Eloxx Pharmaceuticals, Inc. appointed Sumit Aggarwal as new CEO

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.


Eloxx Board of Directors


Effective as of the effective time of the Merger on April 1, 2021, each of Martijn Kleijwegt, Silvia Noiman and Gregory C. Williams resigned from the Eloxx Board. The resignations were not the result of any disagreements with Eloxx relating to the Eloxx's operations, policies or practices.


Immediately following the effective time of the Merger on April 1, 2021, pursuant to the terms of the Merger Agreement, each of Sumit Aggarwal, Alan Walts and Rajesh Parekh were appointed to the Eloxx Board. Mr. Aggarwal, Dr. Walts and Dr. Parekh will each serve until the Company's 2021 annual meeting of stockholders, when they are expected to stand for re-election to the Eloxx Board by a vote of the Company's stockholders. Dr. Walts was also appointed as a member of the Audit Committee of the Eloxx Board.


Dr. Parekh and Dr. Walts will each be compensated in accordance with the Company's standard compensation policies and practices for its non-employee directors.


In addition, Dr. Walts was granted Closing RSUs as described above. The Closing RSUs will vest in full on December 1, 2021 (generally subject to Dr. Walts' continued service through such date). If Dr. Walts is terminated by the Company due to his death or his "Disability" (as defined in the Equity Plan) prior to December 1, 2021, the Closing RSUs will vest as of the date of such termination. The Closing RSUs will also vest in full on the date of a "Corporate Transaction" (as defined in the Equity Plan), subject to Dr. Walts' continuous service through the date of such Corporate Transaction.


Mr. Aggarwal served as President and Chief Executive Officer of Zikani since 2019. Mr. Aggarwal joined Zikani in 2018 as Chief Financial Officer and Chief Business Officer. Prior to joining Zikani, from 2015 to 2018, Mr. Aggarwal served as acting President and Chief Financial Officer of Progenity, Inc., a private genetic services company offering pre-natal genetic testing to OB/GYN. He has also held leadership roles in healthcare and biotechnology at Adage Capital and as an Associate Partner at McKinsey & Company in its healthcare practice.


Dr. Parekh is a General Partner at Advent Life Sciences LLP, which he joined in 2006. During an academic career at Oxford University, he co-founded Oxford GlycoSciences PLC, where he served as Chief Scientific Officer and Chief Executive Officer from 1988 until its sale to Celltech Group PLC (now UCB SA) in 2003.


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Dr. Walts is a US-based Venture Partner with Advent Life Sciences, a position he has held since January 2014. Dr. Walts serves as Executive Chairman and Director of PIC Therapeutics (since 2016) and Artax Biopharma (since 2017). Dr. Walts is also a founder, Director and Treasurer of The Termeer Foundation, a public 501(c)(3) organization founded in 2019. Dr. Walts has over 25 years of industry experience at Genzyme in business development, business strategy, research and development, general management, and venture capital. Prior to leaving Genzyme in 2013, Dr. Walts most recently managed Genzyme's corporate venture fund, Genzyme Ventures (now Sanofi Ventures).


Appointment of New President and Chief Executive Officer; Appointment of Head of Research and Development


Effective as of the effective time of the Merger on April 1, 2021, and pursuant to the Merger Agreement, (i) Sumit Aggarwal was appointed as the President and Chief Executive Officer of the Company, and in connection therewith, the Company and Mr. Aggarwal entered into an Employment Agreement effective as of April 1, 2021 (the "Aggarwal Employment Agreement"); and (ii) Vijay Modur, Ph.D. was appointed the Company's Head of Research and Development, and in connection therewith, the Company and Dr. Modur entered into an Employment Agreement effective as of April 1, 2021 (the "Modur Employment Agreement" and, together with the Aggarwal Employment Agreement, the "Employment Agreements").


Mr. Aggarwal and Dr. Modur each also executed a Confidentiality and Non-Competition Agreement, the obligations of which will survive the termination of the Employment Agreements.


Under the Employment Agreements, (i) Mr. Aggarwal will serve as the President and Chief Executive Officer of the Company and will be appointed as a member of the Eloxx Board and, so long as he continues to serve under the Aggarwal Employment Agreement, will continue to be nominated by the Eloxx Board (or a committee thereof) for re-election as a member of the Board at the expiration of the then-current term; and (ii) Dr. Modur will serve as the Company's Head of Research and Development.


Under the Employment Agreements, Mr. Aggarwal will receive an annual base salary of $530,000 and Dr. Modur will receive an annual base salary of $425,000. Each of Mr. Aggarwal and Dr. Modur will also be eligible for an annual bonus with a target value equal to 50% and 40% of base salary, respectively (as applicable, the "Target Bonus") and for an annual "stretch" bonus of an additional 50% and 25% of base salary, respectively, with such stretch bonus to be earned, if at all, based upon achievement of performance goals and/or such other factors as determined by the Board (or a committee thereof) in its discretion.


In addition, on April 1, 2021, each of Mr. Aggarwal and Dr. Modur was granted the following equity awards under the Equity Plan: (i) an award of stock options to purchase 1,423,238 shares and 711,619 shares of Eloxx Common Stock, respectively, vesting with respect to one-fourth of the shares of Eloxx Common Stock subject to such stock options on April 1, 2022, and vesting with respect to the remaining three-fourths of the shares of Eloxx Common Stock subject to such stock options in equal installments of one-twelfth on each quarterly anniversary of April 1, 2021 thereafter (generally subject to the applicable employee's continued employment with the Company on each such vesting date) (the "Closing Options"); and (ii) an award of restricted stock units in respect of 55,854 shares and 44,683 shares of Eloxx Common Stock, respectively, vesting in full on December 1, 2021 (generally subject to the applicable employee's continued employment through such date) (the "Additional RSUs" and, together with the Closing RSUs received by each of Mr. Aggarwal and Dr. Modur as described above, the "RSUs"). If there is an equity financing that results in proceeds for the Company of at least $20,000,000 and that results in dilution to the percentage of Eloxx Common Stock represented by the equity awards granted to Mr. Aggarwal and Dr. Modur, then within five days of such financing, the Company will grant additional stock options to Mr. Aggarwal and Dr. Modur, as applicable (on terms consistent with the Closing Options) such that, when combined with the Closing Options, Mr. Aggarwal's and Dr. Modur's stock options will represent the same percentage of the Eloxx Common Stock immediately following such financing as the Closing Options represented immediately prior to such financing (determined on a fully-diluted and as-converted basis).


The Employment Agreements can be terminated by the Company without "Cause" (but only following the 18-month anniversary of the effective time of the Merger), due to the applicable employee's death or "Disability" or by the applicable employee with or without "Good Reason" (in each case, as such terms are defined in the Employment Agreements).


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If Mr. Aggarwal's or Dr. Modur's employment with the Company is terminated due to their death or Disability, the applicable employee will be entitled to the following payments and benefits: (i) the "Accrued Amounts" (as defined in the Employment Agreements), (ii) any earned but unpaid bonus in respect of the most recently completed fiscal year of the Company (the "Prior Year Bonus"), a pro-rata bonus for the year of termination (which will be determined (prior to pro-ration) based on the Target Bonus if performance goals have not yet been established for the year of termination at the time of termination, or based on actual performance if performance goals have been established for the year of termination at the time of termination) (as applicable, the "Pro-Rata Bonus"), and (iii) if such termination occurs prior to December 1, 2021, the RSUs will vest in full as of the date of such termination.


If Mr. Aggarwal's or Dr. Modur's employment with the Company is terminated by the Company without Cause or by the applicable employee for Good Reason, the applicable employee will be entitled to the following payments and benefits: (i) the Accrued Amounts, (ii) the Prior Year Bonus, (iii) the Pro-Rata Bonus, (iv) 12 months' base salary, payable in a lump sum (the "Salary Severance"), (v) reimbursement for premiums for continued coverage pursuant to COBRA, or payment in lieu thereof, for a period of 12 months following termination (or until eligible for equivalent health insurance in connection with new employment or self-employment, or until no longer eligible for COBRA continuation coverage) (the "COBRA Benefit"), (vi) if such termination occurs prior to December 1, 2021, the RSUs will vest in full as of the date of such termination, (vii) if such termination occurs (A) prior to April 1, 2023, 50% of all other outstanding equity incentive awards with time-based vesting (including the Closing Options) will vest and an additional 50% of any equity incentive awards with performance-based vesting will vest based on target performance, in each case as of the date of such termination, or (B) on or after April 1, 2023, all other outstanding equity incentive awards with time-based vesting (including the Additional Options) will vest in full and any equity incentive awards with performance-based vesting will vest based on target performance, in each case, as of the date of such termination and (viii) any vested awards of stock options will remain exercisable for a period equal to the shorter of (A) one year following termination and (B) the remaining term of the award (unless the applicable award provides for more favorable treatment on termination).


If there is a "Corporate Transaction" (as defined in the Equity Plan) during Mr. Aggarwal's or Dr. Modur's employment pursuant to the Employment Agreements, all outstanding and unvested equity incentive awards held by the applicable employee as of such time will accelerate and become fully vested and exercisable or payable immediately prior to the closing of such Corporation Transaction.


If Mr. Aggarwal's or Dr. Modur's employment with the Company is terminated by the Company without Cause or by the applicable employee for Good Reason, in either case, within the 24-month period immediately following a Corporate Transaction, the applicable employee will be entitled to the same payments and benefits as set forth above in connection with a termination by the Company without Cause or by the applicable employee for Good Reason, except (i) the Salary Severance will be increased to a total of 18 months' base salary, (ii) in lieu of the Pro-Rata Bonus, the employee will be entitled to receive an amount equal to the Target Bonus and (iii) the COBRA Benefit will cover the 18-month period following termination.


Mr. Aggarwal's and Dr. Modur's entitlement to the foregoing severance payments and benefits is generally subject to their execution of a release of claims in favor of the Company and its affiliates following termination, and their continuing compliance with all confidentiality obligations and restrictive covenants to which they are subject.


The description of these benefits is qualified in its entirety by the Aggarwal Employment Agreement and the Modur Employment Agreement, which are filed as Exhibit 10.1 and Exhibit 10.2 hereto, respectively, and incorporated by reference herein.


Appointment of Interim Chief Financial Officer


Effective as of the effective time of the Merger on April 1, 2021, the Company appointed Daniel Geffken to serve as the Company's Interim Chief Financial Officer.


Mr. Geffken provides services through Danforth Advisors, LLC ("Danforth Advisors"), a consulting entity. It is contemplated that Danforth Advisors and the Company will enter into a new consulting agreement after the effective time of the Merger (the "Consulting Agreement") concerning services to be provided by Danforth Advisors for the benefit of the Company, including those services provided by Mr. Geffken. Mr. Geffken previously provided services as the Chief Financial Officer of Zikani through Danforth Advisors.


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Resignation of Chief Executive Officer


On April 1, 2021, the Company and Dr. Williams entered into a Separation Agreement and General Release (the "Separation Agreement") pursuant to which, among other things, the Company and Dr. Williams agreed that Dr. Williams would separate from service with the Company, resigning from his position as the Chief Executive Officer of the Company and all other offices of the Company, effective as of April 1, 2021.


Dr. Williams' separation from service with the Company was not considered a termination for "Cause" as that term is defined in his employment agreement with the Company, which was included as Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 6, 2020 (the "Williams Employment Agreement"). Dr. Williams' separation was not in connection with a disagreement between Dr. Williams and the Company on any matter relating to the Company's operations, policies or practices.


Pursuant to the terms of the Williams Employment Agreement, Dr. Williams is eligible to receive certain severance payments and benefits due to him upon a termination without "Cause" by the Company, as described in the Williams Employment Agreement, contingent upon his release of claims against the Company. In addition, since the Williams Employment Agreement is not terminable without "Cause" by the Company until August 25, 2021, the Separation Agreement provides that, in consideration of, among other things, Dr. Williams' entry into the Separation Agreement, Dr. Williams will receive certain compensation and continued equity vesting and option exercisability as though Dr. Williams had remained employed through August 25, 2021.


The description of these benefits is qualified in its entirety by the Separation Agreement, which is filed as Exhibit 10.3 hereto and incorporated by reference herein.