Verastem Inc

At the Annual Meeting, stockholders will be asked to approve the adoption of the Company’s Amended and Restated 2021 Equity Incentive Plan adopted by the Board of Directors, upon recommendation by the Compensation Committee, on March 22, 2024 (the “Amended and Restated 2021 Plan”), including to increase the number of shares available for issuance by 3,200,000 shares. The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was originally adopted by the Board of Directors in March 2021 and approved by our stockholders in May 2021, with an amendment and restatement thereof approved by the Compensation Committee in May 2023 to reflect the Company’s 12 for 1 reverse stock split effective on May 31, 2023 (the “May 2023 Amended and Restated 2021 Plan”). If stockholders do not approve the Amended and Restated 2021 Plan, it will not become effective and the May 2023 Amended and Restated 2021 Plan will remain in effect in accordance with its terms.

As discussed further below, stockholders are being asked to approve the adoption of the Amended and Restated 2021 Plan, primarily to enable us to increase the number of shares of our common stock available for issuance pursuant to awards under the plan by 3,200,000 shares. As of March 22, 2024, the date the Board of Directors approved the Amended and Restated 2021 Plan, there were 492,047 shares of our common stock available for issuance under the May 2023 Amended and Restated 2021 Plan. Stockholder approval of the Amended and Restated 2021 Plan would make available for issuance a total of: (i) 3,692,047 shares of our common stock as of March 22, 2024, plus (ii) the number of shares of our common stock underlying awards under our 2021 Plan (inclusive of the May 2023 Amended and Restated 2021 Plan) and the Amended and Restated 2012 Incentive Plan (the “2012 Plan”) that expire, terminate or are surrendered without delivery of shares, are forfeited to or repurchased by the Company, or otherwise become available again for grant under the terms of the applicable plan (in the case of clause (ii), up to 2,340,127 shares).

Equity grants are an essential element of the Company’s compensation program. Stockholder approval of the Amended and Restated 2021 Plan would allow us to continue to use equity incentives to attract and retain high quality and high performing directors, executives, and other employees. The Board of Directors approved the Amended and Restated 2021 Plan and the additional shares of our common stock authorized for issuance under it based upon its review and consideration of:

· the Company’s historic rates of equity award issuances;

· the dilutive impact to stockholders;

· the number of shares necessary for the Company to continue making awards at historical average annual rates for the next two to three years; and

· advice provided by Pearl Meyer, the independent consultant of the Compensation Committee of the Board of Directors.

The Board of Directors believes that equity awards have been, and will continue to be, a critical part of our total compensation program and allow us to attract and retain the key talent needed to effectively compete in our industry, incentivize superior results and long-term value creation, and align the interests of our employees with those of our stockholders. In addition, we believe that equity ownership fosters an ownership mindset by allowing employees to take part in the successes of the Company.

The Board of Directors believes that the Amended and Restated 2021 Plan will promote the interests of our stockholders and is consistent with principles of good corporate governance, including the following:

In setting the size of the share pool under the Amended and Restated 2021 Plan, the Board of Directors considered the historical amounts of equity awards granted by the Company in the last three calendar years. As of March 22, 2024, there were 492,047 shares of our common stock available for grant under the May 2023 Amended and Restated 2021 Plan. In calendar years 2023, 2022 and 2021, we made grants of equity awards under the May 2023 Amended and Restated 2021 Plan, the 2021 Plan and the 2012 Plan totaling 1,108,333 shares, 85,735 shares, and 530,473 shares, respectively, of our common stock. We typically grant annual equity awards to our executive officers and employees in the fourth quarter of each calendar year. In the fourth quarter of 2022, we were in possession of interim data from our ongoing Phase 2 RAMP 201 trial and, as a result, we delayed making equity grants to our executives until the first quarter of 2023, once the interim data was publicly released. As a result, there was a significant increase in the aggregate equity awards issued in 2023 as compared to 2022.

The weighted average number of shares of our common stock outstanding in calendar years 2023, 2022 and 2021 was 22,054,073, 16,137,897 and 14,534,727, respectively. As a result, under the May 2023 Amended and Restated 2021 Plan, the 2021 Plan and 2012 Plan, our three-year average burn rate is 3.3%. In setting the size of the share pool under the Amended and Restated 2021 Plan, the Board also considered the total amount of equity awards outstanding under existing grants as of March 22, 2024, as further shown in the chart below. Based on an analysis by Pearl Meyer of the remaining shares available for grant under the May 2023 Amended and Restated 2021 Plan, the number of equity awards outstanding under our equity incentive plans, our historical burn rate, the features of the Amended and Restated 2021 Plan and the equity plan guidelines established by proxy advisory firms, the Board approved the Amended and Restated 2021 Plan and the share pool authorized under it to ensure that we continue to have the ability to provide industry competitive long-term incentive compensation to our key contributors. Based on these same factors, we estimate that the share pool under the Amended and Restated 2021 Plan will enable us to continue to make grants of equity awards at our historical average annual rates for approximately the next two to three years.