders that are not investors pursuant to the Securities Purchase Agreement and (II) January 21, 2021 and (y) the date on which the number of our unissued ordinary shares available for issuance (less certain reserved shares) is greater than the total number of ordinary shares issuable upon exchange of the then outstanding Exchangeable Notes. If a registration statement has not been filed within the timeframe set forth in the 2020 Investor Rights Agreement or the registration statement covering the Registrable Securities ceases to be effective for resales of Registrable Securities for more than 60 consecutive days or for more than 120 days in any 12-month period, then, subject to the terms of the 2020 Investor Rights Agreement, additional interest will accrue on the Exchangeable Notes and the Royalty-Linked Notes.

In addition, pursuant to the terms of the 2020 Investor Rights Agreement, for so long as Sarissa and its affiliates own at least 5% or 12.5%, as applicable, of our outstanding ordinary shares on a fully diluted basis, promptly, and in any event no more than 5 business days following written request of Sarissa, we will cause our board of directors to increase to consist of one or two additional members, as applicable, and we will cause the board of directors to consist of no more than 10 members without the prior written consent of Sarissa. In addition, for so long as Sarissa and its affiliates own at least 12.5% of our outstanding ordinary shares on a fully diluted basis, Sarissa will have the right to designate two directors to our board of directors and, for so long as Sarissa and its affiliates own at least 5% but less than 12.5%, it will have the right to designate one director to our board of directors (“Investor Designees”). Pursuant to the terms of the 2020 Investor Rights Agreement, such Investor Designees will be appointed to our board of directors and to be members of the class of directors that was subject to re-election at our most recent annual meeting of shareholders. The Investor Designees will be entitled to be a member of any committee of our board of directors subject to the terms of the 2020 Investor Rights Agreement. Pursuant to the terms of the 2020 Investor Rights Agreement, the purchasers party thereto, subject to specified exceptions, have agreed with us to vote in favor of the election of the Investor Designees, and we have agreed to cause the Investor Designees to be named in any relevant proxy statement.

Also pursuant to the terms of the 2020 Investor Rights Agreement, for so long as Sarissa owns 10% of our outstanding ordinary shares on a fully diluted basis, Sarissa will have a right of first offer with respect to future proposed equity financings of ours up to that portion of such new securities which equals Sarissa’s percentage ownership of our outstanding ordinary shares on a fully diluted basis, subject to specified exceptions for certain exempt issuances and pursuant to specified procedures. In the event our board of directors determines in good faith that we must conduct an equity financing on an expedited basis without compliance with the right of first offer described above in order to avoid material harm to us or any of our affiliates, we may effect and consummate such equity financing and, as promptly as practicable following the consummation of such equity financing, Sarissa will have the opportunity to participate in such equity financing and be put in the same place (including in respect of the percentage ownership of our equity securities) Sarissa would have been had such equity financing been effected in accordance with the terms of the right of first offer. As set forth in the 2020 Investor Rights Agreement, in any 12 month period, we may conduct an equity financing without compliance with the pre-emptive rights described above (an “Excused Issuance”); provided that we may not issue new securities (other than specified exempted securities) exceeding (in the aggregate with all other Excused Issuances during such 12 month period) 5% of our issued and outstanding ordinary shares on a fully diluted basis, and we may not issue new securities (other than specified exempted securities) in exchange for consideration (whether in cash or other property) the value of which exceeds (in the aggregate with all other Excused Issuances during such 12 month period) $5.0 million. We may only consummate two Excused Issuances for so long as the 2020 Investor Rights Agreement is in effect.

The descriptions of our Securities Purchase Agreement, Exchangeable Notes Indenture, Royalty-Linked Notes Indenture and 2020 Investor Rights Agreement in this proxy statement are summaries, do not purport to be

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complete, and are qualified in their entirety by reference to the Securities Purchase Agreement, Exchangeable Notes Indenture, Royalty-Linked Notes and 2020 Investor Rights Agreement that were filed as Exhibits 10.25, 4.2, 4.4  and 10.26, respectively, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 12, 2020.

2017 Investor Rights Agreement

In May 2017, we entered into an amended and restated investor rights agreement with holders of our preferred shares and ordinary shares, including certain holders of more than 5% of our share capital, our executive officers, certain of our directors, and entities affiliated with certain of our directors (the “2017 Investor Rights Agreement”). Since the closing of our initial public offering, those holders are entitled to certain registration rights, including the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing. The 2017 Investor Rights Agreement also gave the shareholders that are parties thereto the right to participate in new issuances of equity securities by us, subject to certain exceptions. This right to participate in new issuances of equity securities terminated by its terms upon the completion of our initial public offering in May 2018.

Amended Offer Letters

In May 2018 we entered into amended offer letters with certain of our executive officers. For more information regarding these amended offer letters, see the section titled “Executive Officer and Director Compensation— Employment Agreements with Executive Officers”.

Equity Grants

We have granted stock option and RSU awards to certain non-employee members of our board of directors. For details and a description of these awards, see the section titled “Executive Officer and Director Compensation— Executive Officer Summary Compensation Table”. 

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers.  In addition, our subsidiary, Iterum Therapeutics US Limited, has entered into an indemnification agreement with each of our directors and executive officers. These agreements, among other things, require us to indemnify an indemnitee to the fullest extent permitted by applicable law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the indemnitee in any action or proceeding, including any action or proceeding by us or in our right, arising out of the person’s services as a director or executive officer.   We also maintain a directors and officers liability insurance policy which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.

Related Party Transaction Policy

We have adopted a formal written policy that our executive officers, directors, key employees, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a related-party transaction with us without the prior consent of our audit committee, or other independent body of our board of directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal shareholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000, is required to first be presented to our audit committee for review, consideration, and approval. In approving or rejecting any such proposal, our audit committee will consider the relevant facts and circumstances available and deemed relevant to our audit committee, including, but not limited to, whether the transaction will be on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction.

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Some of the transactions described in this section were entered into prior to the adoption of this policy. Although we did not have a written policy for the review and approval of transactions with related persons prior to May 2018, our board of directors has historically reviewed and approved any transaction where a director or officer had a financial interest, including the relevant transactions described above. Prior to approving such a transaction, the material facts as to a director’s or officer’s relationship or interest in the agreement or transaction were disclosed to our board of directors. Our board of directors took this information into account when evaluating the transaction and in determining whether such transaction was fair to us and in the best interest of all our shareholders.


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MATTERS TO COME BEFORE THE ANNUAL GENERAL MEETING

PROPOSAL NO 1: ELECTION OF CLASS II DIRECTORS

Based upon the recommendation of the nominating and corporate governance committee of our board of directors, our board of directors has nominated Patrick J. Heron, Shahzad Malik, M.D. and Brenton K. Ahrens for re-election at the AGM as Class II directors for a term of three years to serve until the 2023 annual general meeting of shareholders, subject to each such nominee’s prior death, resignation, retirement, disqualification or removal.  

Unless otherwise instructed in the proxy, all proxies will be voted "FOR" the election of each of the nominees identified above. Each of the nominees has indicated his willingness to serve on our board of directors, if elected. If any nominee should be unable to serve, the person acting under the proxy may vote the proxy for a substitute nominee designated by our board of directors. We do not contemplate that any of the nominees will be unable to serve if elected. Proxies cannot be voted for a greater number of persons than the number of nominees named in this proposal.

In order to be elected as a director, each nominee must receive the affirmative vote of a majority of the votes cast at the AGM.

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF PATRICK J. HERON, SHAHZAD MALIK, M.D. AND BRENTON K. AHRENS AS CLASS II DIRECTORS. 


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PROPOSAL NO 2: APPROVAL OF THE AMENDED AND RESTATED 2018 EQUITY INCENTIVE PLAN

On March 11, 2020, upon the recommendation of the compensation committee, and subject to shareholder approval, the board of directors adopted an amendment and restatement of the Company’s 2018 Plan (the “Amended Plan”).  The Amended Plan includes the following material changes to the 2018 Plan:

 

Increases the number of the Company’s ordinary shares available for issuance under the Amended Plan by 2,250,000 shares, subject to adjustment in the event of certain changes in our capital structure;

 

Removes the “evergreen” provision;

 

Prohibits the payment or accrual of dividend equivalents on options or stock appreciation rights, or SARs;

 

Provides that any dividends or dividend equivalents paid with respect to awards of restricted stock, performance stock awards, performance cash awards and other stock awards will be subject to the same terms and conditions as apply to the award to which they relate; and

 

Extends the term during which incentive stock options may be granted to June 10, 2030.  

As of [April 20/May [  ],] 2020, the following equity awards were outstanding under the 2018 Plan or a prior plan:

  

 

[1,132,214] options to purchase ordinary shares with a weighted-average remaining term of [7.78] years and a weighted-average exercise price of $[7.89] per share;

 

 

[25,664] ordinary shares subject to unvested restricted stock unit, or RSU, awards; and  

 

 

[1,127,000] ordinary shares subject to unvested performance restricted stock unit, or PSU, awards.

The board of directors believes that the Company’s future success depends on our ability to attract and retain qualified employees. The market for qualified personnel in our industry is highly competitive. The ability to grant equity awards is critical to the Company’s ability to attract and retain top talent.  If the Amended Plan is not approved, we may be unable to make long-term equity incentive awards under a shareholder-approved equity incentive plan after the end of 2020. Therefore, we consider approval of the Amended Plan vital to the Company’s future success.

OUR BOARD OF DIRECTORS  RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED 2018 EQUITY INCENTIVE PLAN.

Material Features of the Amended Plan

 

 

No Evergreen.    The number of ordinary shares available for issuance under the Amended Plan is fixed and will not be adjusted on an annual basis based on the number of our shares then outstanding.

  

 

 

No Liberal Change in Control Definition. The change in control definition in the Amended Plan is not a “liberal” definition and, for example, would not be achieved merely upon shareholder approval of a transaction.  A change in control must actually occur for the change in control provisions in the Amended Plan to be triggered.

 

 

 

No Discounted Options or SARs.    All options and SARs granted under the Amended Plan must have an exercise price not less than the fair market value of the underlying ordinary shares on the date of grant, except with respect to substitute options and SARs issued in connection with certain acquisitions by the Company.

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No Reload Options or SARs.    No options or SARs granted under the Amended Plan may contain a provision entitling the award holder to the automatic grant of additional options or SARs in connection with any exercise of the original option.

 

 

 

No Dividend Equivalents on Options or SARs.    No options or SARs granted under the Amended Plan may provide for the payment or accrual of dividend equivalents.

 

 

 

Dividends and Dividend Equivalents on Restricted Stock, Restricted Stock Units, Performance Stock Awards, Performance Cash Awards and Other Stock Awards Subject to Same Terms and Conditions as Underlying Award.    Any dividends or dividend equivalents paid with respect to restricted stock, RSUs, PSUs, performance stock awards, performance cash awards and other stock awards will be subject to the same terms and conditions as the award with respect to which they are paid.

Information Regarding Overhang and Dilution

In developing the Company’s share request for the Amended Plan and analyzing the impact of utilizing equity as a means of compensation on the Company’s shareholders, we considered both the Company’s “overhang” and “burn rate.”

Overhang is a measure of potential dilution which we define as the sum of (i) the total number of shares underlying all equity awards outstanding and (ii) the total number of shares available for future award grants, divided by the number of common shares outstanding. As of [April 20/May [  ],] 2020, the Company’s overhang was [31.01]%, reflecting:

  

 

[1,132,214] outstanding options to purchase ordinary shares;

  

 

[25,664] shares of unvested RSUs;

 

 

[1,127,000] shares of unvested PSUs (assuming target performance);

   

 

[2,325,781] shares available for future award grants; and

  

 

[14,868,973] ordinary shares outstanding.

Burn rate provides a measure of the potential dilutive impact of the Company’s equity award program which we calculate by dividing the number of shares subject to equity awards granted during the year by the basic weighted average number of shares outstanding. Set forth below is a table that reflects the Company’s burn rate for the 2019, 2018 and 2017 fiscal years as well as an average over those years.

 

Fiscal Year

 

Options

Granted

 

 

Restricted Stock

Units and Performance Restricted Stock Units Granted

 

 

Total Granted (1)

 

 

Basic Weighted Average Number of Common Shares Outstanding

 

 

Gross Burn Rate (2)

 

2019

 

 

512,778

 

 

 

81,367

 

 

 

594,145

 

 

 

14,518,036

 

 

 

4.1

%

2018

 

 

479,986

 

 

 

36,924

 

 

 

516,910

 

 

 

8,734,109

 

 

 

3.6

%

2017

 

 

198,798

 

 

 

-

 

 

 

198,798

 

 

 

172,130

 

 

 

1.4

%

Three-Year Average

 

 

397,187

 

 

 

39,430

 

 

 

436,618

 

 

 

7,808,092

 

 

 

3.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) “Total Granted” reflects the number of shares underlying equity awards granted in the year. For purposes of this table, the number of PSUs is reflected assuming target performance.

 

(2) “Gross Burn Rate” is defined as the number of shares underlying equity awards granted in the year divided by the basic weighted average number of common shares outstanding

 

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Description of the Amended Plan

The following is a brief summary of the Amended Plan, a copy of which is attached as Appendix A to this proxy statement.

Number of Shares Available for Awards.  

Subject to adjustment in the event of certain changes in our capital structure, the aggregate number of our ordinary shares that may be issued pursuant to awards under our Amended Plan, any or all of which may be incentive stock options, is 4,437,298 shares, which includes any shares that remained available for issuance under the Iterum Therapeutics Public Limited Company (formerly Iterum Therapeutics Limited) 2015 Equity Incentive Plan, which we refer to as the Prior Plan, as of May 24, 2018 and any shares subject to outstanding options or other awards that were granted under the Prior Plan and that are forfeited, terminated, expire or are otherwise not issued.

Shares subject to awards granted under our Amended Plan that expire or terminate without being exercised in full shall be available again for future grant under our Amended Plan. Additionally, shares become available for future grant under our Amended Plan if they were issued under awards under our Amended Plan if we repurchase them or they are forfeited or canceled. This includes shares used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award or shares that are not issued as a result of a SAR being settled in ordinary shares.

Types of Awards

Our Amended Plan authorizes the award of incentive stock options that may qualify for favorable tax treatment under U.S. tax laws to their recipients under Section 422 of the Code, or ISOs, nonstatutory stock options, or NSOs, SARs, restricted stock, RSUs, performance-based awards, and other stock awards, which are collectively referred to as awards. We may only grant ISOs to our employees and employees of a subsidiary corporation or parent corporation (within the meaning of Sections 424(e) and 424(f) of the Code).

Options. Options represent the right to purchase our ordinary shares on the date of exercise at a stated exercise price. The exercise price of an option must be at least equal to the fair market value of our ordinary shares on the date of grant, except in the case of substitute options granted in connection with certain acquisitions by the Company. The maximum term of options granted under our Amended Plan is ten years. The Amended Plan permits, to the extent permitted by applicable law and as determined by our board of directors, the following forms of payment of the exercise price of options: (i) cash, check, bank draft or money order payable to the Company or in connection with a “cashless exercise” through a broker, (ii) delivery to the Company of ordinary shares, (iii) subject to certain conditions, by a “net exercise” arrangement, (iv) deduction from salary due and payable to an employee by the Company or an affiliate of the Company and/or (v) any other form of legal consideration that may be acceptable to the board of directors or the stock plan administrator and permissible under applicable law. No option granted under the Amended Plan may contain any provision entitling the participant to an automatic grant of additional options in connection with the exercise of the original option or provide for the payment or accrual of dividend equivalents.

SARs. SARs provide for a payment, or payments, in cash or ordinary shares, to the holder based upon the difference between the fair market value of our ordinary shares on the date of exercise and the stated exercise price. The exercise price of an SAR must be at least equal to the fair market value of our ordinary shares on the date of grant, except in the case of substitute SARs granted in connection with certain acquisitions by the Company.  The maximum term of SARs granted under our Amended Plan is ten years. No SAR granted under the Amended Plan may contain any provision entitling the participant to an automatic grant of additional SARs in connection with the exercise of the original SAR or provide for the payment or accrual of dividend equivalents.

Restricted Stock Awards. Restricted stock awards represent an offer by us to issue or sell our ordinary shares subject to vesting restrictions, which may lapse based on time or achievement of performance conditions. The price (if any) of a restricted stock award will be determined by our board of directors.  If a participant ceases to provide services to us, we may receive through a forfeiture condition or a repurchase right the shares that are unvested as of

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the date of such cessation of services.  Any dividends paid on restricted stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the restricted stock award to which they relate.

Restricted Stock Unit Awards. RSUs represent the right to receive our ordinary shares at a specified date in the future, subject to forfeiture of that right because of termination of employment or failure to achieve certain performance conditions. If an RSU award has not been forfeited, then on the date specified in the RSU agreement, we will deliver to the holder a number of whole ordinary shares, cash or a combination of our ordinary shares and cash. At the time of grant of an award of RSUs, our board of directors will determine the consideration, if any, to be paid by the recipient of the award upon delivery of the ordinary shares subject to the RSU award.  Additionally, dividend equivalents may be credited in respect of shares covered by an RSU award.  At the sole discretion of the board of directors, any dividend equivalents may be converted into additional ordinary shares covered by the RSU award in a manner determined by the board of directors.  Any dividend equivalents will be subject to all of the same terms and conditions, including vesting and forfeiture provisions, of the underlying award agreement to which they relate.

Other Stock Awards. Other awards valued in whole or in part by reference to, or otherwise based on, our ordinary shares may be granted under the Amended Plan. Our board of directors will determine the number of shares under such award and all other terms and conditions of such awards. Any dividend equivalents with respect to such other stock awards will be subject to the same terms and conditions, including vesting and forfeiture provisions, of the underlying award agreement to which they relate.

Performance Awards.  A performance stock award is any award granted under the Amended Plan that may vest or be exercised contingent on the attainment during a performance period of certain performance goals.  A performance cash award is a cash award that may be paid contingent upon the attainment during a performance period of certain performance goals.  Performance goals for performance stock awards and performance cash awards may be based on any of one, or combination of, the following, as determined by the board of directors: (1) earnings (including earnings per share and net earnings); (2) earnings before interest, taxes and depreciation; (3) earnings before interest, taxes, depreciation and amortization; (4) earnings before interest, taxes, depreciation, amortization and legal settlements; (5) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (6) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense) and stock-based compensation; (7) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), stock-based compensation and changes in deferred revenue; (8) total stockholder return; (9) return on equity or average stockholder’s equity; (10) return on assets, investment, or capital employed; (11) stock price; (12) margin (including gross margin); (13) income (before or after taxes); (14) operating income; (15) operating income after taxes; (16) pre-tax profit; (17) operating cash flow; (18) sales or revenue targets; (19) increases in revenue or product revenue; (20) expenses and cost reduction goals; (21) improvement in or attainment of working capital levels; (22) economic value added (or an equivalent metric); (23) market share; (24) cash flow; (25) cash flow per share; (26) share price performance; (27) debt reduction; (28) implementation or completion of projects or processes (including, without limitation, clinical trial initiation, clinical trial enrollment, clinical trial results, new and supplemental indications for existing products, regulatory filing submissions, regulatory filing acceptances, regulatory or advisory committee interactions, regulatory approvals, and product supply); (29) stockholders’ equity; (30) capital expenditures; (31) debt levels; (32) operating profit or net operating profit; (33) workforce diversity; (34) growth of net income or operating income; (35) billings; (36) bookings; (37) employee retention; (38) initiation of phases of clinical trials and/or studies by specific dates; (39) patient enrollment rates; (40) budget management; (41) submission to, or approval by, a regulatory body (including, but not limited to the U.S. Food and Drug Administration) of an applicable filing or a product candidate; (42) regulatory milestones; (43) progress of internal research or clinical programs; (44) progress of partnered programs; (45) partner satisfaction; (46) timely completion of clinical trials; (47) submission of Investigational New Drug applications and NDAs and other regulatory achievements; (48) research progress, including the development of programs; (49) strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property); (50) customer satisfaction; and (51) other measures of performance selected by the board of directors.  Performance goals may be based on a Company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the board of directors (i) in the applicable award agreement at the time the award is granted or (ii) in such other document setting forth the performance goals at the time the performance goals are established, the board of directors will appropriately make

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adjustments in the method of calculating the attainment of performance goals for a performance period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any items that are unusual in nature or occur infrequently as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; and (12) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item. In addition, the board of directors retains the discretion to increase, to reduce or to eliminate the compensation or economic benefit due upon attainment of performance goals and to define the manner of calculating the performance criteria it selects to use for the performance period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the award agreement or the written terms of a performance cash award. Any dividend equivalents with respect to performance stock awards or performance cash awards will be subject to the same terms and conditions, including vesting and forfeiture provisions, of the underlying award agreement to which they relate.

Transferability of Awards

Awards granted under our Amended Plan may not be transferred in any manner other than by will or by the laws of descent and distribution or as otherwise determined by our compensation committee or under the terms of our Amended Plan or an applicable award agreement.

Eligibility to Receive Awards

We may grant awards under the Amended Plan to our employees, including our officers, and employees of our affiliates. A separate sub-plan to the Amended Plan has been established for the purpose of granting awards to our non-employee directors and consultants and non-employee directors and consultants of our affiliates.

As of the record date (April 15, 2020), we had approximately 33 employees (excluding executive officers), 3 executive officers, 6 directors (excluding any executive officer who is also a director) and no consultants and advisors eligible to receive awards under the Amended Plan and its sub-plan.

Plan Benefits

The granting of awards under the Amended Plan is discretionary, and the Company cannot now determine the number or type of awards to be granted in the future to any particular person or group.

On May [  ], 2020, the last reported sale price of an ordinary share on the Nasdaq Global Market was $[   ].

Awards Previously Made Under the 2018 Plan

Since the initial approval date of the 2018 Plan through [April 20/May [  ],] 2020, the following number of equity awards have been granted to the individuals and groups described in the following table.  No other equity awards have been granted under the 2018 Plan as of such date.

 

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Number of Ordinary Shares

Underlying Grants of Options

 

 

Number of Ordinary Shares

Underlying Grants of Restricted Stock and RSUs

 

 

Number of Ordinary Shares

Underlying Grants of Performance Restricted Stock and PSUs

 

Named Executive Officers:

 

 

 

 

 

 

 

 

 

Corey N. Fishman, President and Chief Executive Officer

 

[277,307]

 

 

 

 

 

[350,000]

 

Michael W. Dunne, M.D., Chief Scientific Officer

 

[164,567]

 

 

 

 

 

[169,000]

 

Judith M. Matthews, Chief Financial Officer

 

[53,870]

 

 

 

 

 

[129,000]

 

Current Executive Officers as a Group (3 persons, including 3 named above)

 

[495,744]

 

 

 

 

 

[648,000]

 

Directors and Nominees for election as Directors:

 

 

 

 

 

 

 

 

 

 

 

Brenton K. Ahrens

 

[19,671]

 

 

[6,154

]

 

 

 

Patrick J. Heron

 

[9,836]

 

 

[9,006

]

 

 

 

Shahzad Malik, M.D.

 

[30,912]

 

 

 

 

 

All current directors who are not executive officers as a group

 

[71,660]

 

 

 

[50,280]

 

 

 

Others:

 

 

 

 

 

 

 

 

 

 

 

Associates of our executive officers, directors or nominees

 

 

 

 

 

All other eligible participants, none of whom received more than 5% of such equity awards

 

 

 

[18,011]

 

 

 

All employees, including all current officers who are not executive officers, as a group

 

[427,360]

 

 

 

 

 

[481,000]

 

 

Plan Administration.  

Our Amended Plan is administered by our board of directors or a duly authorized committee or subcommittee of our board of directors.  Our board of directors has authorized our compensation committee to administer certain aspects of the Amended Plan.  For purposes of this summary, where appropriate in the relevant context, the term “board of directors” may include the compensation committee or any other committee to whom the board of directors delegates authority, as indicated in the Amended Plan. Our board of directors may also delegate to one or more of our officers the authority to designate employees (other than officers) to receive specified awards under the Amended Plan, and determine the number of shares subject to such awards.

Our board of directors will have the authority to construe and interpret our Amended Plan, grant and amend awards, determine the terms of such awards and make all other determinations necessary or advisable for the administration of the plan, including, but not limited to, repricing options or SARs without prior shareholder approval.  All determinations, interpretations and constructions made by the board of directors in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.

 

Changes to Capital Structure.

 

In the event that there is a specified type of change in our capital structure, such as a merger, consolidation, reorganization, recapitalization, reincorporation, share dividend, dividend in property other than cash, large nonrecurring cash dividend, share split or reverse share split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, appropriate and proportionate adjustments will be made to (i) the class and the maximum number of shares reserved for issuance under our Amended Plan, (ii) the class and the maximum number of shares that may be issued upon the exercise of ISOs, and (iii) the class and the number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding awards.

 

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Corporate Transactions and Changes in Control.

Our Amended Plan provides that in the event of certain specified significant corporate transactions, each outstanding award will be treated as determined by our board of directors unless otherwise provided in an award agreement or other written agreement between us and the award holder. The board of directors may take one of the following actions with respect to such awards:

 

 

 

arrange for the assumption, continuation or substitution of an award by the surviving or acquiring corporation (or its parent company);

 

 

 

arrange for the assignment of any reacquisition or repurchase rights held by us in respect of ordinary shares issued under an award to a surviving or acquiring corporation (or its parent company);

 

 

 

accelerate the vesting, in whole or in part, of the award and, if applicable, the time at which the award may be exercised, and provide for its termination prior to the transaction if it is not exercised at or prior to the closing of the transaction;

 

 

 

arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by us with respect to the award;

 

 

 

cancel or arrange for the cancellation of the award, to the extent not vested or not exercised prior to the closing of the transaction, in exchange for a cash payment or no payment, as determined by our board of directors; and

 

 

 

cancel or arrange for the cancellation of the award to the extent not exercised prior to the closing of the transaction, in exchange for a payment, in the form determined by our board of directors, equal to the excess, if any, of (A) the per share amount payable to holders of our ordinary shares in the transaction over (B) any exercise price payable by the participant in connection with the award, multiplied by the number of vested shares subject to the award.

A corporate transaction generally will be deemed to occur in the event of: (i) a sale of all or substantially all of our assets, (ii) the sale or disposition of at least 50% of our outstanding securities, (iii) the consummation of a merger or consolidation where we do not survive the transaction or (iv) the consummation of a merger or consolidation where we do survive the transaction but our ordinary shares outstanding prior to such transaction are converted or exchanged into other property by virtue of the transaction. In addition, any one or more of the above events may be effected pursuant to (x) a takeover under Irish Takeover Rules; (y) a compromise or arrangement under Chapter 1 of Part 9 of the Companies Act 2014 of the Republic of Ireland, or the 2014 Act or (z) Chapter 2 of Part 9 of the 2014 Act.

The board of directors need not take the same action or actions with respect to all awards or portions of awards or with respect to all participants.  The board of directors may take different actions with respect to the vested and unvested portions of an award.  

Notwithstanding the foregoing, if during the period beginning on the date that is 30 days prior to and ending on the date that is 12 months following the consummation of a corporate transaction that also qualifies as a “change in control” (as defined below), if a participant’s services to the Company (or its successor in the change in control) are involuntarily terminated without “cause” (as defined below) or a participant resigns service to the Company (or its successor in the change in control) in all capacities for “good reason” (as defined below), and, in either case other than as a result of the participant’s death or disability, then as of the date of the participant’s termination of service, the vesting and exercisability of any then-unvested award held by a participant will be accelerated in full.

A “change in control” for purposes of the Amended Plan is defined, in summary, as the acquisition by a person or a group of more than 50% of our outstanding stock other than by virtue of a merger or consolidation; our involvement in a merger, consolidation, or similar transaction, unless our stockholders prior to such event continue to own, in substantially the same proportions as before the transaction, more than 50% of the entity surviving such

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event; our shareholders or our board approves a plan of liquidation or dissolution or our complete dissolution or liquidation otherwise occurs; a sale or other disposition of all or substantially all of our assets (other than a sale to an entity more than 50% of which is owned by our shareholders in substantially the same proportions as their ownership of us immediately prior to such transaction); or a change, without approval by our board of directors, of a majority of our board of directors.  In addition, any one or more of the above events may be effected pursuant to (x) a compromise or arrangement sanctioned by the Irish courts under Section 450 of the 2014 Act, (y) a scheme, contract or offer which has become binding on all shareholders pursuant to Section 609 of the 2014 Act, or (z) a bid pursuant to Regulation 23 or 24 of the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006.

“Cause” as used in the Amended Plan has the meaning ascribed to such term in any written agreement between the participant and us defining such term but, in the absence of such a definition, means, in summary (i) the participant’s commission of a felony or crime involving fraud, dishonesty or moral turpitude; (ii) the participant’s attempted commission of, or participation in, a fraud or act of dishonesty against us or an affiliate of ours; (iii) the participant’s intentional, material violation of any contract or agreement between the participant and us or an affiliate of ours, of any statutory duty owed to us or an affiliate of ours; (iv) the participant’s unauthorized use or disclosure of our (or an affiliate’s) confidential information or trade secrets; or (v) the participant’s gross misconduct.  In addition, “good reason” as used in the Amended Plan has the meaning ascribed to such term in any written agreement between the participant and us defining such term but, in the absence of such a definition, means, in summary, any of the following actions taken without the participant’s consent: (i) a material reduction of the participant’s base compensation, other than a reduction that applies generally to all executives; (ii) a material reduction in the participant’s authority, duties and responsibilities; (iii) failure or refusal of a successor of ours to materially assume our obligations under the participant’s offer letter and/or employment agreement, if applicable, in the event of a change in control; or (iv) a relocation of the participant’s principal place of employment that results in an increase in the participant’s one-way driving distance by more than 50 miles from the participant’s then current principal residence.  In addition, in order to resign for “good reason” a participant must provide written notice of the event giving rise to “good reason” to us within 90 days after the condition arises, allow us at least 30 days to cure such provision, and if we fail to cure the condition, resign from all positions not later than 90 days after the end of such cure period.

Effective Date

Our board of directors adopted the 2018 Plan on March 14, 2018 and our shareholders approved the 2018 Plan on May 14, 2018. The Amended Plan will become effective, provided our shareholders approve the plan, on June 11, 2020.  No ISOs may be granted after March 10, 2030.

Amendment and Termination.

Our board of directors has the authority to amend, suspend, or terminate our Amended Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our shareholders. No awards may be granted under our Amended Plan while it is suspended or after it is terminated.

 

Federal Income Tax Consequences

The following is a summary of the United States federal income tax consequences that generally will arise with respect to awards granted under the Amended Plan.  This summary is based on the federal tax laws in effect as of the date of this proxy statement.  In addition, this summary assumes that all awards are exempt from, or comply with, the rules under Section 409A of the Code regarding nonqualified deferred compensation.  Changes to these laws could alter the tax consequences described below.

 

Incentive Stock Options

 

A participant will not have income upon the grant of an ISO.  Also, except as described below, a participant will not have income upon exercise of an ISO if the participant has been employed by the Company or its corporate

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parent or 50% or more-owned corporate subsidiary at all times beginning with the option grant date and ending three months before the date the participant exercises the option.  If the participant has not been so employed during that time, then the participant will be taxed as described below under “Nonstatutory Stock Options.”  The exercise of an ISO may subject the participant to the alternative minimum tax.

 

A participant will have income upon the sale of the ordinary shares acquired under an ISO at a profit (if sales proceeds exceed the exercise price).  The type of income will depend on when the participant sells the shares. If a participant sells the shares more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain.  If a participant sells the shares prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be ordinary income and a portion may be capital gain.  This capital gain will be long-term if the participant has held the shares for more than one year and otherwise will be short-term.  If a participant sells the shares at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss.  This capital loss will be long-term if the participant held the shares for more than one year and otherwise will be short-term.

 

Nonstatutory Stock Options

 

A participant will not have income upon the grant of an NSO.  A participant will have compensation income upon the exercise of an NSO equal to the value of the shares on the day the participant exercised the option less the exercise price.  Upon sale of the shares, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the shares on the day the option was exercised.  This capital gain or loss will be long-term if the participant has held the shares for more than one year and otherwise will be short-term.

 

Restricted Stock

 

A participant will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Code is made within 30 days of the date of grant.  If a timely Section 83(b) election is made, then a participant will have compensation income equal to the value of the shares less the purchase price.  When the shares are sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the shares on the date of grant.  If the participant does not make a Section 83(b) election, then when the shares vest the participant will have compensation income equal to the value of the shares on the vesting date less the purchase price.  When the shares are sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the shares on the vesting date.  Any capital gain or loss will be long-term if the participant held the shares for more than one year and otherwise will be short-term.

 

Restricted Stock Units

 

A participant will not have income upon the grant of a restricted stock unit.  A participant is not permitted to make a Section 83(b) election with respect to a restricted stock unit award.  When the restricted stock unit vests, the participant will have income on the vesting date in an amount equal to the fair market value of the shares on the vesting date less the purchase price, if any.  When the shares are sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the shares on the vesting date.  Any capital gain or loss will be long-term if the participant held the shares for more than one year and otherwise will be short-term.

 

Other Stock Awards

 

The tax consequences associated with any other stock award granted under the Amended Plan will vary depending on the specific terms of such award.  Among the relevant factors are whether or not the award has a readily ascertainable fair market value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the award and the participant’s holding period and tax basis for the Award or underlying ordinary shares.

 

 

 

 

 

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Tax Consequences to the Company

 

There will be no tax consequences to the Company except that the Company will be entitled to a deduction when a participant has compensation income.  Any such deduction will be subject to the limitations of Section 162(m) of the Code.

PROPOSAL NO. 3: TO RATIFY, IN A NON-BINDING VOTE, THE APPOINTMENT OF KPMG TO SERVE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020 AND TO AUTHORIZE THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO SET THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REMUNERATION.

The audit committee has appointed KPMG as our independent registered public accounting firm, to audit our financial statements for the fiscal year ending December 31, 2020.  KPMG has served as our independent registered public accounting firm for the fiscal year ended December 31, 2019. Representatives of KPMG are expected to be present in person or telephonically at the AGM and will have the opportunity to make a statement if they desire to do so. It is also expected that they will be available to respond to appropriate questions from shareholders.

In deciding to appoint KPMG, the audit committee reviewed auditor independence issues and existing commercial relationships with KPMG and concluded that KPMG has no commercial relationship with the Company that would impair its independence for the fiscal year ending December 31, 2020.

The following table presents fees for professional audit services and other services rendered by KPMG to us for the fiscal years ended December 31, 2019 and 2018:

 

 

 

Year Ended December 31, 2019

 

Year Ended December 31, 2018

Audit fees (1)

 

$260,937

 

$380,070

Audit related fees (2)

 

 

Tax fees (3)

 

110,758

 

80,235

All other fees

 

 

 

 

$371,695

 

$460,305

 

 

 

 

 

(1) “Audit Fees” consist of fees billed for professional services performed by KPMG for the audit of our annual financial statements, the review of interim financial statements, and related services that are normally provided in connection with our initial public offering and registration statements on Form S-3 and Form S-8. Included in the 2018 audit fees is $208,427 of fees billed in connection with our initial public offering in May 2018.

(2) “Audit related fees” consist of fees billed by an independent registered public accounting firm for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements.

(3) “Tax fees” consist of fees for professional services, including tax consulting and compliance performed by an independent registered public accounting firm.

 

 

All of these services were pre-approved by the audit committee in accordance with the “Policy on Audit Committee Pre-Approval of Services” described below.  No work carried out in connection with the audit of our financial statements was performed by persons other than KPMG’s full time, permanent employees.

Policy on Audit Committee Pre-Approval of Services

Consistent with SEC policies regarding auditor independence, the audit committee has responsibility for appointing, setting compensation and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the audit committee reviews and pre-approves all audit and permissible non-audit services

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provided by our independent registered public accounting firm; provided, however, that de minimis non-audit services may instead be approved in accordance with applicable SEC rules.

Our board of directors is seeking shareholder ratification of the appointment by the audit committee of KPMG to serve as our independent registered public accounting firm and the authorization of the board of directors, acting through the audit committee, to set the auditor's remuneration. If this proposal is not approved at the AGM, our audit committee may reconsider this selection.

The affirmative vote of a majority of the votes cast at the AGM is required for this proposal.

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020 AND THE AUTHORIZATION OF THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO SET THE AUDITOR'S REMUNERATION.

 

 


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BACKGROUND DISCUSSION ON PROPOSAL NOS 4 TO 7

Introduction

 

On January 16, 2020, the Company entered into a Securities Purchase Agreement by and among Iterum Therapeutics Bermuda Limited ("Iterum Bermuda"), as issuer, the Company, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited and Iterum Therapeutics US Holding Limited, as guarantors (collectively, the "Guarantors"), on the one hand, and certain accredited investors (the "Private Placement Investors"), on the other hand, pursuant to which Iterum Bermuda issued and sold, and the Guarantors guaranteed, an aggregate of 51,588 units (the "Units"), consisting of (i) 6.500% Exchangeable Senior Subordinated Notes due 2025, fully and unconditionally guaranteed on an unsecured senior subordinated basis by the Guarantors, issued by Iterum Bermuda in the aggregate original principal amount of $51.6 million (the "Exchangeable Notes"), and (ii) 50 limited recourse royalty-linked notes, fully and unconditionally guaranteed on an unsecured senior subordinated basis by the Guarantors, issued by Iterum Bermuda in the aggregate original principal amount of $0.1 million (the "Royalty-Linked Notes"), in a private placement to investors including entities affiliated with Sarissa Capital Management LP (“Sarissa” or the “Sarissa Funds”) and RA Capital Management and entities affiliated with certain members of our board of directors, including Brenton Ahrens, Mark Chin, Patrick Heron, Ronald Hunt and Shahzad Malik, and former members of our board of directors, including James Healy and Robert Hopfner, and other investors (the "Private Placement"). The Private Placement closed on January 21, 2020.  

 

The Exchangeable Notes were issued under an indenture, dated as of January 21, 2020, between Iterum Bermuda, the Guarantors and U.S. Bank National Association as trustee (the "Exchangeable Notes Indenture"). The summary of the Exchangeable Notes Indenture in this proxy statement does not purport to be complete and is qualified entirely by reference to the Exchangeable Notes Indenture, which was filed as Exhibit 4.1 in our Current Report on Form 8-K with the SEC on January 17, 2020.

 

The Exchangeable Notes are exchangeable, at Iterum Bermuda’s election, into cash, ordinary shares (or “physical settlement”), or a combination of ordinary shares and cash, at an initial exchange rate of 1,000 shares per $1,000 principal amount of Exchangeable Notes, which is equivalent to an initial exchange price of approximately $1.00 per ordinary share (the “Initial Exchange Rate”). If all holders of Exchangeable Notes issued pursuant to the Exchangeable Notes Indenture and the Securities Purchase Agreement were to exchange their notes and Iterum Bermuda elected to satisfy its exchange obligation by physical settlement, based on the Initial Exchange Rate, the Company would be required to issue approximately 51.6 million ordinary shares to the holders of Exchangeable Notes (not taking into account any additional ordinary shares issuable to satisfy accrued and unpaid interest due upon exchange of any Exchangeable Notes). On the occurrence of certain events, the Exchangeable Notes Indenture requires us to increase the exchange rate, which would increase the number of ordinary shares deliverable on an exchange (for further information regarding the anti-dilution adjustment provisions set forth in the Exchangeable Note Indenture, please see the section titled “Proposal No. 8—Adjustment of Initial Exchange Rate”).

 

As required by our directors, including the directors affiliated with certain of the Private Placement Investors, we agreed to undertake an offering of subscription rights to purchase additional Units (the “Rights Offering”) on a pro rata basis to our other shareholders who did not participate in the Private Placement. To the extent any Exchangeable Notes are issued in the Rights Offering, the percentages set forth in this proxy statement representing the Company’s fully diluted share capital that would be issued to holders of Exchangeable Notes purchased in the Private Placement would be reduced.

 

Under Irish law, a company may only issue shares up to the maximum authorized share capital contained in the company's constitution. The Company is currently authorized to issue up to 50,000,000 ordinary shares, par value $0.01 each, of which 24,301,122 are currently unissued or unreserved and therefore available for issuance (taking into account ordinary shares reserved for the Rights Offering). The Company, therefore, does not  currently have sufficient authorized, but unissued or unreserved share capital to satisfy a full exchange (assuming physical settlement) of the Exchangeable Notes into ordinary shares.

 

In addition, under Irish law, directors of an Irish public limited company must have specific authority from shareholders to allot and issue any of the company’s shares (other than pursuant to employee equity compensation plans). Moreover, when the directors of an Irish public limited company determine that it is in the best interests of

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the company to issue shares for cash, the company must first offer those shares on the same or more favorable terms to existing shareholders of the company on a pro-rata basis (commonly referred to as the statutory pre-emption right) unless the directors opt out of - i.e., "dis-apply" - the statutory pre-emption right under an authority conferred by the constitution of the company or approved by shareholders.

 

The Company's Constitution, adopted on May 30, 2018, authorized our board to allot and issue shares up to a maximum of our then existing authorized but unissued share capital and to opt out of the statutory pre-emption right. Accordingly, subject to Nasdaq and SEC rules and regulations, our board is currently authorized to issue 35,131,027 ordinary shares, without shareholder approval and is further authorized to issue those shares for cash without first being required to offer those shares to all of our shareholders on a pro-rata basis.

 

Information Related to the Private Placement

 

Subject to the terms of the Exchangeable Notes Indenture, on or after January 21, 2021, until the second scheduled trading day immediately preceding January 15, 2025, holders may exchange the Exchangeable Notes at any time. In addition, the Exchangeable Notes will be mandatorily exchangeable if, following January 21, 2021, and on or prior to January 1, 2025, (i) the U.S. Food and Drug Administration, or FDA, accepts for filing a new drug application by us or any of our affiliates for specified sulopenem products; (ii) we have at least $75 million of unrestricted cash, on a consolidated basis without including any net proceeds from sales of the securities to the Private Placement Investors and any other financing provided by such investors after January 21, 2020; and (iii) the daily volume-weighted average price of the ordinary shares has been at least $8.00 for 60 consecutive trading days.

Iterum Bermuda may at any time on or after the earliest of (i) the later of (x) the date on which certain ownership caps set forth in the Exchangeable Notes Indenture no longer apply, and (y) January 21, 2021, (ii) the consummation of a “fundamental change,” as defined in the Exchangeable Notes Indenture, and (iii) the date that the Company enters into a definitive agreement relating to a fundamental change, and, in each case, upon written consent of the holders of any outstanding senior debt, redeem for cash all or a portion of the Exchangeable Notes, at its option. The redemption price will be equal to (a) 115% of the principal amount of the Exchangeable Notes to be redeemed, if the redemption date occurs on or after the approval by the FDA of a new drug application by the Company for specified sulopenem products and there has been a commercial sale of such a product (collectively, the “Redemption Payment Event”), (b) 300% of the principal amount of the Exchangeable Notes to be redeemed, if the redemption date occurs prior to the Redemption Payment Event, or (c) if a change of control transaction is consummated prior to or within 120 days after the applicable redemption date, the greater of (x) 300% of the principal amount of the Exchangeable Note to be redeemed and (y) the consideration that the holder of the Exchangeable Note to be redeemed would have received in connection with such change of control transaction if the Exchangeable Note had been exchanged immediately prior thereto ((x) and (y) collectively, the “Change of Control Price”), plus, in each case, any accrued and unpaid interest to, but excluding, the redemption date.

If the Company undergoes a “fundamental change,” as defined in the Exchangeable Notes Indenture, prior to January 15, 2025, Exchangeable Note holders may require Iterum Bermuda to repurchase for cash all or any portion of their Exchangeable Notes at a fundamental change repurchase price equal to (i) the Change of Control Price, if the fundamental change is not a liquidation event, or (ii) 100% of the principal amount of the Exchangeable Notes to be repurchased, if the fundamental change is a liquidation event, plus, in each case, any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Exchangeable Notes Indenture contains customary terms and certain affirmative covenants, including that upon certain events of default occurring and continuing, either the Exchangeable Note trustee or the holders of at least 25% in aggregate principal amount of the outstanding Exchangeable Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Exchangeable Notes to be due and payable. In addition, the Exchangeable Notes Indenture contains negative covenants which, among other things and subject to specified exceptions, prohibit us, Iterum Bermuda, and our subsidiaries from (i) incurring any indebtedness that is not permitted by the Exchangeable Notes Indenture or amending the terms of any subordinated indebtedness, (ii) entering into strategic transactions or transferring any material assets, (iii) undergoing a change of control transaction (as defined in the Exchangeable Notes Indenture), other than a change of control transaction in which each holder of an outstanding Exchangeable Note receives cash consideration of at least 300% of the outstanding principal amount of such Exchangeable Note, (iv) amending or terminating the Company’s license agreement with Pfizer Inc., (v) acquiring other assets or businesses other than in the ordinary course of business or making any loans

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or other capital contributions or investments in any other person, (vi) entering into transactions with a significant shareholder (as defined in the Exchangeable Notes Indenture), and, in addition, prohibit the Company from redeeming or repurchasing any of its capital stock, in each case without first obtaining the consent of the holders representing at least sixty six and two third percent (66 2/3%) of the aggregate principal amount of Exchangeable Notes outstanding, which consent will be subject to a veto right of the holders of 30% of the outstanding Exchangeable Notes which must include Sarissa so long as Sarissa and its affiliates own at least 10% of the outstanding Exchangeable Notes.

In connection with the transactions contemplated by the Securities Purchase Agreement, we entered into the 2020 Investor Rights Agreement with the Private Placement Investors. Please see the section titled “Certain Relationships and Related Party Transactions—Participation in Private Placement” above for a description of the 2020 Investor Rights Agreement.

 

Specific Rationale for Proposing to Increase our Current Share Issuance Authorities

 

In order to enable the Company to have (i) sufficient authorized but unissued or unreserved share capital and authority for share issuances on a non-pre-emptive basis under Irish law and the rules of Nasdaq to satisfy the full exchange (assuming physical settlement) of all of the Exchangeable Notes based on the Initial Exchange Rate into ordinary shares of the Company, and (ii) future flexibility with respect to share issuances, we are seeking approval at this AGM:

 

(i) to increase our authorized ordinary share capital from $1,500,000 to $2,500,000 by the creation of an additional 100,000,000 ordinary shares (Proposal No. 4, the authorized share capital increase proposal);

 

(ii) to authorise the board to issue shares up to the authorized but unissued share capital following the passing of the authorized share capital increase proposal for a period of five years from the date of the approval (Proposal No. 5, the directors' allotment authority proposal);

 

(iii) to authorise the board to issue ordinary shares for cash pursuant to the authority conferred by the directors’ allotment authority proposal (if approved) on the basis that statutory pre-emption rights will not apply to such issuances (Proposal No. 6, the pre-emption rights dis-application proposal); and

 

(iv) following the passing of the additional share capital proposals (Proposal Nos. 4 to 6) to approve, in accordance with applicable rules of the Nasdaq Stock Market, the issuance by us of our ordinary shares in settlement of the potential future exchange in full of $51.6 million aggregate principal amount of, plus accrued and unpaid interest on, 6.500% Exchangeable Senior Subordinated Notes due 2025 issued pursuant to the Exchangeable Notes Indenture, dated as of January 21, 2020, among us, Iterum Bermuda, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited, Iterum Therapeutics US Holding Limited and U.S. Bank National Association as trustee and the Securities Purchase Agreement, dated as of January 16, 2020, among us, Iterum Bermuda, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited and Iterum Therapeutics US Holding Limited and the accredited investors named therein (Proposal No. 7, the share issuance proposal or the Nasdaq Shareholder Approval Rule).

 

If these approvals are not obtained, we will be limited to issuing a maximum of 24,301,122 ordinary shares on an exchange of the Exchangeable Notes (regardless of the exchange rate) with the excess being capable of cash settlement only. This could adversely affect our liquidity and/or we may not have sufficient cash available at that time to satisfy such cash settlement.  

In addition, the additional share capital proposals will give us flexibility when it comes to future share issuances, including by way of capital raises. As a clinical stage company, we rely heavily on, and until such time that we successfully obtain regulatory approval of our product candidates and achieve substantial positive cash flows from the commercialization of any approved drug candidates, will continue to rely heavily on, access to the capital markets in order to fund our operations. Likewise, because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, the amounts of increased capital outlays and operating expenses associated with completing the development of our product candidates are inherently uncertain,

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as is the time horizon for which we expect to rely principally on access to the capital markets to fund the completion of our product candidate development efforts.

Specifically, our future capital requirements will depend on numerous factors, including, without limitation, the timing of initiation, progress, results and costs of our clinical trials; the results of our research and preclinical studies; the costs of clinical manufacturing and of establishing commercial manufacturing arrangements; the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; the costs and timing of capital asset purchases; our ability to establish research collaborations, strategic collaborations, licensing or other arrangements; the costs to satisfy our obligations under current and potential future collaborations; and the timing, receipt, and amount of revenues or royalties, if any, from any approved drug candidates.

We believe that the additional share capital proposals are in the best interests of our shareholders because, in addition to enabling us to satisfy a full exchange (assuming physical settlement) of the Exchangeable Notes based on the Initial Exchange Rate, the additional share capital proposals provide our board the flexibility, consistent with its fiduciary duties and subject to applicable shareholder approval requirements of Nasdaq and the SEC, to efficiently and cost-effectively access the capital markets without the competitive disadvantage and risks associated with seeking transaction-specific shareholder approvals. In addition, we believe that seeking the directors’ allotment authority proposal and the pre-emption rights dis-application proposal for an additional five years instead of seeking general re-approval of our share issuance authorities on a more frequent basis is in the best interests of our shareholders because (i) the term of the Exchangeable Notes is five years and (ii) seeking general re-approval of our share issuance authorities on a more frequent basis would subject us to the competitive disadvantage risk, particularly given the 75% vote threshold required to dis-apply the statutory pre-emption right. In particular, a single shareholder or small number of shareholders, including those with a short-term focus, could defeat a proposal to disapply the statutory pre-emption right given the high vote threshold to approve that dis-application, even if a substantial majority of our shareholders who are supportive of our business and long-term growth strategy vote to approve the dis-application of the statutory pre-emption right.

 

Limitations derived from Irish capital markets practice should not apply to Iterum

 

While not required by Irish law, we understand that it has become market practice for companies whose share capital is listed on Euronext Dublin or the London Stock Exchange to generally limit the share allotment and issuance authority to an amount equal to 33% of their issued share capital for a period of 12 to 18 months and to generally limit the dis-application of the statutory pre-emption right to only 5% of their issued share capital for a period of 12 to 18 months. While these limitations in size and duration on share issuance authorities are part of the corporate governance framework applicable to companies whose share capital is listed on Euronext Dublin or the London Stock Exchange (regardless of whether such companies are incorporated in Ireland or elsewhere), our shares are not, and never have been, listed on the Euronext Dublin or the London Stock Exchange, and we are not subject to Euronext Dublin or the London Stock Exchange share listing rules or corporate governance standards applicable to companies whose share capital is listed on Euronext Dublin or the London Stock Exchange.

 

We are required to seek shareholder approval for the additional share capital proposals because we are incorporated in Ireland. However, our ordinary shares are listed solely on the Nasdaq Global Market and as such, we believe that our shareholders expect us to, and we are committed to, follow customary U.S. capital markets practices, U.S. corporate governance standards and Nasdaq and SEC rules and regulations. We also believe that applying the standards and market practices of a market where our shares are not listed would be inappropriate and not in the best interests of our Company or our shareholders, especially in circumstances where we are committed to complying with the governance rules and practices of the actual capital market for our shares - the Nasdaq Global Market - which imposes its own restrictions on share issuances for the protection of shareholders.

 

Shareholder approval of the additional share capital proposals does not mean that our board would have no limits on future share issuances. To the contrary, Iterum is considered to be a U.S. domestic reporting company under SEC rules and is subject to the same shareholder approval rules with respect to share issuances as other U.S.-incorporated companies listed on the Nasdaq. For example, Nasdaq rules generally require shareholder approval when any issuance or potential issuance will result in a “change of control” of the issuer (which may be deemed to occur if after a transaction a single investor or affiliated investor group acquires, or has the right to acquire,  20% of the

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ordinary shares (or securities convertible into or exercisable for ordinary shares) or voting power of an issuer and such ownership would be the largest ownership position of the issuer). Likewise, shareholder approval is required under the Nasdaq rules prior to the issuance of securities in connection with a transaction other than a public offering involving the sale, issuance or potential issuance by the company of ordinary shares (or securities convertible into or exercisable for ordinary shares) at a price that is the lower of (1) the closing price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement or (2) the average closing price of the ordinary shares (as reflected on Nasdaq.com) for the five trading immediately preceding the signing of the binding agreement, which alone or together with sales by officers, directors or substantial shareholders of the company, equals 20% or more of the ordinary shares or 20% or more of the voting power outstanding before the issuance. Moreover, with limited exceptions, our board must also seek shareholder approval of equity compensation plans, including material revisions of such plans.

 

We understand that certain proxy advisory firms have in recent proxy seasons applied their United Kingdom and Ireland voting guidelines in formulating their voting recommendations on share issuance authorities proposals for Irish-incorporated U.S.-listed companies, meaning that they have applied or otherwise taken into account the market practice for companies whose share capital is listed on Euronext Dublin or the London Stock Exchange in formulating their voting recommendations on share issuance authorities proposals for Irish-incorporated companies, even if their shares are not listed on Euronext Dublin or the London Stock Exchange. For all of the reasons discussed above and below, we respectfully disagree with this approach.

 

We also understand that some Irish-incorporated companies that are listed solely on U.S. stock exchanges have followed the market practice for companies whose share capital is listed on Euronext Dublin or the London Stock Exchange with respect to their own share issuance authorities. However, those companies may have business and capital-raising needs and strategies that differ from ours or may have different approaches for creating shareholder value.

 

 


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PROPOSAL NO. 4—AUTHORIZED SHARE CAPITAL INCREASE

Overview

Under Irish law, an Irish public limited company must have a maximum authorized share capital. Shareholder approval is required to increase the authorized share capital of an Irish public limited company. Under the current Constitution of the Company, which came into effect on May 30, 2018, the authorized share capital of the Company is $1,500,000, divided into 50,000,000 ordinary shares and 100,000,000 preferred shares, par value $0.01 per share. There are currently 24,301,122 ordinary shares unissued or unreserved and therefore available for issuance (taking into account ordinary shares reserved for the Rights Offering).

Based on the Initial Exchange Rate and assuming physical settlement, the Exchangeable Notes issued pursuant to the Exchangeable Notes Indenture and Securities Purchase Agreement, on full exchange of all of them, would exchange into  approximately 51.6 million ordinary shares (not taking into account any additional ordinary shares issuable to satisfy accrued and unpaid interest due upon exchange of any Exchangeable Notes). The Exchangeable Notes Indenture requires us to increase the exchange rate on certain events, which would increase the number of ordinary shares deliverable on an exchange. See the section titled “Proposal No. 8—Adjustment of Initial Exchange Rate” below for a summary of the anti-dilution adjustment provisions set forth in the Exchangeable Notes Indenture. The Company, therefore, does not currently have sufficient authorized, but unissued or unreserved share capital to satisfy a full exchange of the Exchangeable Notes into ordinary shares of the Company.

In order to enable the Company to have sufficient authorized, but unissued or unreserved share capital available for share issuances in order to satisfy a full exchange (assuming physical settlement) of the Exchangeable Notes into ordinary shares of the Company at the Initial Exchange Rate and to have future flexibility with respect to share issuances, we are seeking approval at this AGM to increase our authorized ordinary share capital from $1,500,000 to $2,500,000 by the creation of an additional 100,000,000 ordinary shares.

The authorized share capital increase proposal (Proposal No. 4) is fundamental to our business and capital management because the Company needs to maintain a greater reserve of authorized but unissued ordinary shares (a) in order to satisfy a full exchange (assuming physical settlement) of the Exchangeable Notes into ordinary shares of the Company based on the Initial Exchange Rate; (b) in order to operate its equity compensation plans and (c) for general corporate purposes. The additional shares would be used in connection with any exchange of the Exchangeable Notes into ordinary shares of the Company to the extent we elect physical settlement pursuant to the Exchangeable Notes Indenture and may be used for various other purposes with or without further shareholder approval, including: raising capital; providing equity incentives to employees, officers or directors; establishing strategic relationships with other companies; and expanding our business or product pipeline through the acquisition of other businesses or products. We have been using the net proceeds of approximately $47.0 million from the Private Placement to fund the continued clinical development of sulopenem and the management of regulatory filings, and for working capital and general corporate purposes.

 

Certain Effects of the Proposal

 

If the authorized share capital increase proposal (Proposal No. 4) is not approved by our shareholders, we will be limited to issuing 24,301,122 ordinary shares on exchange of the Exchangeable Notes (regardless of the exchange rate) with the excess being capable of cash settlement only. This could adversely affect our liquidity and/or we may not have sufficient cash available at that time to satisfy such cash settlement.  In addition, going forward, the Company's financing options may be limited by the lack of sufficient unissued and unreserved authorized ordinary shares, and shareholder value may be harmed by this limitation.

 

We believe our future success depends upon our ability to attract, retain and motivate highly-skilled commercial, regulatory, business development and managerial employees, and if the authorized share capital increase proposal (Proposal No. 4) is not approved by our shareholders, the lack of sufficient unissued and unreserved authorized ordinary shares to provide future equity incentive opportunities as the compensation committee of the board deems appropriate could adversely impact our ability to achieve these goals. In short, if our shareholders do not approve the authorized share capital increase proposal (Proposal No. 4), we may not be able to access the capital markets,

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complete strategic transactions, attract, retain and motivate employees, and pursue other business opportunities integral to our growth and success without further shareholder approval.

Approval of the authorized share capital increase proposal (Proposal No. 4) and the issuance of any additional ordinary shares would not in and of itself affect the rights of the holders of our currently issued ordinary shares, except for, with respect to the issuance of additional shares, effects incidental to increasing the number of ordinary shares in issue, such as dilution of the earnings per share and voting rights of current holders of ordinary shares.

We have agreed in the Securities Purchase Agreement to use commercially reasonable efforts to obtain the shareholder approval described above and to call a meeting of our shareholders no later than June 10, 2020 for such purpose. In the event Proposal No. 4 is not approved, we may solicit such shareholder approvals at a future annual or extraordinary meeting of our shareholders.

If the authorized share capital increase proposal (Proposal No. 4) is approved by our shareholders, we will reserve approximately 51.6 million ordinary shares for issuance pursuant to the terms of the Exchangeable Notes.

Required Vote

Under Irish law, the resolution in respect of the authorized share capital increase proposal (Proposal No. 4) is an ordinary resolution that requires the affirmative vote of a majority of the votes cast at the AGM.

The text of the resolution in respect of the authorized share capital increase proposal is as follows:

THAT the authorized share capital of the Company be and is hereby increased from $1,500,000 divided into 50,000,000 ordinary shares of US$0.01 each and 100,000,000 preferred shares of US$0.01 each to $2,500,000 divided into 150,000,000 ordinary shares of US$0.01 each and 100,000,000 preferred shares of US$0.01 each.”

Pre-emptive Rights

Provided that the pre-emption rights dis-application proposal (Proposal No. 6) is approved, the Company's shareholders will not have pre-emptive rights in connection with the shares being created pursuant to the authorized share capital increase proposal.

Dissenters’ Rights

No dissenters’ rights are available to the Company's shareholders in connection with the ordinary shares being created pursuant to the authorized share capital increase proposal (Proposal No. 4).

OUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE AUTHORIZED SHARE CAPITAL INCREASE PROPOSAL (PROPOSAL NO. 4) IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE AUTHORIZED SHARE CAPITAL INCREASE PROPOSAL.

 


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PROPOSAL NO. 5—DIRECTORS’ ALLOTMENT AUTHORITY

This resolution proposes, subject to and conditional upon the approval by the Company’s shareholders of the authorized share capital increase proposal (Proposal No. 4), to provide the board with the requisite authority to allot and issue shares up to the authorized but unissued share capital of the Company as increased by the authorized share capital increase proposal (Proposal No. 4).

Overview

Under Irish law, directors of an Irish public limited company must have specific authority from shareholders to issue any shares, warrants, convertible instruments or options, even if such shares are part of the company’s authorized but unissued share capital. Our Constitution, which came into effect on May 30, 2018, currently authorises the board to allot and issue new shares without shareholder approval up to the amount of the Company’s existing authorized but unissued share capital.

This authority of our board to allot and issue shares has been in place since the Company adopted its Constitution on May 30, 2018. Under Irish law, this authority may be granted for a maximum period of five years, at which point it lapses unless renewed by our shareholders. Therefore, our board’s current authority to allot and issue shares is due to expire on May 30, 2023.

To ensure that the board continues to have full authority to issue shares, warrants, convertible instruments or options following the authorized share capital increase proposal (Proposal No. 4), we are proposing that shareholders renew our board's authority to allot and issue shares up to the amount of the Company’s authorized but unissued share capital following the passing of the authorized share capital increase proposal (Proposal No. 4) for an additional five-year period to expire on June 10, 2025 (or such date that is five years after the date shareholders approve this Proposal No. 5).

The provision of this authority is fundamental to our business and capital management because it enables us to issue shares on an exchange (assuming physical settlement) of the Exchangeable Notes based on the Initial Exchange Rate and also for general corporate purposes. Approval of the directors’ allotment authority proposal should provide the board with continued flexibility to issue shares up to the maximum of our authorized but unissued share capital, subject to applicable shareholder approval and other requirements of the SEC and Nasdaq. The renewed authority would apply to the issuance of shares and other securities convertible into or exercisable or exchangeable for our shares.

Approval of this authority would not exempt the Company from applicable Nasdaq requirements to obtain shareholder approval prior to certain share issuances or to comply with applicable SEC disclosure and other regulations.

In addition, we follow U.S. capital markets and governance standards to the extent permitted by Irish law and emphasize that this authorization is required as a matter of Irish law and is not otherwise required for other U.S. companies listed on the Nasdaq with which we compete.

Certain Effects of the Proposal

If shareholders do not approve the directors’ allotment authority proposal (Proposal No. 5), the board's existing authority to allot and issue shares up to the amount of the Company’s existing authorized but unissued share capital will continue to apply until May 30, 2023. This would limit us to issuing 24,301,122 ordinary shares on exchange of the Exchangeable Notes (regardless of the exchange rate) with the excess being capable of cash settlement only. This could adversely affect our liquidity and/or we may not have sufficient cash available at that time to satisfy such cash settlement. In addition, we would have no flexibility for any future share issuances (other than pursuant to employee equity compensation plans), including equity or equity-linked capital raises.

We have agreed in the Securities Purchase Agreement to use commercially reasonable efforts to obtain the shareholder approval described above and to call a meeting of our shareholders no later than June 10, 2020 for such

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purpose. In the event Proposal No. 5 is not approved, we may solicit such shareholder approvals at a future annual or extraordinary meeting of our shareholders.

The approval of the directors’ allotment authority proposal (Proposal No. 5) will become effective only if the authorized share capital increase proposal (Proposal No. 4) is approved by the Company's shareholders.

Required Vote

Under Irish law, the resolution in respect of the directors’ allotment authority proposal (Proposal No. 5) is an ordinary resolution that requires the affirmative vote of a majority of the votes cast at the AGM.

The text of the resolution in respect of the directors’ allotment authority proposal is as follows:

THAT, without limitation to the authority contained in Article 7.1 of the Company's Articles of Association and subject to and conditional upon the approval by the Company's shareholders of the authorized share capital increase proposal (Proposal No. 4 as set out in the proxy statement for this Annual General Meeting), the Company's directors be and they are, with effect from the passing of this resolution, hereby generally and unconditionally authorized pursuant to section 1021 of the Irish Companies Act 2014 to exercise all powers of the Company to allot and issue relevant securities (within the meaning of section 1021 of the Irish Companies Act 2014) up to the amount of the Company’s authorized but unissued share capital immediately following the passing of the authorized share capital increase proposal provided that this authority shall expire on June 10, 2025 and provided that the Company may, before such expiry, make an offer or agreement which would or might require relevant securities to be allotted or issued after such expiry and the directors may allot or issue relevant securities in pursuance of such an offer or agreement as if the authority conferred by this resolution had not expired.”

OUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE DIRECTORS' ALLOTMENT AUTHORITY PROPOSAL (PROPOSAL NO. 5) IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE DIRECTORS' ALLOTMENT AUTHORITY PROPOSAL.

 

 


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PROPOSAL NO. 6—PRE-EMPTION RIGHTS DIS-APPLICATION

 

This resolution proposes, subject to and conditional upon the approval by the Company’s shareholders of the directors’ allotment authority proposal (Proposal No. 5), to empower the board to allot the authorized but unissued share capital of the Company as increased by the authorized share capital increase proposal (Proposal No. 4) for cash otherwise than in accordance with the statutory pre-emption right under the Irish Companies Act 2014.

Overview

Under Irish law, unless otherwise authorized by shareholders, when an Irish public limited company issues shares for cash (including rights to subscribe for or otherwise acquire any shares) to new shareholders, it is required first to offer those shares on the same or more favorable terms to existing shareholders of the company on a pro-rata basis (commonly referred to as the statutory pre-emption right). The statutory pre-emption right, if not dis-applied, affords existing shareholders the right to purchase any new shares that we propose to issue for cash in order to maintain their proportionate ownership interests in Iterum following the issuance of those shares. Our Constitution, which came into effect on May 30, 2018, currently authorises the board to issue new shares for cash, up to a maximum of our existing authorized but unissued share capital, without first offering them to existing shareholders, thereby opting out of the statutory pre-emption right.

This authority of our board to opt out of the statutory pre-emption right has been in place since the Company adopted its Constitution on May 30, 2018. Under Irish law, this authority may be granted for a maximum period of five years, at which point it will lapse unless renewed by our shareholders. Therefore, our board’s current authority to opt out of the pre-emption right is due to expire on May 30, 2023.

The pre-emption rights dis-application proposal (Proposal No. 6) provides that for a period expiring five years from the date of the approval of the pre-emption rights dis-application proposal, our board would be empowered to issue ordinary shares for cash pursuant to the authority conferred by the directors’ allotment authority proposal (Proposal No. 5) (if approved) up to the authorized but unissued share capital of the Company as increased by the authorized share capital increase proposal (Proposal No. 4) (if approved) on the basis that statutory pre-emption rights under the Irish Companies Act 2014 will not apply to such issuances. This will enable the Company to issue shares on a full exchange (assuming physical settlement) of the Exchangeable Notes based on the Initial Exchange Rate and should also provide for future flexibility for other share issuances, including pursuant to a capital raise.

The Company’s ordinary shares are not listed on Euronext Dublin nor on the London Stock Exchange. The Company follows U.S. capital markets practices (to the extent permitted by Irish law) and the governance standards of the Nasdaq. The opt-out authorization sought in this pre-emption rights dis-application proposal is required as a matter of Irish law and is not otherwise required for many companies with which we compete. Moreover, shareholders of Irish-incorporated public companies routinely approve an opt-out of the statutory pre-emption rights. Receipt of this authority would merely place us on par with other Nasdaq-listed companies, which may not be subject to a similar statutory pre-emption right. The authority sought in this proposal is fundamental to our business and capital management initiatives because it facilitates our ability to issue equity, including, when appropriate, in connection with capital-raising activities.

Approval of this authority would not exempt the Company from applicable Nasdaq requirements to obtain shareholder approval prior to certain share issuances or to comply with applicable SEC disclosure and other regulations.

Certain Effects of the Proposal

If our shareholders do not approve the pre-emption rights dis-application proposal (Proposal No. 6), the board's existing authority to opt out of the statutory pre-emption right up to the amount of the Company's existing authorized but unissued share capital will continue to apply until May 30, 2023. This would limit us to issuing 24,301,122 ordinary shares on exchange of the Exchangeable Notes (regardless of the exchange rate) with the excess being capable of cash settlement only. In addition, any additional authorized but unissued shares created

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under the authorized share capital increase proposal (Proposal No. 4) that we propose to issue for cash, we would generally first have to offer those shares to all of our existing shareholders on the same or more favorable terms pro-rata to the existing shareholders. As a result of this limitation, in any capital raising transaction where we propose to issue shares for cash consideration, we would be required to first offer those shares that we propose to issue for cash to all of our existing shareholders in a time-consuming pro-rata rights offering, which would disadvantage us vis-à-vis many of our peers in competing for capital, would significantly encumber the capital-raising process, would significantly increase our costs, and would significantly increase the timetable for completing such a cash financing transaction, thus potentially limiting our ability to advance the development of our product candidates and otherwise achieve strategic goals that we believe are in the best interests of our shareholders.

The statutory pre-emption right applies only to share issuances for cash consideration; accordingly, it does not apply where we issue shares for non-cash consideration (such as in a share exchange transaction or in any transaction in which property other than cash is received by us in payment for shares) or where we issue shares pursuant to our employee equity compensation plans.

We have agreed in the Securities Purchase Agreement to use commercially reasonable efforts to obtain the shareholder approval described above and to call a meeting of our shareholders no later than June 10, 2020 for such purpose. In the event Proposal No. 6 is not approved, we may solicit such shareholder approvals at a future annual or extraordinary meeting of our shareholders.

The approval of the pre-emption rights dis-application proposal (Proposal No. 6) will become effective only if the authorized share capital increase proposal (Proposal No. 4) and the directors’ allotment authority proposal (Proposal No. 5) are approved by the Company's shareholders. Therefore, unless shareholders approve Proposal No. 4 and Proposal No. 5, this Proposal No. 6 will fail and not be implemented, even if shareholders approve this Proposal No. 6.

Required Vote

 

Under Irish law the resolution in respect of the pre-emption rights dis-application proposal (Proposal No. 6) is a special resolution that requires the affirmative vote of not less than 75% of the votes cast in person or by proxy at the AGM (including any adjournment thereof) in order to be approved.

The text of the resolution in respect of this proposal is as follows:

THAT, without limitation to the authority contained in Article 7.2 of the Company's Articles of Association and subject to and conditional upon the approval by the Company's shareholders of the directors’ allotment authority proposal (Proposal No. 5 as set out in the proxy statement for this Annual General Meeting), the Company's directors be and are, with effect from the passing of this resolution, hereby empowered pursuant to section 1023 of the Irish Companies Act 2014 to allot equity securities within the meaning of the said section 1023 for cash pursuant to the authority conferred by the directors’ allotment authority proposal up to an aggregate nominal amount equal to the authorized but unissued share capital of the Company immediately following the passing of the authorized share capital increase proposal (Proposal No. 4 as set out in the proxy statement for this Annual General Meeting) as if section 1022 of the Irish Companies Act 2014 did not apply to any such allotment provided that this authority shall expire on June 10, 2025 and provided that the Company may before the expiry of such authority make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Company's directors may allot equity securities in pursuance of such an offer or agreement as if the power conferred by this resolution had not expired.”

OUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE PRE-EMPTION RIGHTS DIS-APPLICATION PROPOSAL (PROPOSAL NO. 6) IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE PRE-EMPTION RIGHTS DIS-APPLICATION PROPOSAL.


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PROPOSAL NO. 7—APPROVAL OF ISSUANCE OF ORDINARY SHARES PURSUANT TO THE LISTING RULES OF THE NASDAQ STOCK MARKET

This resolution proposes, subject to and conditional upon the approval by the Company’s shareholders of the authorized share capital increase (Proposal No. 4), the directors’ allotment authority proposal (Proposal No. 5), and the pre-emption rights dis-application proposal (Proposal No. 6), to approve, in accordance with applicable rules of the Nasdaq Stock Market, the issuance by us of our ordinary shares in settlement of the potential future exchange in full of $51.6 million aggregate principal amount of, plus accrued and unpaid interest on, 6.500% Exchangeable Senior Subordinated Notes due 2025 issued pursuant to the Exchangeable Notes Indenture dated January 21, 2020, among us, Iterum Therapeutics Bermuda Limited, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited, Iterum Therapeutics US Holding Limited and U.S. Bank National Association as trustee and the Securities Purchase Agreement, dated as of January 16, 2020, among us, Iterum Therapeutics Bermuda Limited, Iterum Therapeutics International Limited, Iterum Therapeutics US Limited and Iterum Therapeutics US Holding Limited and the accredited investors named therein.

Overview

As previously disclosed, on January 21, 2020, certain investors purchased Units in the Private Placement pursuant to the Securities Purchase Agreement. Each Unit consisted of $1,000 principal amount of Exchangeable Notes and 50 Royalty-Linked Notes. Subject to satisfaction of certain conditions and during the periods described in the Exchangeable Notes Indenture, the Exchangeable Notes may be exchanged at the Initial Exchange Rate, which is equivalent to an initial exchange price of approximately $1.00 per ordinary share. The Exchangeable Notes will be exchangeable, at Iterum Bermuda’s election, into cash, physical settlement or a combination of cash and ordinary shares.  

The Securities Purchase Agreement and Exchangeable Notes Indenture limit the number of ordinary shares that we can issue upon exchange of the Exchangeable Notes to holders of the Exchangeable Notes. Unless we obtain the necessary shareholder approval, the  Exchangeable Notes issued to the Private Placement Investors will not be exchangeable for ordinary shares to the extent that, upon exchange, (i) the number of ordinary shares then beneficially owned by the holder would exceed 19.99% of the total number of ordinary shares issued and outstanding, (ii) the shares issued, when aggregated with any other ordinary shares beneficially owned by the holder, would otherwise result in a “change of control” of the Company (as described below) or (iii) the shares issued, together with all other ordinary shares issuable upon exchange of the Exchangeable Notes issued to the investors, would exceed 19.99% of the issued and outstanding ordinary shares immediately prior to the issuance of the Exchangeable Notes to the investors (clauses (i)-(iii) together, the “Aggregate Ownership Cap”).

If all holders of the Exchangeable Notes were to exchange their notes and Iterum Bermuda elected to satisfy its exchange obligation by physical settlement based on the Initial Exchange Rate, the Company would be required to issue approximately 51,588,000 ordinary shares to the holders of Exchangeable Notes, which would as of [April 20/May [  ],] 2020 represent approximately [77.6]% of the fully diluted share capital of the Company (excluding any ordinary shares that are issuable upon exercise, conversion or exchange of outstanding options, warrants or other securities or reserved under any equity plan maintained by Iterum or reserved for exchange of any Exchangeable Notes issued pursuant to the Rights Offering, collectively, the “Excluded Securities”, and not taking into account any additional ordinary shares issuable to satisfy accrued and unpaid interest due upon exchange of any Exchangeable Notes). If on the exchange of the Exchangeable Notes issued to Sarissa, Iterum Bermuda satisfies its exchange obligation by physical settlement, based on the Initial Exchange Rate, the Company would be required to issue approximately 15,000,000 ordinary shares to Sarissa, which would as of [April 20/May [  ],] 2020 represent approximately [22.5]% of the fully diluted share capital of the Company (assuming a full exchange of all outstanding Exchangeable Notes but excluding the Excluded Securities and not taking into account any additional ordinary shares issuable to satisfy accrued and unpaid interest due upon exchange of any Exchangeable Notes). If only the Exchangeable Notes held by Sarissa were exchanged and the remaining noteholders chose not to exchange their Exchangeable Notes, 15,000,000 ordinary shares would as of [April 20/May [  ],] 2020 represent approximately [50.2]% of the issued share capital of the Company (excluding the Excluded Securities and not taking into account any additional ordinary shares issuable to satisfy accrued and unpaid interest due upon exchange of any Exchangeable Notes). The final number of ordinary shares issuable in exchange for the Exchangeable Notes will

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depend on the exchange rate at the time of exchange, which may be adjusted pursuant to the terms of the Exchangeable Notes Indenture, in addition to the amount of accrued and unpaid interest due upon exchange and the extent to which  Iterum Bermuda elects physical settlement. A summary description of the Exchangeable Notes and Exchangeable Notes Indenture is contained in the section titled “Background Discussion on Proposal Nos. 4 to 7” above. For further information regarding the anti-dilution adjustment provisions set forth in the Exchangeable Notes Indenture, see the section titled “Proposal No. 8—Adjustment of Initial Exchange Rate” below.

The Nasdaq Shareholder Approval Rule

 

Our ordinary shares are listed on the Nasdaq Global Market and, as such, we are subject to the Nasdaq Listing Rules. As noted above, the Exchangeable Notes Indenture and Securities Purchase Agreement restrict the number of shares that we may issue to holders of Exchangeable Notes to the Aggregate Ownership Cap. Because the total number of shares issuable by us in connection with settlement of potential future exchanges cannot exceed the Aggregate Ownership Cap without shareholder approval pursuant to the terms of the Securities Purchase Agreement and Exchangeable Notes Indenture, we were not required to seek shareholder approval in connection with the issuance of Exchangeable Notes in connection with the closing of the Private Placement. However, we can remove this Aggregate Ownership Cap by obtaining shareholder approval in compliance with the applicable Listing Rules of the Nasdaq Stock Market and we are therefore requesting shareholder approval for Proposal No. 7 to enable us to allot and issue ordinary shares in connection with the potential future exchange in full of the Exchangeable Notes. 

 

 

 

The Nasdaq “Change in Control” Rule. Nasdaq Listing Rule 5635(b) requires shareholder approval when any issuance or potential issuance will result in a “change of control” of the issuer (which may be deemed to occur if after a transaction a single investor or affiliated investor group acquires, or has the right to acquire, at least 20% of the ordinary shares (or securities convertible into or exercisable for ordinary shares) or voting power of an issuer and such ownership would be the largest ownership position of the issuer). Shareholders should note that a “change of control” as described under Rule 5635(b) applies only with respect to the application of such rule, and does not constitute a “change of control” for purposes of the Irish law, our organizational documents, or any other purpose.

 

 

 

The Nasdaq 20% Rule. Nasdaq Listing Rule 5635(d) requires shareholder approval prior to the issuance of securities in connection with a transaction other than a public offering involving the sale, issuance or potential issuance by the company of ordinary shares (or securities convertible into or exercisable for ordinary shares) at a price that is the lower of (1) the closing price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement or (2) the average closing price of the ordinary shares (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement, which alone or together with sales by officers, directors or substantial shareholders of the company, equals 20% or more of the ordinary shares or 20% or more of the voting power outstanding before the issuance.

We refer to Nasdaq Listing Rules 5635(b) and (d) collectively herein as the “Nasdaq Shareholder Approval Rule.” We are seeking shareholder approval for the issuance of our ordinary shares in connection with the potential future exchange in full of the Exchangeable Notes issued pursuant to the Exchangeable Notes Indenture and Securities Purchase Agreement.

Shareholder approval of this Proposal No. 7 will constitute shareholder approval for purposes of Nasdaq Listing Rules 5635(b) and (d).

Pursuant to the Securities Purchase Agreement, we agreed to seek shareholder approval (i) as may be required by the applicable rules and regulations of the Nasdaq Stock Market to permit the issuance of ordinary shares issuable in connection with the exchange of all Exchangeable Notes, (ii) to increase the authorized number of our ordinary shares under our Constitution to permit the issuance of ordinary shares issuable in connection with the exchange of all Exchangeable Notes and (iii) as may be required under Irish Takeover Rules to facilitate the issuance of ordinary shares without triggering a requirement for a mandatory offer under Irish Takeover Rules.

Pursuant to the Securities Purchase Agreement, each Private Placement Investor, subject to specified exceptions, has agreed to vote all ordinary shares (other than any ordinary shares issued upon the exchange of any Exchangeable

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Note) that are owned beneficially or of record by such investor in favor of the shareholder approvals set forth above, including this Proposal No. 7.

Certain Effects of the Proposal

If we do not obtain shareholder approval of Proposal No. 7 to issue our ordinary shares in settlement of the potential future exchange of Exchangeable Notes, we would not be able to settle exchanges of  Exchangeable Notes beyond the Aggregate Ownership Cap with ordinary shares and would be required to settle them in cash. For a description of the Aggregate Ownership Cap, see the section titled “Proposal No. 7—Overview.”

We have agreed in the Securities Purchase Agreement to use commercially reasonable efforts to obtain the shareholder approvals described above and to call a meeting of our shareholders no later than June 10, 2020 for such purpose. In the event Proposal No. 7 is not approved, we may solicit such shareholder approvals at a future annual or extraordinary meeting of our shareholders.

If shareholder approval of Proposal No. 7 is obtained to issue ordinary shares in settlement of the potential future exchange of Exchangeable Notes and (i) assuming all $51.6 million of Exchangeable Notes were exchanged and we elected to settle all such exchanges in ordinary shares and (ii) further assuming that the Initial Exchange Rate applies, then we would issue to the holders of Exchangeable Notes an aggregate of 51,588,000 ordinary shares, or approximately [77.6]% of our outstanding shares as of [April 20/May [  ],] 2020 (excluding the Excluded Securities and not taking into account additional ordinary shares issuable to satisfy accrued and unpaid interest due upon exchange of any Exchangeable Notes). The actual number of ordinary shares that may become issuable is subject to anti-dilution adjustments, including weighted-average anti-dilution protections and other anti-dilution protections, as set forth in the Exchangeable Notes Indenture, in addition to the amount of accrued but unpaid interest due upon exchange and the extent to which Iterum Bermuda elects physical settlement.