Item 8.01 Other Events.
As previously reported, a putative class action was filed on February 9, 2022 in
the Delaware Chancery Court (the "Court") by Rafal Aponowicz derivatively and on
behalf of all Aytu stockholders, challenging the grant in 2021 of certain stock
option awards to directors and officers (the "2021 Grants"). The stockholder
contended that those awards were in amounts exceeding the shares available under
the Company's 2015 equity incentive plan and that the directors therefore
breached their fiduciary duties and breached a purported contract between them
and stockholders. The Complaint sought rescission of the awards, unspecified
damages to stockholders as a result of the awards, and attorneys' fees. A second
such action was filed by Paul John M. Paguia on March 7, 2022; Mr. Paguia
asserted the same claims and seeks the same relief. The parties have agreed to
settle these matters, subject to approval by the Court.
On December 19, 2022, the Company entered into a Stipulation of Compromise and
Settlement (the "Stipulation") with respect to these actions. Pursuant to the
terms of the Stipulation, the Company has agreed, among other things, to (i)
cancel 25% of the aggregate 2021 Grants; (ii) add two new directors who meet the
NASDAQ independence standards within six months of the date of final Court
Approval (one of whom has already been appointed); (iii) designate a lead
independent director; (iv) adopt a new equity compensation plan and seek
approval of the plan at the Company's next annual meeting with a share reserve
not ever to exceed 15% of the Company's then outstanding shares; (v) not issue
further awards to the named defendants under the Company's prior incentive plan;
and (vi) limit aggregate non-employee director compensation to $175,000 through
2024. The Stipulation also provides for a release of claims related to the
allegations with no admission of wrongdoing. As part of the Stipulation, the
Company has agreed to pay an award of attorneys' fees and expenses to
plaintiffs' counsel up to $425,000. As required by the Court, a copy of the
Notice of Pendency of Settlement of Action (the "Notice") is included as Exhibit
99.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits Item
99.1 Notice of Pendency of Settlement of Action, approved in connection
with a scheduling order dated December 28, 2022.
104 Cover Page Interactive Data File (formatted as inline XBRL)
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