Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As previously disclosed, on August 7, 2019, Avedro, Inc., a Delaware corporation
("Avedro") entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Glaukos Corporation, a Delaware corporation ("Glaukos") and Atlantic Merger
Sub, Inc., a Delaware corporation and wholly owned subsidiary of Glaukos
("Merger Sub"), pursuant to which Merger Sub will merge with and into Avedro,
with Avedro continuing as the surviving corporation (the "Merger"). Pursuant to
the terms of the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), each outstanding and unexercised option (an "Avedro Stock
Option") to purchase shares of Avedro's common stock, par value $0.00001 per
share ("Avedro Common Stock"), whether vested or unvested, will be assumed by
Glaukos and converted into an option to purchase a number of shares (rounded
down to the nearest whole share) of Glaukos' common stock, par value $0.001 per
share ("Glaukos Common Stock"), equal to the product of the number of shares of
Avedro Common Stock subject to such Avedro Stock Option immediately prior to the
Effective Time, multiplied by 0.365.
Effective November 15, 2019, Avedro entered into letter agreements (the "Letter
Agreements") with each of Reza Zadno, the Chief Executive Officer of Avedro,
Thomas Griffin, the Chief Financial Officer of Avedro, and Jim Schuermann, the
Chief Business Officer of Avedro (the "Executives"). Messrs. Zadno, Griffin and
Schuermann each currently holds a total of 810,286, 60,985 and 100,251
non-qualified Avedro Stock Options that were previously granted under Avedro's
2012 Equity Incentive Plan (the "2012 Plan"). Pursuant to the Letter Agreements,
Avedro and the Executives have agreed that (1) 412,345 of Mr. Zadno's
non-qualified Avedro Stock Options and all of the non-qualified Avedro Stock
Options held by Messrs. Griffin and Schuermann will expire no later than
June 30, 2020, (2) if any portion of those Avedro Stock Options is exercised,
such options will be settled in cash (based on the extent, if any, to which the
fair market value of the shares underlying the options at the time of exercise
exceeds the applicable exercise price of the options, and such options referred
to as the "Cash-Settled Options"), and (3) the exercise period of Mr. Zadno's
remaining 397,941 non-qualified Avedro Stock Options will be extended until
three years after his continuous service with Avedro terminates other than for
cause (but subject to the original maximum term of the options).
The Letter Agreements also provide that each Executive will be entitled to
receive a potential bonus payment (the "Equalization Payment") from Glaukos in
the event that any Executive purchases shares of Glaukos Common Stock within
three business days after his Cash-Settled Options are exercised and the
purchase price (the "Purchase Price") of any shares of Glaukos Common Stock
purchased is greater than the closing price of a share of Glaukos Common Stock
on the date his Cash-Settled Options are exercised (the "Exercise Value"). The
amount of each Executive's potential Equalization Payment will be an amount such
that after payment of all applicable income and employment taxes, each Executive
will retain an after-tax amount equal to any positive difference between the
Purchase Price and the Exercise Value with respect to any shares of Glaukos
Common Stock that he purchases, plus the amount of any broker fees or related
costs. Pursuant to the Letter Agreements, each Executive will also be entitled
to receive a gross-up payment equal, on an after-tax basis after taking into
account any taxes and penalties on the gross-up payment itself, to the amount of
any excise taxes that may be triggered pursuant to Sections 280G and 4999 of the
Internal Revenue Code by the Merger. The Executives will not be subject to any
cutback of benefits in order to avoid triggering these excise taxes.
Avedro currently estimates that each Executive will not be subject to any
parachute payment excise taxes pursuant to Sections 280G and 4999 of the
Internal Revenue Code in connection with the Merger, even if the Executive's
employment was to terminate in connection with the Merger. Accordingly, Avedro
currently estimates that the aggregate dollar amount of the Executives'
Section 280G gross-up payments will be ($0). This estimate is based on
assumptions that may or may not occur.
At this time, it is not possible to determine or estimate the value of the
potential Equalization Payments that may be made to the Executives, as the
amount of these payments (if any) will depend on whether (A) any Executive
purchases shares of Glaukos Common Stock after the Merger within three business
days after exercising any Cash-Settled Options and (B) the Purchase Price for
any purchased shares actually exceeds the Exercise Value. If the Exercise Value
is equal to or greater than the Purchase Price, the amount of each Executive's
Equalization Payment would be limited to the amount of any broker fees or
related costs, which each Executive is obligated to minimize.
The Letter Agreements with the Executives will only become effective if the
Merger is completed.
The Letter Agreements were entered into in order to reduce the total number of
shares of Glaukos Common Stock that are issuable under the Merger Agreement to a
number that is less than 20% of the outstanding shares of Glaukos Common Stock
to comply with certain New York Stock Exchange limitations and satisfy a
condition to closing of the Merger.
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The foregoing description of the Letter Agreements does not purport to be
complete and is subject to, and qualified in its entirety by, the full text of
the Letter Agreements, attached as Exhibit 10.1 to this Current Report
on Form 8-K, which is incorporated herein by reference.
Item 8.01 Other Events.
Option Exercise Extension
Effective November 1, 2019, the Board of Directors of Avedro approved the
extension of the exercise periods of 273,845 previously issued and outstanding
Avedro Stock Options, to be exercisable following the Effective Time. These
Avedro Stock Options were originally issued on March 23, 2015, January 13, 2016,
June 27, 2017, July 18, 2018, and January 9, 2019 under Avedro's 2012 Equity
Incentive Plan (the "2012 Plan") to Avedro's Director, Garheng Kong (8,314
options), Avedro's Director, Hongbo Lu (8,314 options), Avedro's Director,
Robert J. Palmisano (60,336 options), Avedro's Director, Jonathan Silverstein
(8,314 options), Avedro's Director, Donald Zurbay (60,479 options), Avedro's
former Director, Thomas W. Burns, (119,774 options) and Avedro's former
Director, Gilbert H. Kliman, M.D. (8,314 options). The Board of Directors of
Avedro has exercised its discretion in accordance with the 2012 Plan to extend
the option exercise period for each of these Avedro Stock Options until
November 1, 2020.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Number Description
10.1 Form of Letter Agreement
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Additional Information and Where to Find It
In connection with the proposed transaction between Avedro and Glaukos, Glaukos
filed with the SEC a registration statement on Amendment No. 1 to Form S-4 (No.
333-233807) (the "Registration Statement") containing a document constituting a
prospectus of Glaukos and a proxy statement of Avedro. The Registration
Statement was declared effective by the SEC on October 17, 2019, and Avedro
mailed the definitive proxy statement/prospectus to stockholders of Avedro on or
about October 17, 2019. Avedro also filed with the SEC certain supplemental
disclosures to the proxy statement/prospectus on a Current Report on Form 8-K on
November 8, 2019. Avedro and Glaukos also plan to file other relevant documents
with the SEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS
ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY
CONTAIN IMPORTANT INFORMATION. Investors and security holders are able to obtain
free copies of the Registration Statement and the definitive proxy
statement/prospectus and other relevant documents filed or that will be filed by
Avedro or Glaukos with the SEC through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by Glaukos are
available free of charge within the Investor Relations section of Glaukos'
internet website at https://investors.glaukos.com or by contacting Glaukos
Investor Relations by email at investors@glaukos.com or by phone at
949-481-0510. Copies of the documents filed with the SEC by Avedro are available
free of charge within the Investor Relations section of Avedro's internet
website at https://investors.avedro.com or by contacting Avedro Investor
Relations by email at investors@avedro.com or by phone at 646-924-1769.
No Offer or Solicitation
This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities nor a solicitation of any vote or approval with
respect to the proposed transaction or otherwise. No offering of securities
shall be made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended, and otherwise in
accordance with applicable law.
Participants in the Solicitation
Each of Avedro and Glaukos and their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies from Avedro
stockholders in connection with the proposed transaction. Information about
Avedro's directors and executive officers is included in Avedro's Annual Report
on Form 10-K for the year ended December 31, 2018, which was filed with the SEC
on March 21, 2019, and is also included in Avedro's Form S-1 Registration
Statement filed with the SEC on January 18, 2019, as amended by Amendment No. 1
to Avedro's Form S-1 Registration Statement filed with the SEC on February 4,
2019. Information about Glaukos' directors and executive officers is included in
its definitive proxy statement for its 2019 annual meeting of stockholders,
which was filed with the SEC on April 17, 2019. Other information regarding the
participants in the solicitation of proxies in connection with the proposed
transaction and a description of their direct and indirect interests, by
security holdings or otherwise, was contained in the definitive proxy
statement/prospectus filed with the SEC on October 17, 2019. Investors may
obtain free copies of these documents from Avedro or Glaukos as indicated above.
Use of Forward-Looking Statements
This communication contains "forward-looking statements" within the meaning of
federal securities laws. Forward-looking statements may contain words such as
"believes", "anticipates", "estimates", "expects", "intends", "aims",
"potential", "will", "would", "could", "considered", "likely" and words and
terms of similar substance used in connection with any discussion of future
plans, actions or events identify forward-looking statements. All statements,
other than historical facts, including statements regarding the expected timing
of the closing of the proposed transaction and the expected benefits of the
proposed transaction, are forward-looking statements. These statements are based
on management's current expectations, assumptions, estimates and beliefs. While
Avedro and Glaukos believe these expectations, assumptions, estimates and
beliefs are reasonable, such forward-looking statements are only predictions,
and are subject to a number of risks and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: (i) failure
of Avedro to obtain stockholder approval as required for the proposed
transaction; (ii) failure to satisfy the conditions to the closing of the
proposed transaction; (iii) unexpected costs, liabilities or delays in
connection with or with respect to the proposed transaction; (iv) the effect of
the proposed transaction on the ability of Avedro or Glaukos to retain and hire
key personnel and maintain business relationships with customers, suppliers and
others with whom Avedro or Glaukos does business, or on Avedro's or Glaukos'
operating results, market price of common stock, and business generally;
(v) legal proceedings relating to the proposed transaction and the outcome of
any such legal proceeding; (vi) the inherent
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risks, costs and uncertainties associated with integrating the businesses
successfully and risks of not achieving all, or any of, the anticipated benefits
of the proposed transaction, or the risk that the anticipated benefits of the
proposed transaction may not be fully realized or take longer to realize than
expected; (vii) competitive pressures in the markets in which Avedro and Glaukos
operate; (viii) the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement; and (ix) other risks
to the consummation of the proposed transaction, including the risk that the
proposed transaction will not be consummated within the expected time period or
at all. Additional factors that may affect the future results of Avedro and
Glaukos are set forth in their respective filings with the SEC, including each
of Avedro's and Glaukos' most recently filed Annual Report on
Form 10-K, subsequent Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and other filings with the SEC, which are available on the SEC's
website at www.sec.gov. The risks and uncertainties described above and in
Avedro's most recent Quarterly Report on Form 10-Q and Glaukos' most recent
Quarterly Report on Form 10-Q are not exclusive and further information
concerning Avedro and Glaukos and their respective businesses, including factors
that potentially could materially affect their respective businesses, financial
condition or operating results, may emerge from time to time. Readers are urged
to consider these factors carefully in evaluating these forward-looking
statements, and not to place undue reliance on any forward-looking statements.
Readers should also carefully review the risk factors described in other
documents that Avedro and Glaukos file from time to time with the SEC. The
forward-looking statements in these materials speak only as of the date of these
materials. Except as required by law, Avedro and Glaukos assume no obligation to
update or revise these forward-looking statements for any reason, even if new
information becomes available in the future.
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