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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 Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
Preliminary Proxy Statement | ||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
Definitive Proxy Statement | ||
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
IRONWOOD PHARMACEUTICALS, INC. | ||||
(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): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | 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) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: |
100 Summer Street, Suite 2300
Boston, Massachusetts 02110
301 Binney StreetCambridge, Massachusetts 02142
PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION
NOTICE OF 20192021 ANNUAL MEETING OF STOCKHOLDERS OF
IRONWOOD PHARMACEUTICALS, INC.
Date: | ||||
Time: | 9:00 a.m. Eastern Time | |||
Location: | Our 2021 annual meeting of stockholders will be a "virtual meeting." You will be able to attend the annual meeting, vote and submit questions via live webcast by visiting www.virtualshareholdermeeting.com/IRWD2021. | |||
Purpose: | We are holding the annual meeting for stockholders to consider | |||
1. | To elect our Class | |||
2. | To hold an advisory vote on named executive officer compensation; and | |||
3. | ||||
To ratify our audit committee's selection of Ernst & Young LLP as our auditors for | ||||
2021. |
We will also consider action on any other matter that may be properly brought before the meeting or any postponement(s) or adjournment(s) thereof.
Our board of directors recommends you vote "for" each of the nominees for Class IIII and Class II director (proposal no. 1), "for" on anthe advisory vote on named executive officer compensation (proposal no. 2), "for" the proposed amendment to our certificate of incorporation (proposal no. 3), "for" our 2019 Equity Incentive Plan (proposal no. 4), and "for" ratification of our selection of auditors (proposal no. 5)3). Only stockholders of record at the close of business on April 9, 201912, 2021 are entitled to notice of and to vote at the meeting.
YouWe are cordially invitedpleased to attendtake advantage of the Securities and Exchange Commission, or SEC, rules that allow us to furnish proxy materials to our stockholders on the internet. We believe these rules allow us to provide you with the information that you need while lowering the costs of delivery and reducing the environmental impact of the annual meeting.
The safety of our stockholders is important to us and given the current guidance by public health officials and protocols that federal, state and local health authorities have imposed surrounding the coronavirus (COVID-19) pandemic, at the time of this filing we believe it is not advisable to hold our annual meeting in person. Our virtual stockholder format uses technology designed to provide our stockholders rights and opportunities to participate in the virtual meeting similar to an in-person meeting. You may attend the meeting, vote and submit questions electronically during the meeting via live webcast by visiting the website provided above. A list of stockholders of record will be available electronically during the meeting. The website can be accessed on a computer, tablet, or phone with internet connection. To ensurebe admitted to the meeting at www.virtualshareholdermeeting.com/IRWD2021, you must enter the 16-digit control number found on your proxy card, voting instruction form or notice that your vote is counted at the annual meeting, however, please vote as promptly as possible.you received.
Proxy Material Mailing Date: April 22, 2021 | Sincerely, Thomas McCourt President and Interim Chief Executive Officer |
Letter From Our President and Interim CEO
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About Ironwood | 3 | |||
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Our Board of Directors | 5 | |||
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Proposal No. 1 Election of Directors | 27 | |||
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Our Executives | 28 | |||
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Executive Compensation | 31 | |||
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Our Stockholders | 68 | |||
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Certain Relationships and Related Person Transactions | 71 | |||
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Proposal No. | ||||
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User's Guide | ||||
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2021 Proxy Statement i
Dear Ironwood stockholders,
Our team showed passion and commitment in 2020 as we continued to execute towards our mission, despite the challenges brought on by the COVID-19 pandemic. Ironwood's business fundamentals and financials are strong and we believe the strength of LINZESS® (linaclotide), combined with continued profit and cash generation in 2020, provide a solid foundation for our future.
We have a significant opportunity to execute on our vision to become the leading U.S. gastrointestinal, or GI, healthcare company, advancing treatments for GI diseases and redefining the standard of care for GI patients. Our strategy to get there is grounded on three priorities: maximizing LINZESS, building an innovative GI pipeline, and delivering sustained profits and generating cash flow.
We are Executing Our GI-Focused Strategy
LINZESS showed remarkable resilience in 2020, delivering $931 million in 2020 U.S. net sales—an increase of 10% year-over-year—further strengthening its position as the number one prescribed medicine in the U.S. for the treatment of adults with irritable bowel syndrome with constipation, or IBS-C, or chronic idiopathic constipation, or CIC. We believe there is substantial opportunity for continued growth and are working closely with our partner, AbbVie Inc., or AbbVie, to advance innovative commercial strategies and enhance linaclotide's clinical utility through lifecycle management.
We are also seeking to build an innovative development portfolio by advancing our own IW-3300 for the potential treatment of visceral pain conditions and by pursuing assets that target serious, organic GI diseases. We had some disappointing outcomes from our GI development pipeline last year, and while these types of outcomes are not uncommon in drug development, they are never easy when there are so many patients in need of new therapies. However, with continued scientific progress and our unique expertise and capabilities within GI, we remain committed in our pursuit of innovative treatments for GI diseases.
And lastly, we are continuing our disciplined approach to capital allocation to support our goal of delivering sustainable profits and cash flow. We achieved our second full year of profits in 2020, recording $106 million in net income. Importantly, we ended 2020 with $363 million in cash and cash equivalents—more than doubling our cash position from the end of 2019.
We are Committed to Fostering an Inclusive and Diverse Culture
We believe that creating an equitable, inclusive and diverse culture is critical to attracting, motivating, and retaining the talent necessary to deliver on our mission. In 2020, we adopted a long-term equality, diversity and inclusion strategy, introduced new learning and development opportunities, strengthened our talent acquisition strategies, and made contributions to organizations that advance racial equality and social justice in our communities.
2021 Proxy Statement 1
We are Focused on Driving Stockholder Value
We remain focused on driving value for our stockholders by bringing important medicines to patients and building a growing and successful business. This is central to successfully executing against our strategic priorities and a critical threshold as we continue to invest thoughtfully into our business. Thank you for supporting Ironwood and our path forward. I am confident that with continued focus and execution, Ironwood is well positioned to deliver benefits for patients and value for stockholders.
Sincerely,
301 Binney StreetThomas McCourtCambridge, Massachusetts 02142President and Interim Chief Executive Officer
2 Ironwood
PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION
We aspire to bring innovative treatments for GI diseases to patients in need.
We are a GI healthcare company on a mission to advance the treatment of GI diseases and redefine the standard of care for GI patients. Leveraging our demonstrated expertise and capabilities in GI diseases, we are focused on the development and commercialization of innovative GI product opportunities in areas of significant unmet need.
LINZESS® (linaclotide), our commercial product, is the first product approved by the United States Food and Drug Administration, or U.S. FDA, in a class of GI medicines called guanylate cyclase type C agonists and is indicated for adult men and women suffering from IBS-C or CIC. LINZESS is the prescription market leader in the IBS-C and CIC category in the U.S. Outside of the U.S., LINZESS is available to adults suffering from IBS-C or CIC in Mexico and Japan and to adults suffering from IBS-C in China (including Hong Kong and Macau). Linaclotide is also available under the trademarked name CONSTELLA® to adults suffering from IBS-C or CIC in Canada, and to adults suffering from IBS-C in certain European countries.
We recognize the value of collaboration and have a track record of establishing, operating and evolving high-performance partnerships globally. We have strategic partnerships with leading pharmaceutical companies to support the development and commercialization of linaclotide around the world. We also aim to leverage our leading capabilities in GI to bring additional treatment options to GI patients in the U.S.
We believe our history of innovation in GI medicine, deep expertise in developing and commercializing innovative GI therapies, established relationships within the GI community, as well as our leadership's experience building blockbuster brands, positions us well to advance GI care and bring treatments that can deliver great impact for patients, our business and our stockholders.
Our strategy in 2020 was focused on three core priorities: drive LINZESS growth, advance our GI development portfolio and deliver sustainable profits. Our performance against our 2020 core priorities was as follows:
PROXY STATEMENT FOR2021 Proxy Statement 3
OurWe demonstrated strong progress across our corporate goals in 2020. As a result, our 2020 company performance achievement multiplier, which we used as a key consideration in determining executive compensation for 2020 performance, was 101%, as determined by our board of directors is soliciting proxies fordirectors. Please see the 2019 annual meeting of stockholders. ThisCompensation Discussion and Analysis section included elsewhere in this proxy statement explains the agenda, votingfor detailed information and procedures for the meeting. Please read it carefully. This proxy statement and accompanying proxy card are first being mailedon compensation to the stockholders on or about [ ]. All stockholders will also have the ability to access the proxy materials online through the Investors section of our website atwww.ironwoodpharma.com, under the heading Featured Reports.2020 named executive officers.
In this proxy statement, references to "the company" or "Ironwood" and, except within the Audit Committee Report and the Compensation Committee Report, references to "we", "us" or "our" mean Ironwood Pharmaceuticals, Inc. LINZESS® is a trademarkand CONSTELLA® are trademarks of Ironwood Pharmaceuticals, Inc. ZURAMPIC® and DUZALLO® are trademarks of AstraZeneca AB. Any other trademarks referred to in this proxy statement are the property of their respective owners. All rights reserved.
The contents of our website are not incorporated into this document and you should not consider information provided on our website to be part of this document.
Who can vote.4 Ironwood
Quorum. In order to hold and complete the business of the annual meeting, we must have a majority of the votes entitled to be cast represented in person or by proxy at the meeting. On our record date, April 9, 2019, we had 155,633,473 shares of our common stock outstanding and entitled to vote. With respect to all matters that will come before the meeting, each share is entitled to one vote.
Voting procedures—stockholders of record and beneficial owners. You are a stockholder of record if your shares of our stock are registered directly in your own name with our transfer agent, Computershare Trust Company, N.A., or Computershare. You are a beneficial owner if a brokerage firm, bank, trustee or other agent, called a "nominee", holds your stock. This is often called ownership in "street name" because your name does not appear in the records of Computershare. If you hold your shares in street name, you should receive a voting instruction form from your broker nominee.
How to vote your shares.
If you are a stockholder of record, there are four ways to vote:
If you are a beneficial owner of shares held in street name, there are four ways to provide voting instructions:
How you may revoke your proxy or voting instructions. If you are a stockholder of record, you may revoke or amend your proxy before it is voted at the annual meeting by writing to us directly in a timely manner "revoking" your earlier proxy, submitting a new proxy in a timely manner with a later date by mail, over the telephone or on the internet, or by attending the meeting and voting in person. Your last dated proxy timely received prior to or vote cast at the annual meeting will be counted.
What if you receive more than one proxy card or voting instruction form? This means that you may have more than one account at Computershare and/or with a nominee. Your proxy card or voting instruction form lists the number of shares you are voting. Please vote all proxy cards and voting instruction forms that you receive.
We recommend you consolidate your holdings under the same name, address and tax identification number, if possible. This will eliminate some duplication of mailings and reduce costs. Please contact your nominee to consolidate accounts, or our transfer agent, Computershare, at (800) 662-7232, as applicable.
Abstentions and "broker non-votes." If you are a stockholder of record and you vote "abstain" or "withhold" on any matter, your shares will not be voted on that matter and will not be counted as votes cast in the final tally of votes on that matter. However, your shares will be counted for purposes of determining whether a quorum is present. If you are a beneficial owner holding shares through a broker nominee, you may instruct your broker nominee that you wish to abstain from voting on a proposal or withhold authority to vote for one or more nominees for director.
A broker nominee generally may not vote on "non-routine" matters without receiving your specific voting instructions. A "broker non-vote" occurs when a broker nominee holding shares in street name votes shares on some matters at the meeting but not others. Like abstentions, broker non-votes are
counted as present and entitled to vote for quorum purposes, but are not counted as votes cast. At the annual meeting, your broker nominee will not be able to submit a vote on the election of directors, the advisory votes on named executive officer compensation, the amendment to our certificate of incorporation or the approval of our 2019 Equity Incentive Plan unless it receives your specific instructions. If your broker nominee does not receive your specific instructions for these proposals, it will submit a broker non-vote. The broker nominee will, however, be able to vote on the ratification of the selection of our independent auditors even if it does not receive your instructions, so we do not expect any broker non-votes will exist in connection with such proposal.
Discretionary authority. If you are a stockholder of record and you properly submit your proxy card without making any specific selections, your shares will be voted on each matter before the annual meeting in the manner recommended by our board. If other matters not included in this proxy statement properly come before the annual meeting, the persons named on the proxy card, or otherwise designated, will have the authority to vote on those matters for you as they determine, to the extent permitted by Rule 14a-4(c)(1) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. If you are a beneficial owner of shares held in street name, please see the discussion above regarding broker non-votes and the rules related to voting by broker nominees.
Vote required. The required vote for each of the proposals expected to be acted upon at the annual meeting is described below.
Results of the voting. We expect to announce the preliminary voting results at the annual meeting. The final voting results will be tallied by the inspector of election and published in a Current Report on Form 8-K, which we are required to file with the Securities and Exchange Commission, or the SEC, within four business days following the annual meeting.
Costs of solicitation and solicitation participants. We will pay the costs of soliciting proxies. We will solicit proxies by email from stockholders who are our employees or who previously requested to receive proxy materials electronically. Our directors, our officers and our employees also may solicit proxies on our behalf, personally, electronically or by telephone, facsimile or mail or other means, without additional compensation. We may request that brokerage firms, banks and other agents forward proxy materials to beneficial owners and we would reimburse such institutions for their out-of-pocket expenses incurred.
We may also utilize the assistance of third parties in connection with our proxy solicitation efforts, and we would compensate such third parties for their efforts. We have engaged one such third party, MacKenzie Partners, to assist in the solicitation of proxies and provide related advice and informational support, for service fees of up to $20,000 and the reimbursement of certain expenses.
The following table sets forth certain information with respect to the beneficial ownership
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
The percentage of common stock beneficially owned by each person is based on 155,633,473 shares of common stock outstanding on April 2, 2019. Shares of common stock that may be acquired within 60 days following April 2, 2019 pursuant to the exercise of options or the vesting of restricted stock units, or RSUs, are included in the holdings of each stockholder, as applicable, and are deemed to be outstanding for the purpose of computing the percentage ownership of such holder. Such amounts, however, are not included in the holdings of any other stockholder in the table and are not deemed to be outstanding for computing the percentage ownership of any other holder shown in the table. Beneficial ownership representing less than one percent is denoted with an "*."
Unless otherwise indicated, the address for each of the stockholders in the table below is c/o Ironwood Pharmaceuticals, Inc., 301 Binney Street, Cambridge, Massachusetts 02142.
Name of Beneficial Owner | Number of Shares of our Common Stock(1) | Percentage | |||||
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Officers and Directors(2) | |||||||
Peter M. Hecht(3) | 5,430,772 | 3.4 | % | ||||
Gina Consylman(4) | 166,857 | * | |||||
Mark G. Currie(5) | 1,426,698 | * | |||||
Thomas A. McCourt(6) | 1,111,492 | * | |||||
William Huyett(7) | 149,185 | * | |||||
Andrew Dreyfus | 58,107 | * | |||||
Jon Duane | 2,995 | * | |||||
Marla Kessler | 2,995 | * | |||||
Mark Mallon | 0 | * | |||||
Julie H. McHugh | 88,131 | * | |||||
Catherine Moukheibir | 2,995 | * | |||||
Lawrence S. Olanoff | 37,553 | * | |||||
Edward P. Owens | 199,528 | * | |||||
All executive officers and directors as a group (14 persons)(8) | 9,294,741 | 5.9 | % | ||||
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5% Security Holders | |||||||
Wellington Management Group LLP(9) | 19,600,069 | 12.6 | % | ||||
FMR LLC (Fidelity)(10) | 14,872,366 | 9.6 | % | ||||
The Vanguard Group(11) | 13,360,554 | 8.6 | % | ||||
BlackRock, Inc.(12) | 12,317,565 | 7.9 | % | ||||
Brown Capital Management, LLC(13) | 10,129,331 | 6.5 | % | ||||
UBS Group AG(14) | 8,591,679 | 5.5 | % |
Schedule 13G, Brown Capital has sole voting power with respect to 6,449,894 of these shares, sole dispositive power with respect to all of these shares, and shared voting power and shared dispositive power with respect to none of these shares. The address of Brown Capital is 1201 N. Calvert Street, Baltimore, MD 21202.
Who We Are |
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Since January 1, 2018, except as described below, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which, with respect to our directors and named executive officers are described under the captionsDirectors and Corporate Governance—How We Are Paid andExecutive Compensation appearing elsewhere in this proxy statement.
Indemnification Agreements
We have entered into indemnification agreements with each of our current directors and certain of our officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We intend to enter into indemnification agreements with our future directors and executive officers.
The Separation
On April 1, 2019, we completed the previously-announced separation of our soluble guanylate cyclase, or sGC, stimulators business and certain other assets and liabilities into an independent, publicly traded company, or the Separation. This Separation was effected by means of a distribution of all of the outstanding shares of common stock of Cyclerion Therapeutics, Inc., or Cyclerion, through a dividend in-kind of Cyclerion's common stock, with no par value, to our stockholders of record as of the close of business on March 19, 2019. In connection with the separation, we and Cyclerion have entered into certain agreements that effect the separation of Cyclerion's business from us and govern our relationship with Cyclerion after the Separation. The following is a summary of the terms of the material agreements that we have entered into with Cyclerion in connection with the Separation.
Separation Agreement
In connection with the Separation, Ironwood entered into a separation agreement with Cyclerion, dated as of March 30, 2019, that, among other things, set forth our agreements with Cyclerion regarding the principal actions to be taken in connection with the Separation, including the distribution. The separation agreement identified assets to be transferred, liabilities to be assumed and contracts to be assigned to each of Ironwood and Cyclerion as part of the Separation, and it provided for when and how these transfers, assumptions and assignments would occur. The separation agreement was intended to provide for those transfers of assets and assumptions of liabilities that were necessary so that after the Separation, Ironwood and Cyclerion would have the assets necessary to operate their respective businesses and retain or assume the liabilities related to those assets. Each of Ironwood and Cyclerion agreed to releases, with respect to pre-distribution claims, and cross indemnities, with respect to post-distribution claims, that, except as otherwise provided in the separation agreement, were principally designed to place financial responsibility for the obligations and liabilities allocated to Ironwood under the separation agreement with Ironwood and financial responsibility for the obligations and liabilities allocated to Cyclerion under the separation agreement with Cyclerion.
Ironwood and Cyclerion are also each subject to two-year non-solicit and non-hire restrictions. In addition, the parties agreed to certain non-competition restrictions, including Ironwood's agreement not to engage, for three years following the Separation, in the business of discovering, researching, developing, importing, exporting, manufacturing, marketing, distributing, promoting or selling any pharmaceutical product (a) for the diagnosis, prevention or treatment of diabetic nephropathy, heart
failure with preserved ejection fraction or sickle cell disease or (b) that contains one or more sGC stimulators.
Development Agreement
We entered into a development agreement with Cyclerion pursuant to which it provides us with certain research and development services with respect to certain of our products and product candidates, including without limitation MD-7246 (linaclotide delayed release) and IW-3718. Such research and development activities are governed by a joint steering committee comprised of representatives from both Cyclerion and Ironwood. We pay Cyclerion fees for such research and development services as mutually agreed upon by us and Cyclerion as provided under this development agreement with certain allowances for specified overages.
Transition Services Agreements
Ironwood Transition Services. Prior to the Separation, we provided Cyclerion with significant corporate and shared services and resources related to corporate functions such as finance, human resources, internal audit, research and development, financial reporting and information technology, which we refer to collectively as the "Ironwood Services." Pursuant to this agreement, each of the Ironwood Services will continue for an initial term of up to two years (as applicable), unless earlier terminated or extended according to the terms of the transition services agreement. Cyclerion pays us fees for the Ironwood Services as mutually agreed upon by us and Cyclerion as provided under this transition services agreement, which fees are based on our cost of providing the Ironwood Services.
Cyclerion Transition Services. We also entered into a second transition services agreement whereby Cyclerion provides certain finance, procurement and facilities services to us, which we refer to herein collectively as the "Cyclerion Services." Pursuant to this agreement, each of the Cyclerion Services will continue for an initial term of up to one year, unless earlier terminated or extended according to the terms of such transition services agreement. We pay Cyclerion fees for the Cyclerion Services, as mutually agreed upon by us and Cyclerion as provided under this transition services agreement, which fees are based on Cyclerion's cost of providing the Cyclerion Services.
Intellectual Property License Agreement
We entered into an intellectual property license agreement with Cyclerion pursuant to which each party granted a license to certain know-how. We granted Cyclerion a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license to certain know-how to allow Cyclerion to use such know-how in connection with Cyclerion's ongoing and future research and development activities related to sGC stimulator products in any field. Cyclerion granted us a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license to certain know-how for use outside of the research and development of sGC stimulator products, including in our existing products and product candidates. Such licenses between the parties generally allow current or future uses of the know-how in connection with each party's respective fields.
Tax Matters Agreement
Allocation of taxes. We entered into a tax matters agreement with Cyclerion that governs Ironwood's and Cyclerion's respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the distribution of Cyclerion common stock to Ironwood stockholders and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters.
Preservation of the tax-free status of certain aspects of the Separation. The tax matters agreement imposed certain restrictions on Cyclerion and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the distribution and certain related transactions. The tax matters agreement also provided special rules that allocate tax liabilities in the event the distribution, together with certain related transactions, is not tax-free. In general, under the tax matters agreement, each party is expected to be responsible for any taxes imposed on Ironwood or Cyclerion that arise from the failure of the distribution, together with certain related transactions, to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Code, to the extent that the failure to so qualify is attributable to an acquisition of stock or assets of, or certain actions, omissions or failures to act of, such party. If both Cyclerion and Ironwood are responsible for such failure, liability will be shared according to relative fault. U.S. tax otherwise resulting from the failure of the distribution, together with certain related transactions, to qualify as a transaction that is tax-free generally is the responsibility of Ironwood.
Employee Matters Agreement
We entered into an employee matters agreement with Cyclerion, which allocated assets, liabilities and responsibilities relating to the employment, compensation, and employee benefits of Ironwood and Cyclerion employees, and other related matters in connection with the Separation, including the treatment of outstanding incentive equity awards and certain retirement and welfare benefit obligations. The employee matters agreement generally provided that, unless otherwise specified, Cyclerion is responsible for liabilities associated with employees who transferred to Cyclerion and employees whose employment terminated prior to the Separation but who primarily supported the Cyclerion business, whether incurred prior to or after the Separation, and Ironwood is responsible for liabilities associated with other employees, including employees retained by Ironwood.
The Private Placement
On February 25, 2019, Cyclerion, which was Ironwood's wholly owned subsidiary at the time, and various investors entered into an amended and restated common stock purchase agreement pursuant to which these investors agreed to make an aggregate cash investment in Cyclerion. These investors included the following, each of whom was either an Ironwood director, an Ironwood executive officer, an immediate family member of an Ironwood director or executive officer, an entity related to such a director, executive officer or immediate family member, or beneficially owned at least 5% of Ironwood's common stock: accounts managed by direct or indirect subsidiaries of FMR LLC, a donor advised fund created by Peter M. Hecht, Ph.D., our former chief executive officer, Mark Currie, our former senior vice president, chief scientific officer and president of research and development and current member of our board of directors, and certain members of Dr. Hecht's immediate family, including through a trust or donor advised fund. Pursuant to this agreement, accounts managed by direct or indirect subsidiaries of FMR LLC agreed to invest up to $17,500,004, the donor advised fund created by Dr. Hecht agreed to invest up to $34,000,000, Dr. Currie agreed to invest up to $4,000,000 and Dr. Hecht's immediate family agreed to invest up to $6,800,000 in the aggregate. This investment closed on April 2, 2019.
Procedures for Related Party Transactions
Under our code of business conduct and ethics, our employees, officers and directors are discouraged from entering into any transaction that may create or give the appearance of a conflict of interest. In addition, they must report any potential conflict of interest, including related party transactions, to certain members of our management or the chair of our audit committee. Pursuant to its charter, our audit committee must approve any related party transactions, including those
transactions involving our directors. In approving or rejecting a proposed transaction, the audit committee considers the relevant facts and circumstances available to and deemed relevant by the audit committee, including the material terms of the transaction, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director's independence. Our audit committee will approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our audit committee determines in the good faith exercise of its discretion. A copy of our code of business conduct and ethics and our audit committee charter are available through the Investors section of our website atwww.ironwoodpharma.com, under the heading Corporate Governance.
DIRECTORS AND CORPORATE GOVERNANCE
Who We Are
The following table sets forth certain information, as of [ ], 2019,April 22, 2021, with respect to each of our directors:
Name | Age | Class | Year term expires | Audit committee | Governance and Nominating committee | Compensation and HR committee | ||||||||
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Andrew Dreyfus(1) | 60 | III | 2019 | C | ||||||||||
Julie H. McHugh, Chair(1) | 54 | III | 2019 | ü | ü | |||||||||
Edward P. Owens | 72 | III | 2019 | ü | ||||||||||
Mark G. Currie, Ph.D. | 64 | I | 2020 | |||||||||||
Jon Duane | 60 | I | 2020 | ü | ü | |||||||||
Mark Mallon, Chief Executive Officer | 56 | I | 2020 | |||||||||||
Marla Kessler | 49 | II | 2021 | ü | ||||||||||
Catherine Moukheibir | 59 | II | 2021 | C | ||||||||||
Lawrence S. Olanoff, M.D., Ph.D. | 67 | II | 2021 | C |
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Name | Age | Class | Year Term Expires | Audit Committee | Governance and Nominating Committee | Compensation and HR Committee | ||||||
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Mark G. Currie, Ph.D. | 66 | I | 2021 | | | | ||||||
Alexander J. Denner, Ph.D. | 51 | I | 2021 | ✓ | ||||||||
Jon R. Duane | 62 | I | 2021 | | ✓ | ✓ | ||||||
Marla L. Kessler | 51 | II | 2021 | ✓ | ||||||||
Catherine Moukheibir | 61 | II | 2021 | C | | | ||||||
Lawrence S. Olanoff, M.D., Ph.D. | 69 | II | 2021 | C | ||||||||
Jay P. Shepard | 63 | II | 2021 | ✓ | | | ||||||
Andrew Dreyfus | 62 | III | 2022 | C | ||||||||
Julie H. McHugh, Chair | 56 | III | 2022 | ✓ | ✓ | | ||||||
Edward P. Owens | 74 | III | 2022 | ✓ | ||||||||
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"C" indicates chair of the committee.
Class III Directors (accepted nomination for election at the 2019 annual meeting)2021 Proxy Statement 5
Andrew Dreyfus, 60, IndependentDirector since 2016Compensation and HR Committee, Chair
Mr. Dreyfus has served as president and chief executive officer for Blue Cross Blue Shield of Massachusetts, or BCBSMA, one of the largest independent, not-for-profit Blue Cross Blue Shield plans in the country, since September 2010. From July 2005 to September 2010, Mr. Dreyfus served as the executive vice president of health care services of BCBSMA. Prior to joining BCBSMA, he served as the first president of the Blue Cross Blue Shield of Massachusetts Foundation. Mr. Dreyfus also previously served as executive vice president of the Massachusetts Hospital Association and held a number of senior positions in Massachusetts state government, including undersecretary of consumer affairs and business regulation.
Mr. Dreyfus is chair of the board of the National Institute for Health Care Management and serves on the board of directors of BCBSMA, the Blue Cross Blue Shield Association, Jobs for Massachusetts, Boys & Girls Club of Boston, RIZE Massachusetts and NACD New England Chapter, and the advisory board of Ariadne Labs. Mr. Dreyfus received a B.A. in English from Connecticut
College. Mr. Dreyfus brings to our board of directors significant expertise in the healthcare payer and reimbursement market, and broad management and executive leadership experience, providing valuable insight as we continue to develop and commercialize medicines in an evolving healthcare landscape.
Julie H. McHugh, 54, Chair, IndependentDirector since 2014Audit Committee memberGovernance and Nominating Committee member
Ms. McHugh most recently served as chief operating officer for Endo Health Solutions, Inc., from March 2010 through May 2013, where she was responsible for the specialty pharmaceutical and generic drug businesses. Prior to joining Endo, Ms. McHugh was the chief executive officer of Nora Therapeutics, Inc., a venture capital backed biotech start-up company focused on developing novel therapies for the treatment of infertility disorders. Before that she served as company group chairman for Johnson & Johnson's (J&J) worldwide virology business unit, and previously she was president of Centocor, Inc., a J&J subsidiary. While at J&J, Ms. McHugh oversaw the development and launches of several products, including Remicade® (infliximab), Prezista® (darunavir) and Intelence® (etravirine), and she was responsible for oversight of a research and development portfolio including compounds for HIV, hepatitis C, and tuberculosis. Prior to joining Centocor, Ms. McHugh led the marketing communications for gastrointestinal drug Prilosec® (omeprazole) at Astra-Merck Inc.
She currently serves on the board of visitors for the Smeal College of Business of the Pennsylvania State University as well as on the board of directors of Aerie Pharmaceuticals, Inc., Lantheus Holdings, Inc. and Trevena, Inc., all publicly held companies, and The New Xellia Group, a privately held company. She previously served on the board of directors for ViroPharma Inc., Epirus Biopharmaceuticals, Inc., the Biotechnology Industry Organization (BIO), the Pennsylvania Biotechnology Association and the New England Healthcare Institute (NEHI).
Ms. McHugh received her masters of business administration degree from St. Joseph's University and her Bachelor of Science degree from Pennsylvania State University. Ms. McHugh's experience as a chief executive officer and a chief operating officer at large multinational pharmaceutical companies make her a valuable member of our board of directors, particularly as we evolve as a company and seek to maximize our current products and execute on our corporate strategy and associated pipeline.
Edward P. Owens, 72, IndependentDirector since 2013Audit Committee member
Mr. Owens was previously partner, portfolio manager and global industry analyst with Wellington Management Company, LLP where he worked in investment management since 1974. He was the portfolio manager of the Vanguard Health Care Fund for 28 years from its inception in May 1984 until his retirement from Wellington in December 2012.
Mr. Owens serves on the board of directors of Stealth BioTherapeutics Corp. He has a B.S. in physics from the University of Virginia and an M.B.A. from Harvard Business School. He brings to our board extensive experience in evaluating and investing in life sciences companies, providing valuable insight as we continue to strive towards our goal of maximizing long-term stockholder value.
Class I Directors (term expires(nominated for election at the 20202021 annual meeting)
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MARK G. CURRIE, Ph.D. Former President and Chief Age: 66 Director since 2019 | • Dr. Currie has served as a senior advisor to Cyclerion Therapeutics, Inc., or Cyclerion, a clinical-stage biopharmaceutical company, since January 2021. Dr. Currie previously served as Cyclerion's president and chief scientific officer from April 2019 to December 2020, and, prior to that, served as senior vice president, chief scientific officer and president of research and development at Ironwood from 2002 to April 2019. • Prior to joining Ironwood, Dr. Currie directed cardiovascular and central nervous system disease research as vice president of discovery research at Sepracor, Inc. and initiated, built and led discovery pharmacology and also served as director of arthritis and inflammation at Monsanto Company. • Dr. Currie currently serves on the board of directors of Science Exchange LLC. • Dr. Currie earned a B.S. in biology from the University of South Alabama and holds a Ph.D. in cell biology from the Bowman Gray School of Medicine of Wake Forest University. • We believe that Dr. Currie's vast experience leading the research and development efforts of an international biotechnology company will prove instrumental in guiding us through the research and development of novel therapies. |
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ALEXANDER J. DENNER, Ph.D. Founding Partner and Chief Age: 51 Director since 2020 Board Committees • Governance and Nominating Committee | • Dr. Denner is a founding partner and the chief investment officer of Sarissa Capital Management LP, or Sarissa, a registered investment advisor, where he has been since 2011. • Prior to joining Sarissa, Dr. Denner served as a senior managing director at Icahn Capital L.P, an investment advisory firm, from 2006 to 2011. Prior to that, he served as a portfolio manager at Viking Global Investors, a private investment fund, and Morgan Stanley Investment Management, a global asset management firm. • Dr. Denner serves on the board of directors of Biogen Inc. In the last five years, Dr. Denner has served as chair of the board of directors of Ariad Pharmaceuticals, Inc. and The Medicines Company, as well as a member of the board of directors of Bioverativ Inc. • Dr. Denner earned his B.S. in mechanical engineering from Massachusetts Institute of Technology, an M.S. and M.Phil in mechanical engineering from Yale University and an interdisciplinary Ph.D. from Yale University. • Dr. Denner brings to the board significant experience overseeing the operations and research and development of healthcare companies and evaluating corporate governance matters. He also has extensive experience as an investor, particularly with respect to healthcare companies, and possesses broad healthcare industry knowledge. |
Mark G. Currie, Ph.D., 64Director since 20196 Ironwood
Dr. Currie has served as president of Cyclerion Therapeutics, Inc. since April 2019, and previously served as senior vice president, chief scientific officer and president of research and development at
Ironwood Pharmaceuticals, Inc. from 2002 to April 2019. Prior to joining Ironwood, Dr. Currie directed cardiovascular and central nervous system disease research as vice president of discovery research at Sepracor Inc. Previously, Dr. Currie initiated, built and led discovery pharmacology and also served as director of arthritis and inflammation at Monsanto Company. Dr. Currie earned a B.S. in biology from the University of South Alabama and holds a Ph.D. in cell biology from the Bowman-Gray School of Medicine of Wake Forest University. We believe that Dr. Currie's vast experience leading the research and development efforts of an international biotechnology company will prove instrumental in guiding us through the research and development of novel therapies.
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JON R. DUANE Senior Partner Emeritus, Age: 62 Director since 2019 Board Committees • Governance and Nominating Committee • Compensation and HR Committee | • Mr. Duane is senior partner emeritus at McKinsey & Company, or McKinsey, an international management consulting company. Before his retirement in December 2017, Mr. Duane had served as a partner at McKinsey since 1992. • At McKinsey, Mr. Duane founded and led the firm's biotech practice. In that role, Mr. Duane advised both private and public companies in the pharmaceutical, medical device and life science industries, as well as academic research centers, on various strategic initiatives. • Mr. Duane serves as the executive chair on the board of Nashville Biosciences. • Mr. Duane graduated from Wesleyan University with a B.A. in government and received an M.B.A from Harvard Business School. • Mr. Duane brings to the board of directors significant experience advising academic research centers and companies across the life science and medical device industries. |
Jon R. Duane, 60, IndependentDirector since 2019Governance and Nominating Committee memberCompensation and HR Committee member2021 Proxy Statement 7
Mr. Duane is senior partner emeritus at McKinsey & Company, or McKinsey. Before his retirement in December 2017, Mr. Duane had served as a partner at McKinsey since 1992. At McKinsey, Mr. Duane founded and led the firm's biotech practice. In that role, Mr. Duane advised both private and public companies in the pharmaceutical, medical device and life science industries, as well as academic research centers, on various strategic initiatives. Mr. Duane has served as the executive chair on the board of Nashville Biosciences since 2017.
Mr. Duane graduated from Wesleyan University with a B.A. in government and received an M.B.A from Harvard Business School. Mr. Duane brings to the board of directors significant experience advising academic research centers and companies across the life science and medical device industries.
Mark Mallon, 56Director and chief executive officer since 2019
Prior to joining Ironwood in January 2019 as executive senior advisor and becoming chief executive officer of Ironwood in April 2019, Mr. Mallon was a member of the senior executive team of AstraZeneca PLC (AstraZeneca) and led its strategic functions, global product and portfolio strategy, global medical affairs, and corporate affairs. After joining AstraZeneca in 1994, Mr. Mallon held a number of senior sales and marketing roles, including executive vice president, international from January 2013 to April 2017 and executive vice president, global product and portfolio strategy from August 2016 to present. Mr. Mallon started his career in the biopharmaceutical industry in management consulting.
Mr. Mallon earned his B.S. in chemical engineering from the University of Pennsylvania and his M.B.A. in marketing and finance from the Wharton School of Business. Mr. Mallon's extensive experience building and shaping businesses, combined with his deep knowledge of GI, will be valuable to our board of directors.
Class II Directors (term expires at the 2021 annual meeting)
Marla L. Kessler, 49, IndependentDirector since 2019Compensation and HR Committee member
Ms. Kessler has been the senior vice president for strategy, marketing and communications for IQVIA (formerly IMS Health and Quintiles) since October 2016. Previously, Ms. Kessler served in various roles for IQVIA, including vice president for global services marketing and knowledge management from June 2013 to September 2016, regional leader of the IMS Consulting Group in Europe from 2011 to 2013, location manager for the London IMS Consulting Group from 2009 to 2011 and senior principal from 2008 to 2009. Before joining IQVIA, Ms. Kessler led several marketing
efforts Class II Directors (nominated for Pfizer, Inc. from 2004 to 2007 and worked in consulting for McKinsey & Company from 1996 to 2004.
Ms. Kessler received a B.S. in economics from Arizona State University and an M.B.A. from the Fuqua School of Business at Duke University. As a result of her marketing expertise in the life sciences and technology industries, Ms. Kessler provides an important outside perspective to our board of directors as we continue to execute our corporate goals on delivering treatments to patients.
Catherine Moukheibir, 59, IndependentDirector since 2019Audit Committee, Chair
Ms. Moukheibir most recently served as the senior advisor for finance and a member of the executive board at Innate Pharma from March 2011 to December 2016. Prior to that, Ms. Moukheibir was the chief financial officer for Movetis N.V. from 2008 to 2010, when it was acquired. Ms. Moukheibir previously served as the director of capital markets for Zeltia Group S.A. from 2001 to 2007. Ms. Moukheibir presently serves on the board of directors of Orphazyme, GenKyoTex, MedDay Pharmaceuticals and Zealand Pharma A/S. She also held past directorships on the boards of Ablynx, Cerenis and Creabilis S.A.
Ms. Moukheibir has an M.A. in economics and an M.B.A. from Yale University. Ms. Moukheibir's long leadership career in the biopharmaceutical industry, as well as her deep background in international finance, provide her with valuable business and financial expertise in support of our corporate objectives.
Lawrence S. Olanoff, M.D., Ph.D., 67, IndependentDirector since 2015Governance and Nominating Committee, Chair
Dr. Olanoff most recently served as chief operating officer for Forest Laboratories, Inc. (acquired by Allergan plc) from October 2006 to December 2010. Dr. Olanoff also served as a director of Forest from October 2006 to July 2014. From July 2005 to October 2006, Dr. Olanoff was president and chief executive officer and a director at Celsion Corporation. He also served as executive vice president and chief scientific officer of Forest from 1995 to 2005. Prior to joining Forest in 1995, Dr. Olanoff served as senior vice president of clinical research and development at Sandoz Pharmaceutical Corporation (now a division of the Novartis Group) andelection at the Upjohn Company in a number2021 annual meeting)
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MARLA L. Former Senior Vice President Age: 51 Director since 2019 Board Committees • Compensation and HR Committee | • Ms. Kessler served as an advisor to the chief executive officer of IQVIA Holdings Inc., or IQVIA (formerly IMS Health and Quintiles), a global analytics and technology company, from October 2020 to February 2021. Prior to that, Ms. Kessler had been the senior vice president for strategy, marketing and communications for IQVIA since October 2016. • Previously, Ms. Kessler served in various roles for IQVIA, including vice president for global services marketing and knowledge management from 2013 to September 2016, regional leader of the IMS Consulting Group in Europe from 2011 to 2013, location manager for the London IMS Consulting Group from 2009 to 2011 and senior principal from 2008 to 2009. • Before joining IQVIA, Ms. Kessler led several marketing efforts for Pfizer Inc. from 2004 to 2007 and worked in consulting for McKinsey & Company from 1996 to 2004. • Ms. Kessler received a B.S. in economics from Arizona State University and an M.B.A. from the Fuqua School of Business at Duke University. • Ms. Kessler provides an important commercial perspective to our board of directors given her expertise in strategic marketing, evidence-based research and customer experience in the life science industry. |
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CATHERINE MOUKHEIBIR Former Chief Executive Officer, Age: 61 Director since 2019 Board Committees • Audit Committee, Chair | • Ms. Moukheibir most recently served as chief executive officer of MedDay Pharmaceuticals, or MedDay, a biopharmaceutical company that focused on nervous system disorders, from July 2019 to January 2021. She was also the chairman of the board of directors of MedDay from April 2016 to January 2021. • Prior to that, Ms. Moukheibir served as the senior advisor for finance and a member of the executive board of directors at Innate Pharma SA, an oncology company, from 2011 to December 2016, and as the chief financial officer for Movetis N.V. from 2008 to 2010, when it was acquired. • Ms. Moukheibir previously served as the director of capital markets for Zeltia Group S.A. from 2001 to 2007. • Ms. Moukheibir currently serves on the board of directors and chairs the audit committee of Orphazyme A/S and CMR Surgical. She also held past directorships on the boards of directors of Ablynx NV, Cerenis Therapeutics SA, Creabilis S.A., GenKyoTex S.A., Kymab Group Limited and Zealand Pharma A/S. • Ms. Moukheibir has an M.A. in economics and an M.B.A. from Yale University. • Ms. Moukheibir's long leadership career in the biopharmaceutical industry, as well as her deep background in international finance, provide her with valuable business and financial expertise in support of our corporate objectives. |
8 Ironwood
Table of positions including corporate vice president of clinical development and medical affairs.Contents
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LAWRENCE S. OLANOFF, M.D., Ph.D. Former Chief Operating Officer, Forest Laboratories, Inc. Age: 69 Director since 2015 Board Committees • Governance and Nominating Committee, Chair | • Dr. Olanoff most recently served as chief operating officer for Forest Laboratories, Inc., or Forest, (acquired by Allergan plc) from 2006 to 2010. Dr. Olanoff also served as a director of Forest from 2006 to 2014. • From 2005 to 2006, Dr. Olanoff was president and chief executive officer and a director at Celsion Corporation. He also served as executive vice president and chief scientific officer of Forest from 1995 to 2005. • Prior to joining Forest in 1995, Dr. Olanoff served as senior vice president of clinical research and development at Sandoz Pharmaceutical Corporation (now a division of the Novartis Group) and at the Upjohn Company in a number of positions, including corporate vice president of clinical development and medical affairs. • In addition, he is currently an adjunct assistant professor and special advisor to the president for corporate relations at the Medical University of South Carolina (MUSC), an ex-officio director of the MUSC Foundation for Research Development, chairman of the board of directors of Mitochondria in Motion, chairman of TAC Development LLC, chairman of the Elliot and Eleanor Foundation and a member of the board of directors of Clinical Biotechnology Research Institute at Roper St. Francis Hospital, the Westedge Project, Ichnos Sciences, and the Zucker Institute for Applied Neurosciences. Dr. Olanoff also held past directorships on the boards of directors of Axovant Sciences Ltd. and Celsion Corporation. • Dr. Olanoff received his Ph.D. in biomedical engineering and M.D. degree from Case Western Reserve University. • Dr. Olanoff's detailed knowledge of the pharmaceutical industry, his broad operational experience and his research and development leadership over the course of his career make him an important asset to our board of directors. |
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JAY P. SHEPARD Former President and Chief Age: 63 Director since 2020 Board Committees • Audit Committee | • Mr. Shepard was president and chief executive officer of Aravive, Inc. (formerly Versartis, Inc.), a clinical-stage oncology company, from May 2015 to January 2020, and has served as a member of its board of directors since 2013 and as chairman of its board of directors since January 2020. • From 2012 until May 2015, Mr. Shepard was an executive partner at Sofinnova Ventures, a venture capital firm focused on the healthcare industry, which he joined as an executive in residence in 2008. From 2010 to 2012, Mr. Shepard served as president and chief executive officer and was a member of the board of directors of NextWave Pharmaceuticals, Inc., a specialty pediatric pharmaceutical company. From 2005 to 2007, Mr. Shepard served as president and chief executive officer and a member of the board of directors of Ilypsa, Inc. (acquired by Amgen Inc.), a biopharmaceutical company focused on therapies for renal and metabolic disorders. • Mr. Shepard currently serves on the board of directors of Inovio Pharmaceuticals, Inc., Esperion Therapeutics, Inc. and the Christopher & Dana Reeve Foundation. Within the past five years, Mr. Shepard also served on the boards of directors of Marinus Pharmaceuticals, Inc. and Durect Corporation. • Mr. Shepard holds a B.S. in Business Administration from the University of Arizona. • Mr. Shepard brings deep expertise to our board of directors, as a recognized leader within the pharmaceutical industry, with nearly three decades of expertise as an accomplished public company CEO and senior executive. |
2021 Proxy Statement 9
Class III Directors (term expires at the Medical2022 annual meeting)
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ANDREW President and Chief Executive Age: 62 Director since 2016 Board Committees • Compensation and HR Committee, Chair | • Mr. Dreyfus has served as president and chief executive officer for Blue Cross Blue Shield of Massachusetts, or BCBSMA, one of the largest Blue Cross Blue Shield insurance plans in the country, since 2010. From 2005 to 2010, Mr. Dreyfus served as the executive vice president of healthcare services of BCBSMA. • Prior to joining BCBSMA, he served as the first president of the Blue Cross Blue Shield Foundation. Mr. Dreyfus also previously served as executive vice president of the Massachusetts Hospital Association and held a number of senior positions in Massachusetts state government, including undersecretary of consumer affairs and business regulation. • Mr. Dreyfus serves on the board of directors of BCBSMA, the Blue Cross Blue Shield Association, Boys & Girls Clubs of Boston and RIZE Massachusetts. He is a member of the advisory boards of Ariadne Labs and the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California (USC). He is a founding member of the Massachusetts Coalition for Serious Illness Care. • Mr. Dreyfus received a B.A. in English from Connecticut College. • Mr. Dreyfus brings to our board of directors significant expertise in the healthcare payer and reimbursement market, and broad management and executive leadership experience, providing valuable insight as we continue to develop and commercialize medicines in an evolving healthcare landscape. |
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JULIE H. Former Chief Operating Officer, Age: 56 Director since 2014 Board Committees • Audit Committee • Governance and Nominating Committee | • Ms. McHugh most recently served as chief operating officer for Endo Health Solutions, Inc., or Endo, from 2010 through 2013, where she was responsible for the specialty pharmaceutical and generic drug businesses. • Prior to joining Endo, Ms. McHugh was the chief executive officer of Nora Therapeutics, Inc. • Before that she served as company group chairman for the worldwide virology business unit of Johnson & Johnson, or J&J, and previously she was president of Centocor, Inc., a J&J subsidiary. While at J&J, Ms. McHugh oversaw the development and launches of several products, including Remicade® (infliximab), Prezista® (darunavir) and Intelence® (etravirine), and she was responsible for oversight of a research and development portfolio including compounds targeting HIV, hepatitis C, and tuberculosis. • Prior to joining Centocor, Inc., Ms. McHugh led the marketing communications for gastrointestinal drug Prilosec® (omeprazole) at Astra-Merck Inc. • Ms. McHugh currently serves on the board of directors of Trevena, Inc. (with such service to end in connection with Trevena, Inc.'s 2021 annual meeting of stockholders), Aerie Pharmaceuticals, Inc. and Lantheus Holdings, Inc. She also serves on the board of directors of Evelo Biosciences, Inc., including serving as chair of the nominating and corporate governance committee and as a member of the audit committee. She also chairs the board of visitors for the Smeal College of Business of Pennsylvania State University as well as serves on the board of directors of The New Xellia Group. She previously served on the board of directors for ViroPharma Inc., Epirus Biopharmaceuticals, Inc., the Biotechnology Industry Organization, the Pennsylvania Biotechnology Association and the New England Healthcare Institute. • Ms. McHugh received her M.B.A. degree from St. Joseph's University and her B.S. degree from Pennsylvania State University. • Ms. McHugh's experience as a chief executive officer and a chief operating officer at large multinational pharmaceutical companies makes her a valuable member of our board of directors. Her deep knowledge of Ironwood's history and strategy and strong relationships with our senior leadership team also make her a valuable resource, particularly during the chief executive officer transition period. |
10 Ironwood
Table of South Carolina (MUSC), an ex-officio directorContents
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EDWARD P. Former Partner, Portfolio Manager Age: 74 Director since 2013 Board Committees • Audit Committee | • Mr. Owens was previously partner, portfolio manager and global industry analyst with Wellington Management Company, LLP where he worked in investment management from 1974 to 2012. He was the portfolio manager of the Vanguard Health Care Fund for 28 years from its inception in May 1984 until his retirement from Wellington in December 2012. • Mr. Owens serves on the board of directors of Stealth BioTherapeutics Corp and ESCAPE Bio. He has a B.S. in physics from the University of Virginia and an M.B.A. from Harvard Business School. • He brings to our board of directors extensive experience in evaluating and investing in life sciences companies, providing valuable insight as we continue to strive towards our goal of maximizing long-term stockholder value. |
2021 Proxy Statement 11
Table of the MUSC Foundation for Research Development, chairman of the board of Mitochondria in Motion, a biopharmaceutical company and a board member of the Clinical Biotechnology Research Institute at Roper St. Francis Hospital, the Westedge Project, and the Zucker Institute for Applied Neurosciences, and a former board member of Axovant Sciences Ltd. and Celsion Corporation.Contents
Dr. Olanoff received his Ph.D. in biomedical engineering and M.D. degree from Case Western Reserve University. Dr. Olanoff's detailed knowledge of the pharmaceutical industry, his broad operational experience and his research and development leadership over the course of his career make him an important asset to our board of directors.
How We are Selected and Evaluated |
We believe that our board of directors should be comprised of individuals with sophistication and experience in many substantive areas that will help us achieve our goalsvision of creatingbecoming a leading U.S. GI healthcare company dedicated to advancing the treatment of GI diseases and commercializing medicines that make a differenceredefining the standard of care for patients, building value for our fellow stockholders, and empowering our passionate team.
Table of ContentsGI patients.
The core criteria that we use in evaluating each nominee to our board of directors consists of the following: (a) an owner-oriented attitude and a commitment to represent the interests of our stockholders, demonstrated, in part, through ownership of our capital stock; (b) strong personal and professional ethics, integrity and values; (c) strong business acumen and savvy; (d) a deep, genuine passion for our business and the patients whom we serve; (e) demonstrated achievement in the nominee's field of expertise; (f) the absence of conflicts of interest that would impair the nominee's ability to represent the interests of our stockholders; (g) the ability to dedicate the time necessary to regularly participate in meetings of the board and committees of our board; and (h) the potential to contribute to the diversity of our board of directors, as a result of the nominee's professional background, expertise, gender, age or ethnicity.
As illustrated in the matrix below, we believe our current directors possess the professional and personal qualifications and necessary expertise both within and outside of the healthcare industry to maintain an effectivea diverse and experienced board of directors that can effectively represent stockholders.
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Broader Business | Healthcare Industry | |||||||||||||||||||||
Ironwood Board of Directors | Capital Allocation / Finance / Accounting | Strategic Transactions | Risk Management | Human Capital | Public Company Board | Senior Leadership biotech) | Senior Leadership pharma) | Customer / Market Insights (patient, payer, physician) | ||||||||||||||
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Julie H. McHugh | ✓ | ✓ | ||||||||||||||||||||
Andrew Dreyfus | ||||||||||||||||||||||
Lawrence S. Olanoff, M.D., | ||||||||||||||||||||||
| ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||
Jon R. Duane | ||||||||||||||||||||||
Edward P. Owens | | ✓ | | | | |||||||||||||||||
Mark G. Currie, Ph.D. | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||
Marla L. Kessler | | ✓ | ✓ | ✓ | | | ✓ | ✓ | ||||||||||||||
Catherine Moukheibir | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||
| ✓ | | | | ||||||||||||||||||
Jay P. Shepard | ✓ | ✓ | ||||||||||||||||||||
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Director Succession Planning
We refresh our board of directors and assess our board succession plans regularly with the aim of balancing tenure and expertise.regularly. As of [ ], 2019,April 20, 2021, the average age of our independent directors is 60directors' was 61 years, and the average tenure of our independent directors is 2.5was approximately 3.8 years. All seven independentSix of our ten directors joined our board of directors since our separation, or Separation,
12 Ironwood
from Cyclerion Therapeutics, Inc., or Cyclerion, in 2013 or later,April 2019, including threetwo directors, Dr. Denner and Mr. Shepard, who were newly appointedjoined our board of directors in 2019.2020.
Annual Evaluations
Our directors conduct annual evaluations to assess the performance and effectiveness of the board of directors and each committee in which they are a member. In addition, each director completes a self-evaluation as well as a peer evaluation of each other director. For 2018,2020, each director, except Dr. Denner and Mr. Shepard, completed a written questionnaire which solicited open-ended and candid feedback on an anonymous basis. Dr. Denner and Mr. Shepard did not complete a written questionnaire as they joined the board of directors in the fourth quarter of 2020. In addition to the director evaluations, we also solicit annual feedback from senior management concerning the board's performance on an anonymous basis. After the collective board and committee evaluations and comments (including those from senior management) and the self and peer evaluations and comments were compiled, and summarized, the chair of the governance and nominating committee provided the committeemet with a summary of the individual evaluations for the Class III directors up for election at the 2019 annual meeting. Theour chair of the committee then met withboard and Mark Mallon, our currentformer chief executive officer, to discuss the board and committee evaluations and individual evaluations for directors who were staying on our board following the Separation.directors. The chair of the governance and nominating committee also conducted individual feedback sessions with each such director (except Dr. Denner and Mr. Shepard) to discuss the results of his or her individual evaluation.evaluation and then provided the governance and nominating committee with a summary of the individual evaluations for the Class I and Class II directors up for election at the 2021 annual meeting of stockholders. The chair of the governance and nominating committee then presented a summary of the collective board and committee evaluations and comments (including those from senior management) are then compiled, summarized and presented to the governance and nominating committee and full board of directors.
Director Nomination Process
Our governance and nominating committee identifies potential director candidates through referrals and recommendations, including byfrom incumbent directors, management and stockholders, as well as through business and other organizational networks. Wenetworks and relationships. The board and management had built a strong relationship with Dr. Denner from his role as chief investment officer of Sarissa Capital Management LP, one of Ironwood's largest stockholders, and valued his significant experience overseeing the operations of healthcare companies. For that reason, our governance and nominating committee recommended and the board elected Alexander J. Denner, Ph.D. to join our board effective in November 2020. In 2020, we also worked with a leadership consulting firm to identify opportunities to build on capabilities we believed were necessary to execute on our strategic priorities. In connection with that process, we identified an opportunity to add a director with experience as a chief executive officer in the pharmaceutical industry with a history of directorsvalue creation through inorganic growth to our board. We then retained a search firm to identify candidates that met these qualifications and, paid third party firmsthrough that process, identified Jay P. Shepard, who the governance and nominating committee recommended and the board elected to assist in identifying and evaluating potential director nominees forjoin our board of directors following the Separation, including our chief executive officer. effective in December 2020.
Stockholders who wish to recommend candidates may contact the governance and nominating committee in the manner described inStockholder Communications, Proposals and Nominations for Directorships—Communications. Stockholder-recommended candidates whose recommendations comply with these procedures will be evaluated by the governance and nominating committee in the same manner as candidates identified by the governance and nominating committee.
2021 Proxy Statement 13
How We are Organized and Governed |
Board Size and GovernedTerms
Key governance structures
As we have grown and evolved, our governance profile has grown with us. As you will read in more detail in the pages that follow, our dual-class stock structure expired at the end of fiscal year 2018 and we are in the process of de-classifying our board, subject to stockholder approval at the annual meeting. We separate the roles of chair of the board and chief executive officer and rotate the chair approximately every five years.
Board size and terms
Our Eleventh Amended and Restated Certificate of Incorporation, as amended, or our Certificate of Incorporation, states that our board of directors shall consist of between one and 15 members, and the precise number of directors shall be fixed by a resolution of our board.board of directors. Our board of directors currently consists of ten members. Each director holds office until his or her successor is duly elected and qualified or until his or her death, resignation or removal. Our Certificate of Incorporation currently provides that our directors may be removed only for cause by the stockholders. If the proposed amendment to our Certificate of Incorporation is adopted, our directors will be removable with or without cause by our stockholders following the declassification of our board of directors.
Our board of directors currently consists of nine members, seven of whom are independent members. On April 1, 2019, we completed the previously-announced Separation. Our board of directors consisted of nine members prior to the Separation and nine members immediately thereafter. Mses. Fanucci and Schulman, Dr. Hecht and Mr. McGuire transitioned off of our board of directors on April 1, 2019 in connection with their appointment to the Cyclerion board of directors. Additionally, Dr. Williams transitioned off of the board of directors on April 1, 2019 in connection with the Separation. SeeCertain Relationships and Related Person Transactions—The Separation for more information about the Separation.
In accordance with the terms of our Certificate of Incorporation, our board of directors is currently divided into three classes, and the directors in each class serve for three-year terms. Any vacancy on the board of directors, including a vacancy that results from an increase in the number of directors, may be filled by a vote of the majority of the directors then in office. Any additional directorships resulting from an increase in the number of directors will be apportioned by our board of directors among the three classes.classes until the declassification of our board of directors, as described further below.
In accordance with the terms of our Certificate of Incorporation, our board of directors is currently divided into three classes, which has resulted in staggered elections. Upon the expiration of the one-year term of a class of directors, directors in that class will be eligible to be nominated and elected for a new three-yearone-year term at the annual meeting in the year in which their term expires. The current members of each class are set forth in the table above underWho We Are. The classification of the board of directors results in staggered elections, with each class of directors standing for election every third year. One class consists of members whose terms expire upon the election and qualification of their successors at the 2019 Annual Meeting, or the Class III directors,
one class consistsOn the recommendation of members whose terms expire at the 2020 annual meeting of stockholders, or the Class I directors, and one class consists of members whose terms expire at the 2021 annual meeting of stockholders, or the Class II directors.
After careful consideration, our board of directors, has determined that it is advisable and in the best interestsour stockholders voted at our 2019 annual meeting of the company and its stockholders to amend our Certificate of Incorporation to declassify theour board of directors to allow the company's stockholders to vote on the election of the entire board of directors on an annual basis, rather than on a staggered basis, and our board of directors has recommended thatbasis. Consistent with the company's stockholders vote in favor of such a proposal. SeeProposal No. 3—Amendmentamendment to our Certificate of Incorporation to Declassifythat was approved by our stockholders, the Boarddeclassification of Directorsthe board of directors is being phased in as follows:
For so long as our board of directors is classified, directors may be removed by our stockholders only for cause. Following the proposed amendment todeclassification of our Certificateboard of Incorporation.directors, our directors will be removable with or without cause by our stockholders.
We separate the roles of chair of the board of directors and chief executive officer and rotate the chair approximately every five years, unless the governance and nominating committee recommends otherwise. Our board of directors believes that this structure enhances the board'sboard of directors' oversight of, and independence from, management, and enables the board of directors to carry out its responsibilities on behalf of our stockholders. This leadership structure also allows Mr. Mallon, our chief executive officer to focus his or her time and energy on operating and managing the company, while leveraging the experience and perspective of Ms. McHugh, the current chair of our board.board of directors. We expect the next chair rotation will take place in 2024.
Director Independence
Under Nasdaq Rule 5605, a majority of a listed company's board of directors must be comprised of independent directors. In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed company's audit, compensation and governance and nominating committees be independent, and that audit and compensation committee members satisfy the additional independence criteria set forth in Rule 10A-3 and 10C-1, respectively, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under Nasdaq Rule 5605(a)(2), a director will only qualify as an "independent director" if, in the opinion of that company's
14 Ironwood
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.
Our board of directors determined that none of Messrs. Dreyfus, Duane, Owens and Owens,Shepard, Mses. Kessler, McHugh and Moukheibir, and Dr.Drs. Denner and Olanoff, representing sevennine of our eight non-employee directors and seven of our nine currentten 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 Nasdaq Rule 5605(a)(2). Mr. Mallon, our current chief executive officer, and Dr. Currie, who served as our senior vice president, chief scientific officer and president of research and developmentR&D until the Separation werein April 2019, was not determined to be independent due to their current orhis recent employment with the company. Our board of directors also determined that each of the current members of our audit committee, our governance and nominating committee, and our compensation and HR committee satisfies the independence standards for such committee established by Rule 10A-3 and 10C-1 under the Exchange Act, the SEC rules and the Nasdaq rules, as applicable. In making such determinations, our board of directors considered the information requested from and provided by each director concerning theirthe director's background, employment and affiliations, including family relationships, the relationships that each such non-employee director has with Ironwood and all other facts and circumstances the board of directors deemed relevant in determining theirassessing independence. As part of such determination, the board of directors considered: (a) Dr. Olanoff's service on our Pharmaceutical Advisory Committee, or the PAC,additional time Ms. McHugh is spending providing counsel and any payments for such services (however, his service onguidance to the PAC has since concludedCompany's senior leadership team during the chief executive officer transition period and he currently serves asthe related incremental chair retainer and equity grant recommended by the compensation and HR committee and approved by the board representative toof directors (as described elsewhere in this proxy statement under the PAC, and receives no compensation for such representation);caption Additional Chair Compensation), (b) the volume of business between BCBSMA, the company in which Mr. Dreyfus serves as president and chief executive officer, and Ironwood, which amounted to less than 1% of the annual revenues of each
company;BCBSMA in 2020; and (c) payments made by Ironwood to IQVIA, the company in which Ms. Kessler servesserved as athe former senior vice president for strategy, marketing and communications and former adviser to the chief executive officer, which amounted to less than 1% of the annual revenues of IQVIA.IQVIA in 2020.
Risk Oversight
Our board of directors retains ultimate responsibility for risk oversight and our management team retains the responsibility for risk management. In carrying out its risk oversight responsibilities, our board of directors reviews the long- and short-term internal and external risks facing the company through its participation in long-range strategic planning, and the annual review and evaluation of corporate risks that the audit committee reports. Our board of directors also believes that separating the roles of chair of the board of directors and chief executive officer enhances the board'sboard of directors' ability to oversee risk in an objective manner.
We have implemented and continue to refine a formalized enterprise risk management process. On an ongoing basis, we identify key risks, assess their potential impact and likelihood, and, where appropriate, implement operational measures and controls or purchase insurance coverage in order to help ensure adequate risk mitigation. Together with our board of directors, we continue to closely monitor the developments and impact of COVID-19 on our business and operations, including employees, and work diligently to quickly address and mitigate risks in the evolving and dynamic environment.
On a quarterly basis, key risks, status of mitigation activities and potential new or emerging risks are reported to and discussed with senior management and further addressed with our board of directors, as necessary. On at least an annual basis, a long-term comprehensive enterprise risk management update is provided to our board.board of directors. The long-term goal of our enterprise risk management process is to ingrain a culture of risk awareness and mitigation throughout the organization that can be applied to our current business activities as well as our assessment and pursuit of future business opportunities.
2021 Proxy Statement 15
As set forth in its charter, our audit committee discusses with management and our independent registered public accounting firm any significant risks or exposures facing Ironwood, evaluates the steps management has taken or proposes to take to mitigate such risks and reviews our compliance with such mitigation plans. As part of fulfilling these responsibilities, the audit committee meets regularly with Ernst & Young LLP, our independent registered public accounting firm, and members of our management, including our chief executive officer and chief financial officer,officer. Our audit committee also discusses with Ernst & Young LLP any significant risks or exposures facing the company to the extent that such risks or exposures relate to accounting and chief administrative officer.financial reporting and reviews related mitigation plans with Ernst & Young LLP. In addition, our audit committee reviews the risk factors presented in our annual reports on Form 10-K and our quarterly reports on Form 10-Q that we file with the SEC.
As part of our board'sboard of directors' risk oversight role, our compensation and HR committee reviews and evaluates the risks associated with our compensation programs and succession plans, as itplans. The compensation and HR committee also is responsible under its charter for approving the compensation of all of our executive officers (other than our chief executive officer), recommending chief executive officer compensation to our board of directors and overseeing the maintenance and presentation to our board of directors of succession planningplans for members of our senior management. Likewise, our governance and nominating committee is responsible for evaluating the performance, operations and composition of our board of directors and the sufficiency of our corporate governance guidelines, either of which may impact our risk profile from a governance perspective.
In performing their risk oversight functions, each committee of our board of directors has full access to management, as well as the ability to engage outside advisors.
Hedging and Pledging Policy
As part of our insider trading prevention policy, our directors and executive officers are prohibited from engaging in any hedging or monetization transactions of our company securities, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. In addition, our insider trading prevention policy generally prohibits our directors and executive officers from holding company securities in a margin account or pledging company securities as collateral for a loan.
Corporate Governance Guidelines
We have adopted corporate governance guidelines which are accessible through the Investors section of our website atwww.ironwoodpharma.com, under the heading Corporate Governance, and which also are available in print to any stockholder who requests them from our Secretary.secretary. Our board of directors believes that sound governance practices and policies provide an important framework to assist it in fulfilling its duties to stockholders and relies on these guidelines to provide that framework. Among other things, the guidelines help to ensure that our board of directors is independent from management, that our board of directors adequately performs its oversight functions and that the interests of our board of directors and management align with the interests of our stockholders.
SunsetEquality, Diversity and Inclusion
We believe that creating an equitable, diverse, and inclusive culture is critical to attracting, motivating and retaining the talent necessary to deliver on our mission, and our compensation HR committee actively engages with management on matters such as employee development, corporate culture and engagement, as well as equality, diversity and inclusion, or EDI, initiatives.
In 2020, we established an EDI working group dedicated to advancing key EDI initiatives. Ironwood's leadership team and board of Dual Class Voting Structuredirectors champions these efforts. In October 2020, our management adopted a long-term EDI strategy and, in January 2021, our board of directors approved a specific corporate goal for 2021 aimed at
16 Ironwood
fostering an environment where employees feel included and empowered. Current EDI initiatives include empowering our employee resource groups, such as Ironwomen and Ironwood Stands Together Against Racism, or ISTAR, introducing new learning and development opportunities, strengthening our talent acquisition strategies and introducing new metrics and measurements on outreach to diverse candidate sources, retention, career advancement and employee survey feedback from diverse populations.
From the timeAs of December 31, 2020, approximately 50% of our initial public offering, or IPO, until December 31, 2018, we maintained a dual class equity voting structure, which provided holdersemployees are women, and women represent approximately 30% of our Class B common stock with significant influence over certain limited matters requiring stockholder approval, including a merger involving Ironwood, a sale of substantially all Ironwood assetsleadership team (vice president and a dissolution or liquidation of Ironwood. In accordance with the termsabove) and nearly 30% of our Certificateboard of Incorporation, each outstanding sharedirectors (including our board and audit committee chairs). Additionally, approximately 20% of Class B common stock converted into one shareour employees are racially or ethnically diverse and, in 2020, approximately 40% of Class A common stock on December 31, 2018, resulting in the company having only one class of common stock. Throughout this proxy statement, unless otherwise noted, we refer to our Class A common stock as our "common stock."new hires were racially or ethnically diverse.
Board Meetings
Our board of directors held eightnine meetings during 2018.2020. As stated in our corporate governance guidelines, we expect our board membersdirectors to rigorously prepare for, attend and participate in all board and applicable committee meetings. Each board memberdirector is expected to ensure that other existing and planned future commitments do not materially interfere with his or her service as a director. We also expect that all of our board members up for election at, or who have a term that continues after, andirectors will attend our annual meeting of stockholders unless a director will attendnot be continuing to serve on the board following such annual meeting. In 2018,2020, each incumbent director attended at least 75% of all meetings of the board of directors and all committees of the board of directors on which he or she served that were held during the period that such director was a member of the board of directors or the applicable committee. All nineEight of our nine directors at the time of our 20182020 annual meeting of stockholders attended suchthe meeting.
Committees
Our board of directors has established three standing committees: an audit committee, a governance and nominating committee and a compensation and HR committee. In addition, our board of directors established a capital allocation committee in 2018 to oversee and monitor the company's business mix and capital allocation decisions in order to make recommendations to the board of directors, as well as advise on the Separation. This committee was disbanded upon completion of the Separation. Each of the audit committee, the governance and nominating committee and the compensation and HR committee operates under a charter that has been approved by our board.board of directors. Copies of each charter are accessible through the Investors section of our website atwww.ironwoodpharma.com, under the heading Corporate Governance, and are also available in print to any stockholder who requests them from our Secretary.secretary. The chair of each of our committees is expected to rotate approximately every three to five years, unless the governance and nominating committee recommends otherwise.
Audit Committee.Committee
We have a separately designated standing audit committee established by our board of directors for the purpose of overseeing our accounting and financial reporting processes and audits of our financial statements. The members of our audit committee are Mses. Moukheibir and McHugh and Mr.Messrs. Owens with each of Ms. Moukheibir and Mr. Owens being appointed to the committee upon
Table of ContentsShepard.
completion of the Separation. Ms. Moukheibir chairs the audit committee. Prior to the Separation, the audit committee was comprised of Mses. McHugh and Fanucci and Mr. Dreyfus. Our audit committee met sevenfour times during 2018.2020. Our audit committee assists our board of directors in its oversight of significant risks facing Ironwood, the integrity of our financial statements and our independent registered public accounting firm's qualifications, independence and performance.
Our audit committee's responsibilities include:
2021 Proxy Statement 17
Our board of directors has determined that Ms. Moukheibir is an audit committee financial expert, as defined in Item 407(d)(5) of Regulation S-K.
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Audit Committee Report
In the course of our oversight of Ironwood's financial reporting process, we have (i) reviewed and discussed with management the company's audited financial statements for the fiscal year ended December 31, 2018,2020, (ii) discussed with Ernst & Young LLP, the company's independent registered public accounting firm, the matters and communications required to be discussed pursuant toby the applicable auditing standards,requirements of the PCAOB and the SEC, and (iii) received the written disclosures and the letter from Ernst & Young LLP, the company's independent registered public accounting firm, required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent registered public accounting firm's communications with us concerning independence, discussed with the independent registered public accounting firm its independence, and considered whether the provision of non-audit services by the independent registered public accounting firm is compatible with maintaining its independence.
Based on the foregoing review and discussions, we recommended to the board of directors of the company that the audited financial statements be included in the company's Annual Report on Form 10-K for the year ended December 31, 20182020 for filing with the SEC.
By the Audit Committee, | ||
Julie H. McHugh Edward P. Owens Jay P. Shepard |
2021 Proxy Statement 19
Governance and Nominating Committee.Committee
The members of our governance and nominating committee are Messrs.Drs. Denner and Olanoff, andMr. Duane and Ms. McHugh. Mr. Duane joined the governance and nominating committee upon the completion of the Separation. Mr.Dr. Olanoff chairs the governance and nominating committee. Prior to the completion of the Separation, Mr. McGuire was a member of the committee. Our governance and nominating committee met twofour times during 2018.2020.
Our governance and nominating committee's responsibilities include:
Compensation and HR Committee.Committee
The members of our compensation and HR committee are Messrs. Dreyfus and Duane and Ms. Kessler, each of whom was appointed to the committee upon completion of the Separation.Kessler. Mr. Dreyfus chairs our compensation and HR committee. Prior to the completion of the Separation, the compensation and HR committee consisted of Mr. Owens, Ms. Schulman and Dr. Williams. Our compensation and HR committee met sixfive times during 2018.2020. Our compensation and HR committee assists our board of directors in fulfilling its responsibilities relating to the compensation of our board of directors and our executive officers.
Our compensation and HR committee's responsibilities include:
20 Ironwood
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation and HR committee is or has at any time during the past fiscal year been an officer or employee of Ironwood. None of the members of our compensation and HR committee has formerly been an officer of Ironwood. None of our executive officers serve, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our board of directors or compensation and HR committee. None of the members of our compensation and HR committee had any relationship with us that requires disclosure under any paragraph of Item 404 of Regulation S-K under the Exchange Act.
How We Are Paid
How We Are Paid |
The vastUnder our director compensation policy, effective May 2019, the majority of the compensation that our non-employee directors receive for service on our board of directors is paid in the form of restricted shares of our Class A common stock. Vesting of these shares of restricted stock is contingent on each non-employee director continuing to serve as a member of the board of directors on the last day of each applicable vesting period. Further, whetherIf a director ceases serving as a member of our board of directors at any time during the vesting period of a restricted stock award, or RSA, unvested shares will be forfeited on the date of such director's termination of service. Shares of restricted stock are vested or not, no director may transfer any shares of restricted stock while such person is a director of Ironwood, subjectgranted to limited exceptions. We believe these forfeiture and transfer restrictionsdirectors in 2020 under our director compensation plan effectively create stock ownership guidelinespolicy were granted under our 2019 Equity Incentive Plan, or our 2019 Plan. Under our 2019 Plan, the aggregate value of all compensation paid or granted to any director for our directorshis or her service as a director in that they ensure that the interests of our directors, each of whom has equity in the business, are aligned with those of our stockholders and they focus our directors on maximizing long-term value.any calendar year may not exceed $600,000.
Under our director compensation plan, effective January 1, 2014,policy, at each annual meeting of stockholders, our non-employee directors receive an annual grant of the number ofare granted restricted shares of
our Class A common stock calculated by dividing (i) the dollar amount for total director compensation approximating the 25th percentilewith a grant date fair value of our current peer group$250,000, determined based on the date of grant, by (ii) the average closing price of our Class A common stock on the Nasdaq Global Select Market (or the stock exchange on which our stock is being actively traded) for the six months preceding the month in which the applicable annual meeting of stockholders occurs.award is granted, rounded down to the nearest whole share. Such restricted shares vest 25% on each three-month anniversary of the grant date over a nine-month period and the remaining 25%in full on the day beforedate immediately preceding the date of the next annual meeting of stockholdersstockholders.
Each non-employee director who is first elected to our board of directors will, upon his or her initial election, be granted restricted shares of our Class A common stock with a grant date fair value of $250,000, determined based on the average closing price of our Class A common stock on the Nasdaq Global Select Market (or the stock exchange on which our stock is being actively traded) for the next calendar year. For 2018, our compensation and HR committee determined thatsix months preceding the 25th percentile for total director compensation for our peer group was approximately $250,000. Accordingly,month in which the
2021 Proxy Statement 21
award is granted, rounded down to the nearest whole share. Such restricted shares vest in three equal installments on May 31, 2018, the datefirst three anniversaries of our 2018 annual meeting of stockholders, each of our non-employee directors received athe grant of restricted stock consistent with the foregoing terms and valuation.
Underdate. In addition, under our director compensation plan,policy, if a non-employee director is elected other than at an annual meeting of our stockholders, on the start date of such non-employee directors service on thethen upon his or her initial election to our board of directors, such non-employee director will be granted the number of restricted shares of our Class A common stock granted to non-employee directors at the most recent annual meeting of our stockholders, prorated based on the number of days between the last annual meeting of our stockholders and the date on which the non-employee director began service with us. In connection with their election to the board, on April 1, 2019, each of Mses. Kessler and Moukheibir, Dr. Currie and Mr. Duane were issued 2,995Such restricted shares of our common stock, which are scheduled towill vest in full on the day beforedate immediately preceding the date of thisthe next annual meeting of stockholders.
In addition pursuant to ourequity grants, each non-employee director compensation plan, the chair of our board and each of the committee chairs receives an annual compensation of $10,000, payable quarterly in unrestricted stock or cash at the individual director's election. Shares of our common stock issued to our directorsretainer under our director compensation plan are granted under our Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan,policy for his or the 2010 Plan, in which our directors are eligible to participate. If a director ceases serving as a member ofher service on our board of directors, at any time during the vesting period of a restricted stock award, unvested sharesas well as additional fees for board chair, committee or committee chair service as follows:
| | |
Fees | ||
| | |
Annual retainer for members of the board of directors | $50,000 ($80,000 for the chair) | |
Additional annual retainer for members of the audit committee | $10,000 ($20,000 for the chair) | |
Additional annual retainer for members of the compensation and HR committee | $7,500 ($15,000 for the chair) | |
Additional annual retainer for members of the governance and nominating committee | $5,000 ($10,000 for the chair) | |
| | |
All cash fees are payable quarterly in arrears and will be forfeitedprorated for any quarter of partial service. Each non-employee director may elect, prior to January 1 of the year with respect to which such election will be effective, to receive fully vested shares of our Class A common stock at no cost in lieu of his or her annual cash retainer and any additional cash retainers for board chair, committee or committee chair service set forth above. The number of shares of our Class A common stock issued is determined by dividing the applicable cash retainer(s) the director would be eligible to receive by the closing price of our Class A common stock on the Nasdaq Global Select Market (or the stock exchange on which our stock is being actively traded) on the date of such director's termination of service.the cash fees would otherwise be paid, rounded down to the nearest whole share. Further, non-employee directors are reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of the board of directors and its committees.
Director Compensation Table
The following table sets forth information regarding the compensation earned during the year ended December 31, 20182020 by each of our directors who served in 2020 other than Dr. Hecht, whoMr. Mallon, our former chief executive officer and former member of our board of directors. Mr. Mallon did not receive compensation for his service as a director. Dr. Hecht's compensation for his service ason our chief executive officer is described in ourCompensation Discussion and Analysis and in theSummary Compensation Table and related footnotes included elsewhere in this proxy statement.board of directors.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($) | Total ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Andrew Dreyfus | — | 301,423 | — | 301,423 | |||||||||
Marsha H. Fanucci | 10,000 | (2) | 301,423 | — | 311,423 | ||||||||
Terrance G. McGuire | 9,965 | (3) | 301,423 | — | 311,388 | ||||||||
Julie H. McHugh | 10,000 | (4) | 301,423 | — | 311,423 | ||||||||
Lawrence S. Olanoff, M.D., Ph.D. | — | 301,423 | 6,250 | (5) | 307,673 | ||||||||
Edward P. Owens | 10,000 | (6) | 301,423 | — | 311,423 | ||||||||
Amy W. Schulman | 7,299 | (7) | 301,423 | — | 308,722 | ||||||||
Douglas E. Williams, Ph.D. | — | 301,423 | 301,423 |
| | | | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||
| | | | | | | | | | |
Mark G. Currie, Ph.D. | $ | 50,000 | $ | 218,286 | $ | 268,286 | ||||
Alexander J. Denner, Ph.D. | $ | 7,912 | (2) | $ | 400,461 | (4) | $ | 408,373 | ||
Andrew Dreyfus | $ | 64,977 | (3) | $ | 218,286 | $ | 283,263 | |||
Jon R. Duane | $ | 62,500 | $ | 218,286 | $ | 280,786 | ||||
Marla L. Kessler | $ | 57,500 | $ | 218,286 | $ | 275,786 | ||||
Julie H. McHugh | $ | 95,000 | $ | 218,286 | $ | 313,286 | ||||
Catherine Moukheibir | $ | 70,000 | $ | 218,286 | $ | 288,286 | ||||
Lawrence S. Olanoff, M.D., Ph.D. | $ | 60,000 | $ | 218,286 | $ | 278,286 | ||||
Edward P. Owens | $ | 60,000 | $ | 218,286 | $ | 278,286 | ||||
Jay P. Shepard | $ | 4,728 | $ | 411,750 | (5) | $ | 416,478 | |||
| | | | | | | | | | |
our 2021 annual meeting of stockholders, subject to continued service on our board as of the vesting date. The number of shares subject to the restricted stock grant was determined by dividing (i) $250,000 (the dollar amount for the total director compensation approximating the 25th percentile of our current peer group on the date of grant), by (ii) the average closing price of our Class A common stock on the Nasdaq Global Select Market for the six months preceding the month of the 20182020 annual meeting of stockholders. Each such award of restricted stock had a grant date fair value of $18.58$10.05 per share and was granted pursuant to the terms of our director compensation planpolicy and our 20102019 Plan. As of December 31, 2018, 8,1122020, each non-employee director other than Dr. Denner and Mr. Shepard held 21,720 restricted shares underlying each suchof Class A common stock as a result of this grant and held no other unvested equity awards.
22 Ironwood
Additional Chair Compensation
In connection with Mr. Mallon's resignation as our chief executive officer and a member of our board of directors, Ms. McHugh is spending additional time providing counsel and guidance to the Company's senior leadership team. In connection with her expanded responsibilities and additional time commitment, the compensation and HR committee recommended and the board of directors approved (i) additional cash compensation of $10,000 per month for Ms. McHugh, retroactive to February 15, 2021, for the period in which she serves in this expanded role (as determined by the board of directors), up to a maximum of six months, and (ii) a grant of 2,500 shares of restricted stock, to vest in full in March 2022, subject to Ms. McHugh's continued service on our board of directors through such vesting date. In making its recommendation to the board, the compensation and HR committee took into account a number of factors, including the scope of additional responsibility and anticipated duration and additional time associated with the expanded role, as well as market data provided by our compensation consultant, Rewards Solutions, Aon, which we refer to throughout this proxy statement as 'Aon,' related to board chair compensation.
Director Stock Ownership Guidelines
In May 2019, we instituted stock ownership guidelines as part of our director compensation policy that provide that each non-employee director must accumulate and continuously hold shares of our Class A common stock with a value equal to or greater than three times the amount of the then-current annual retainer paid to the non-employee director for service on our board of directors (excluding any additional board chair, committee, or committee chair retainers). Non-employee directors are required to achieve this level of ownership by the later of (a) May 30, 2021 (the date which is two years from the date of our 2019 annual meeting of stockholders) and (b) two years from the date the individual began service with us, or the Ownership Date.
Compliance with the stock ownership requirements will be measured on the date of the annual meeting of stockholders each year based on the annual retainer then in effect. Following the Ownership Date, until a non-employee director holds the required ownership level and if such director does not hold the number of shares of our Class A common stock to meet the stock ownership requirements at any time thereafter, such director will be required to retain 100% of any shares of our Class A common stock held or received upon the vesting or settlement of equity awards or the exercise of stock options, in each case, net of shares sold to cover applicable taxes and the payment of any exercise or purchase price (if applicable). Further, following the Ownership Date, to the extent a non-employee director does not hold the number of shares of our Class A common stock that meets this threshold, such director will be automatically deemed to have elected to receive any cash retainer for service on our board of directors or a committee thereof in the form of shares of our Class A common stock in an amount that satisfies the threshold shortfall.
2021 Proxy Statement 23
In addition to the stock ownership guidelines described above, no director may transfer any shares of restricted stock granted pursuant to our director compensation policy that was effective between January 2014 and May 2019, whether the shares of restricted stock are vested or not, while such person is a director of Ironwood, subject to limited exceptions.
We believe our stock ownership guidelines and other transfer restrictions ensure that the interests of our directors, each of whom has equity in the business, are aligned with those of our stockholders and further focus our directors on maximizing long-term value.
24 Ironwood
PROPOSAL NO. 1—ELECTION OF DIRECTORS
Proposal No. 1 |
Our board recommends that you vote for eachIn furtherance of theClass III phased-in board declassification process described elsewhere in this proxy statement under the caption Board Size and Terms, our board of directors up for election.
Our board has nominated each of our current Class IIII directors—Messrs. OwensDrs. Currie and DreyfusDenner and Ms. McHugh—Mr. Duane—and Class II directors—Mses. Kessler and Moukheibir, Dr. Olanoff and Mr. Shepard—for election at the 20192021 annual meeting. Each of Drs. Currie, Denner and Olanoff, Messrs. OwensDuane and DreyfusShepard and Ms. McHughMses. Kessler and Moukheibir has indicated his or her willingness to serve if elected and has consented to be named in the proxy statement. Should any nominee become unavailable for election at the annual meeting, the persons named on the enclosed proxy card as proxy holders may vote all proxies given in response to this solicitation for the election of a substitute nominee chosen by our board.board of directors.
Vote Required
The threeseven nominees for director with the highest number of affirmative votes will be elected as directors to serve for three yearsone year and until their successors are duly elected and qualified or until their death, resignation or removal. Because there is no minimum vote required, abstentions and broker non-votes will not affect the outcome of this proposal.
2021 Proxy Statement 27
Who We Are |
The following table sets forth certain information, as of April 22, 2021, with respect to each of our executive officers.
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Name | Age | Position(s) | |||
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Gina Consylman, CPA | | 49 | Senior Vice President, Chief Financial Officer | ||
Thomas McCourt | 63 | President and Interim Chief Executive Officer | |||
Jason Rickard | | 50 | Senior Vice President, Chief Operating Officer | ||
Michael Shetzline, M.D., Ph.D. | 62 | Chief Medical Officer, Senior Vice President and Head of Drug Development | |||
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GINA CONSYLMAN, CPA Senior Vice President, Chief Age: 49 Joined Ironwood 2014 | • Ms. Consylman has served as our senior vice president, chief financial officer since November 2017. Ms. Consylman previously served as our interim chief financial officer from September 2017 to November 2017, and as our vice president of finance and chief accounting officer from August 2015 to November 2017. She also previously served as our vice president, corporate controller and chief accounting officer from 2014 to 2015. • Prior to joining Ironwood, Ms. Consylman served as vice president, corporate controller and principal accounting officer of Analogic Corporation, or Analogic, (which was acquired by funds affiliated with Altaris Capital Partners, LLC) from 2012 to 2014, where she oversaw Analogic's global accounting team. • Prior to joining Analogic, Ms. Consylman served in various finance roles at Biogen Inc., or Biogen, from 2009 to 2012, culminating in her service as senior director, corporate accounting where she was responsible for the accounting teams for the corporate and U.S. commercial business units. • Before joining Biogen, Ms. Consylman also served as corporate controller at Varian Semiconductor Equipment Associates, Inc. (subsequently acquired by Applied Materials, Inc.) • Ms. Consylman currently serves on the board of directors and chair of the audit committee of Verastem, Inc. and as a member of the board of directors and member of the audit committee of Assembly Biosciences, Inc. Ms. Consylman, a Certified Public Accountant, began her career in public accounting at Ernst & Young LLP. She holds a B.S. in accounting from Johnson & Wales University and a M.S. in taxation from Bentley University. |
28 Ironwood
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THOMAS McCOURT President and Interim Chief Age: 63 Joined Ironwood 2009 | • Mr. McCourt has served as our president since April 2019 and as our interim chief executive officer since Mr. Mallon's resignation in March 2021. Prior to April 2019, Mr. McCourt served as our senior vice president of marketing and sales and chief commercial officer since joining Ironwood in 2009. • Prior to joining Ironwood, Mr. McCourt led the U.S. brand team for denosumab at Amgen Inc. from 2008 to 2009. Prior to that, Mr. McCourt was with Novartis AG from 2001 to 2008, where he directed the launch and growth of ZELNORM™ for the treatment of patients with IBS-C and CIC and held a number of senior commercial roles, including vice president of strategic marketing and operations. • Mr. McCourt was also part of the founding team at Astra-Merck Inc., leading the development of the medical affairs and science liaison group and then serving as brand manager for PRILOSEC® and NEXIUM®. • Mr. McCourt serves on the board of directors of Acceleron Pharma Inc., including as a member of the audit committee and the chair of the nominating and governance committee, and on the board of trustees for the American Society of Gastrointestinal Endoscopy (ASGE). Mr. McCourt has a degree in pharmacy from the University of Wisconsin. |
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JASON RICKARD Senior Vice President, Chief Age: 50 Joined Ironwood 2012 | • Mr. Rickard has served as our chief operating officer since April 2020. Prior to his appointment as the company's senior vice president, chief operating officer, Mr. Rickard had been the company's senior vice president, operations since July 2018, in which capacity he led the company's manufacturing, pharmaceutical development, quality, human resources, information technology and facilities functions. Before becoming senior vice president, operations, Mr. Rickard served as the company's vice president global operations and information technology from July 2015 to July 2018; vice president global operations from 2014 to July 2015; vice president commercial manufacturing supply chain from 2013 to 2014; and head of supply chain from 2012 to 2013. • Prior to joining Ironwood, Mr. Rickard was with Genentech, Inc. from 2000 to 2012 in roles of increasing responsibility in manufacturing and supply chain. Mr. Rickard began his career as a mechanical engineer at AMOT Controls Corporation. • Mr. Rickard holds an M.S. from California State University—Sacramento and a B.S. from California State University—Chico, both in mechanical engineering. |
2021 Proxy Statement 29
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MICHAEL SHETZLINE, M.D., Ph.D. Chief Medical Officer, Senior Vice Age: 62 Joined Ironwood 2019 | • Dr. Shetzline has served as our chief medical officer, senior vice president and head of drug development since January 2019. Dr. Shetzline is a gastroenterologist and internist, with more than 25 years of experience in the biopharmaceutical industry and academia. • Before joining Ironwood, Dr. Shetzline was vice president and head of gastroenterology clinical sciences at Takeda Pharmaceuticals International Co., or Takeda, a global pharmaceutical company, where he led global clinical development for all GI assets from January 2015 to January 2019. • Prior to Dr. Shetzline's role at Takeda, Dr. Shetzline served as vice president and global head of gastroenterology at Ferring International Pharmascience Center U.S., Inc., or Ferring, from 2012 to January 2015, during which he led Ferring's clinical development programs in gastroenterology. Before that, Dr. Shetzline was vice president and global program head crossing multiple therapeutic areas and head of translational medicine GI discovery at Novartis Pharmaceuticals AG from 2002 to 2012. • Dr. Shetzline also served as gastroenterology program director and assistant professor of medicine at Duke University Medical Center from 1997 to 2002. Dr. Shetzline has published over 40 full papers and book chapters and acted as a reviewer for a range of medicine journals. • Dr. Shetzline earned his M.D. and Ph.D. from The Ohio State University in physiology and medicine. Dr. Shetzline completed his internal medicine residency and fellowship in gastroenterology and served on the faculty as a National Institutes of Health supported physician scientist at Duke University Medical Center. • Dr. Shetzline is a Fellow of the American College of Physicians, the American College of Gastroenterology, and the American Gastroenterological Association and certified by the American Board of Internal Medicine. |
30 Ironwood
EXECUTIVE COMPENSATION
Table of Contents
Compensation Discussion and Analysis
Compensation Highlight: Performance-based Restricted Stock Units |
Our executive equity compensation program continued to evolve in 2020 and 2021. One key highlight is the addition of performance-based restricted stock units, or PSUs, granted to our named executive officers.
In 2020, PSUs replaced stock options in our 2020 executive compensation program to further tie executive compensation to corporate performance and stockholder value. The PSUs awarded in March 2020 may be earned over a two to three-year performance period based on corporate achievement in three categories: (1) gaining the U.S. FDA acceptance of one or more additional NDAs through internal development or acquisition of development-stage or commercial-stage programs, (2) achieving cumulative adjusted organic EBITDA goals, and (3) realizing specified levels of relative stockholder return, or rTSR.
In 2021, to further tie the compensation of our named executive officers to stockholder value, our compensation and HR committee determined to have an rTSR performance goal as the sole PSU performance metric in our 2021 executive equity compensation program, as measured over a three-year performance period against an expanded peer group.
Additional information on PSUs awarded to our named executive officers in 2020 and 2021 is provided under the respective captions 2020 Annual Equity Awards and 2021 Annual Equity Awards, below.
Stockholder Engagement and Say-On-Pay Vote Consideration |
Feedback from stockholders is an essential part of our executive compensation decision-making process. Our company engages with many of our largest stockholders on an annual basis. We invite feedback on a wide variety of topics including corporate strategy, capital allocation, governance, and executive compensation. In 2020, senior management met with the majority of Ironwood's largest 20 stockholders, which represented over 85% of our outstanding shares as of December 31, 2020. In addition, Alexander J. Denner, Ph.D., who is the chief investment officer of Sarissa Capital Management LP, one of our largest stockholders, joined our board in November 2020.
Our stockholders also have the opportunity to cast a non-binding advisory vote on named executive officer compensation, or a "say-on-pay" vote, every year. This allows our stockholders to provide us with regular, timely and direct input on our executive compensation philosophy, policies and practices. We believe this enables us to further align our compensation programs with our stockholders' interests and to enhance our ability to consider stockholder feedback as part of our annual compensation review process. We sought stockholder input on our executive compensation program through the say-on-pay vote at our 2020 annual meeting of stockholders and approximately 84% of votes cast by our stockholders voted in support of our named executive officer compensation.
2021 Proxy Statement 31
Named Executive Officers: Goals and Accomplishments |
Named Executive Officers for 2020
This section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers who are named in theSummary Compensation Table, or our named executive officers. Provided below are material factors we believe are relevant to an analysis of these policies and decisions. Our named executive officers for 20182020 were:
Executive Summary
2018 was a year of extraordinary change at Ironwood. On May 1, 2018, we announced our intent toseparate our sGC business from our gastrointestinal, or GI, business and create two independent, publicly-traded companies (Ironwood and Cyclerion). On April 1, 2019, we announced the completion of this transaction. Effective upon the Separation, Mark Mallon became interim chief executive officer of Ironwood, succeeding Ironwood's co-founder Peter Hecht. Ironwood is now a GI-focused healthcare company. Mr. Mallon's compensation is disclosed on page 38. However, thiscompensation discussion and analysis primarily focuses on the compensation of our named executive officers with respect to 2018.
Our executive officer compensation program remains focused on linking the ultimate value of our executive's compensation to our stockholders' returns. With this philosophy,we seek to attract and motivate owner-oriented employees, align their interests with those of our stockholders and create long-term stockholder value. The three primary elements of our executive officer compensation program are base salary, cash bonus and long-term equity incentive compensation. Both annual bonus payments and the value of long-term equity incentive award grants are determined based on the achievement of pre-established performance goals. Long-term equity incentive compensation represents a significant percentage of each named executive officer's total direct compensation. We believe this emphasis on equity strongly reinforces the concept of "pay for performance," as the single largest component of pay is tied to future increases in the value of our stock. Additionally, in early 2019,we adopted a clawback policy that provides that our board of directors may recover from our current and former executive offers certain incentive compensation under certain conditions upon a financial restatement.
In addition, the pay opportunity in 2018 of our former chief executive officer, Dr. Hecht, demonstrated the strong alignment of our compensation program with our stock's performance. Pay opportunity includes base salary, target bonuses and grant-date fair value of stock options awarded in this time frame. Dr. Hecht has also consistently declined increases in his base salary and, until 2019, the receipt of cash bonuses, and he continued to earn the salary of $100,000 per year that he was first awarded 20 years ago in 1998.
Our performance in 2018 included the following achievements:
Successfully implemented a test market strategy for the lesinurad franchise, ultimately informing the decision to terminateMr. Rickard and Dr. Shetzline became executive officers of Ironwood effective April 17, 2020. Effective March 12, 2021, Mr. Mallon resigned from his position as Ironwood's chief executive officer and Mr. McCourt became our license agreement with AstraZeneca.
Goals and Accomplishments
In late 2019, our board, with input from senior management, established what it believed were challenging corporate performance goals for adults with IBS-C.
In determining compensation for our named executive officers, our compensation and HR committee emphasizes2020, the achievement of our corporate goals designed to drive and maximize stockholder value. We made strong progress in 2018, including the achievement of certain stretch goals. As a result,our 2018 company performance achievement multiplier, which we used as a key consideration in determining executive compensation for 2018 performance, was 100%, as determined by the compensation and HR committee.
Compensation Actions in 2019 and 2018
Summary
The following table summarizes the compensation actions taken by our compensation and HR committee for each of our named executive officers in recognition of the company's and his or her performance in 2018 and to motivate him or her to achieve our 2019 goals.
Name | Peter M. Hecht, Ph.D. | Gina Consylman | Mark G. Currie, Ph.D. | Thomas A. McCourt | William Huyett | |||||||||||
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Title | Former Chief Executive Officer | Chief Financial Officer and Senior Vice President | Former Senior Vice President, Chief Scientific Officer, and President of R&D | President | Former Chief Operating Officer | |||||||||||
Base salary increase | — | (1) | $ | 65,000 | $ | 15,000 | $ | 20,000 | $ | 20,000 | ||||||
2018 base salary | $ | 100,000 | $ | 415,000 | $ | 485,000 | $ | 465,000 | $ | 465,000 | ||||||
2019 base salary | $ | 100,000 | $ | 480,000 | $ | 500,000 | $ | 485,000 | $ | 485,000 | ||||||
Cash bonus(2) | $ | 1,192,500 | $ | 207,500 | $ | 242,500 | $ | 232,500 | $ | 232,500 | ||||||
Annual restricted stock units awarded(3) | — | 72,500 | — | — | 43,125 | |||||||||||
Annual stock options awarded(4) | 1,000,000 | 145,000 | 600,000 | 345,000 | 258,750 | |||||||||||
Additional restricted stock units awarded in connection with the Separation(5) | — | 12,000 | 12,000 | 12,000 | 12,000 |
Alignment of Pay and Performance for our Chief Executive Officer
Five-year Pay Opportunity vs. Five-year Realizable Pay
Because of our stock price performance, Dr. Hecht's realizable pay over the past five years has significantly trailed his disclosed pay opportunities as shown in the chart below. Dr. Hecht's realizable pay is approximately 8.5% of the pay opportunity provided to him from 2014 through 2018, reflecting the heavy emphasis on stock options during this period. The weighted average exercise price of his option grants for 2014 through 2018 is $14.01, as compared to our 2018 fiscal year-end closing stock price of $10.36 on December 31, 2018. Because the vast majority of Dr. Hecht's options were underwater at fiscal year-end, his realizable pay attributable to these awards as of such date totaled $106,800. Combined with his base salary of $100,000 per year and no cash bonus payouts during this
five-year period other than for 2018, which was paid in 2019, his total five-year realizable value as of our 2018 fiscal year-end was approximately $1.8 million.
Three-year Realizable Pay vs. Three-year Total Stockholder Return
Further, Dr. Hecht's total realizable pay from 2016 through 2018 shows a strong connection to our total stockholder return, or TSR, relative to our peer group, as shown in the graph below. Data points that are within the shaded area designate peer group companies that exhibit pay-for-performance alignment (meaning less than 25 percentage point difference between CEO realizable pay percentile and company TSR percentile).
This analysis shows that Dr. Hecht's realizable compensation compared to CEOs of our peer companies trailed our relative TSR position for 2016 through 2018. We believe this analysis is appropriate for assessing our pay and performance alignment for the following reasons:
Elements of Executive Compensation and Determination of Amounts
Short-and Long-Term Incentive Awards
For 2018, allocations of cash and equity awards were, in large part, dependent upon our meeting certain weighted corporate performance goals. We work thoughtfully with our compensation and HR committee and other members of our board of directors to establish what we believe are challenging corporate goals thatwould further the accomplishment of our long-term business plan. These goals included LINZESS net sales growth as well as the attainment of certain financial targets, in each case, based on the Company's board-approved operating plan for 2020. In early 2018,2020, our compensation and HR committee approved the relative weighting of our corporate performance goals for 2018.2020.
Dr. Hecht's performance evaluation wasOur named executive officers (except Mr. Mallon) were evaluated based primarily on the level of achievement of the 2018 corporate goals. Our other executive officers were evaluated on the achievement of the 20182020 corporate goals and their achievements in 2020, including additional individual goals that contributed toward, and related directly to, the accomplishment of the 20182020 corporate goals. OurThe compensation and HR committee and board determined to equate Mr. Mallon's individual performance with the company's overall corporate performance, and, as a result, assessed Mr. Mallon's performance based on the achievement of the 2020 corporate performance goals and accomplishments. Performance measured against the 20182020 corporate and individual goals (as applicable) was used, to determine compensationin part, in determining salary adjustments and cash bonus awards and adjustments for our named executive officers in early 2019. These2021.
As described in more detail elsewhere in this proxy statement under Compensation Determination Process, beginning in 2021, our board became responsible for assessing the Company's performance against its pre-determined corporate goals. Thus, in January 2021, our board determined that the 2020 company performance achievement multiplier, which was used as a key consideration in determining executive compensation awarded for 2020 performance, was 101%. When assessing corporate performance for 2020, our board noted that certain of our corporate goals andfor 2020 were met or exceeded despite the challenges posed by the COVID-19 pandemic. No COVID-19-related adjustments were made to goals, expectations or compensation targets for our actualnamed executive officers in 2020.
32 Ironwood
The level of achievement of theseagainst our 2020 corporate performance goals, as determined by our board in 2018, areearly 2021, was as follows:
Corporate Goal | Target Percentage (%) | Actual Level of Achievement (%) | |||||
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Maximize the impact of our products | 40 | % | 35 | % | |||
Create value from our innovative pipeline | 25 | % | 22 | % | |||
Driving value through our partnership choices | 20 | % | 5 | % | |||
Exercising financial discipline | 10 | % | 10 | % | |||
Leverage our talent, team and culture | 5 | % | 5 | % | |||
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Totals | 100 | % | 77 | % | |||
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Corporate Goal | Stockholder Impact | Achievements | Target Percentage (%) | Actual Level of Achievement (%) | |||||||
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Drive LINZESS Growth | Grows the revenue base | • Exceeded target U.S. LINZESS net sales of $892 million with compliance excellence • Obtained U.S. FDA approval of sNDA to include IBS-C overall abdominal symptoms data LINZESS label | 30 | % | 40 | % | |||||
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Advance our Pipeline | Advances future business growth and profitability | • Obtained Phase III data from IW-3718 program and made data-driven "go/no go" decision to discontinue development of IW-3718 • Obtained Phase II data from MD-7246 clinical trial ahead of schedule and made data-driven decision to discontinue development of MD-7246 | 30 | % | 30 | % | |||||
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Expand our impact in GI | Supports potential for long-term growth and profitability | • In connection with a U.S. disease education and promotional agreement with Alnylam Pharmaceuticals, Inc., Ironwood efforts contributed to >25 patients starting on GIVLAARI® (givosiran) treatment | 20 | % | 6 | % | |||||
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Invigorate Ironwood | Helps to attract, motivate and retain top talent | • Built new GI capabilities and expertise • Strengthened and advanced equality, diversity & inclusion (ED&I) initiatives | 5 | % | 5 | % | |||||
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Strengthen our financial profile | Enables Ironwood to invest thoughtfully without reliance on capital markets | • Exceeded target revenue of $372 million, target adjusted EBITDA* of $105 million, and target cash from operations of $135 million • Delivered 2nd full year of profitability | 15 | % | 20 | % | |||||
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Totals | 100 | % | 101 | % | |||||||
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Stretch Goals for Additional Potential Achievement | 50 | % | 0 | % | |||||||
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TOTALS | 150 | % | 101 | % | |||||||
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* Adjusted EBITDA from continuing operations was calculated by subtracting net interest expense, income taxes, depreciation, amortization, mark-to-market adjustments on derivatives related to Ironwood's 2.25% convertible notes due 2022, restructuring expenses, from GAAP net income (loss) from continuing operations.
2021 Proxy Statement 33
In addition tosupport of the above corporate goals, the company achieved certain stretch goals, including the progress made towards the Separation, as well as better-than-planned acceleration of our pipeline product candidates. The Separation was a transformative transaction that has the potential to unlock value for shareholders and was a substantial addition to the originally planned corporate activity. Therefore, the Separation and the other stretch goals achieved in connection with the acceleration of our pipeline resulted in a total company performance achievement multiplier of 100% for 2018, as determined by the compensation and HR committee.
In addition to the 20182020 corporate goals identified above, for whichat the beginning of 2020 as well as throughout 2020 in response to changes in the business, Mr. Mallon assigned ownership of a specific subset of goals to each of our named executive officers, was directly accountable, the following is a summary of the 2018 individual goals for our named executive officers set in early 2018, other than Dr. Hecht:as follows:
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Name | Summary of Individual Goals | |||
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Gina Consylman | •
• Generate cash from operations, requiring substantial management judgment and • Evaluate inorganic opportunities in effort to • Lead corporate strategy, investor relations and corporate communications activities to gain alignment on a refreshed corporate strategy | |||
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Thomas McCourt | • Deliver LINZESS net trade sales and total revenue targets • Grow the value of IW-3718 in refractory GERD and advance MD-7246 IBS-D pain program and additional early-stage pipeline assets • Maximize the value delivered from our salesforce optimizing our GIVLAARI partnership with Alnylam Pharmaceuticals, Inc. and securing an additional commercial product • Establish one new innovative payer contract working with our commercial partner for LINZESS, AbbVie, during 2020 in an effort to stabilize and ultimately improve net price • Build needed capabilities aimed at becoming the recognized leader in GI including optimizing our sales force, enhancing healthcare provider engagement, and certain talent upgrades | |||
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Jason Rickard | • Lead the company's response to the COVID pandemic* • Facilitate the smooth transition of all linaclotide international supply responsibilities to AstraZeneca AB and • Execute operations relative to IW-3718 and MD-7246 programs including pharmaceutical development, supply chain and GxP quality • Further IT operational efficiencies including optimizing certain enterprise systems • Lead the • Deliver on | |||
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Michael Shetzline, M.D., Ph.D. | •
• Obtain IW-3718 top-line Phase III data in refractory GERD, implementing programs to accelerate screening and participant recruitment and gaining U.S. FDA consent to certain trial design changes to strengthen the overall program • Make go / no go decision on IW-3718 based on the clinical outcomes with a • Complete the data analysis and make go / no go decision on MD-7246 based on the clinical outcomes with a thorough assessment on strategic implications under various scenarios • Co-lead the GI landscape assessment to • Establish a team of world class experts and trusted opinion leaders in | |||
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34 Ironwood
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In early 2019, Dr. Hecht2021, Mr. Mallon evaluated each named executive officer'sthe individual performance in 20182020 of each of the named executive officers (other than himself) and provided feedback and made recommendations to our compensation and HR committee. The committee then determined the named executive officers' compensation, taking into account Ironwood's level of achievement of its corporate goals as well asdetermined by our board and the fact that each named executive officer strongly met or exceeded all or substantially allperformance expectations for 2020, as well as peer group and other market data from the competitive assessment undertaken by our compensation and HR committee's independent compensation consultant, Aon, as discussed below.
Additional information on the basis for decisions about 2020 compensation relating to our named executive officers is available throughout this section and elsewhere in this proxy statement under the captions Role of his or her respective individual goals for 2018.the Compensation and HR Committee and Role of the Compensation Consultant: Benchmarking and Peer Group Analysis.
Compensation Decisions for 2020 and 2021 |
Named Executive Officer Compensation Program
As in prior years, the three primary elements of our executive compensation program are base salary, cash bonus and long-term equity incentive compensation.
Base Salary
Base salaries are determined at an executive's commencement of employment and are generally re-evaluated annually and adjusted, if warranted, to realign salaries with market levels or in connection with promotions or other changes in role and to reflect the performance of the named executive officer. In determining whether to adjust or recommend an adjustment to a named executive officer's base salary, our compensation and HR committee takes into consideration factors such as our corporate performance
in prior years, general economic factors and compensation parity among our named executive officers, as well as the abilities, performance and experience of ourthe named executive officers.officer. Our compensation and HR committee also reviews our named executive officers' past compensation at the company and market data.
Dr. Hecht's salary of $100,000 represents the salary that he has received since he began serving as chief executive officer Beginning in 1998, and his compensation was reviewed and approved annually by our compensation and HR committee. In each of January 2019 and January 2018,2021, our compensation and HR committee recommended an increase to Dr. Hecht's base salary to be market competitive with his peers, but Dr. Hecht declined to accept such increase. Ourrecommends, and our board approves, compensation determinations for our chief executive officer. Please see Role of the Compensation and HR committee recognizes that Dr. Hecht's cash compensation has been well below his market peers but believes thatCommittee and Role of the emphasis on stock ownership significantly aligns his interests with those of our stockholdersCompensation Consultant: Benchmarking and the creation of long-term stockholder value.Peer Group Analysis for further information.
In January 2018,2020, our compensation and HR committee reviewed and approved the following base salaries for 20182020 for our named executive officers other than Dr. Hecht: Dr. Currie received a $15,000 increase in base salary from $470,000 to $485,000Mr. Mallon, Ms. Consylman and Mr. McCourt received a $15,000 increase from $450,000 to $465,000.McCourt. The increaseincreases in base salary for each of Dr. CurrieMr. Mallon, Ms. Consylman and Mr. McCourt waswere based on our compensation and HR committee's determination that we achieved 84%130% of our corporate goals in 20172019 and, in the case of Ms. Consylman and Mr. McCourt, recognition of theirthat each meeting or exceedingexecutive far exceeded all or substantially all of theirher or his respective individual and corporate performance goals in 2017. This determinationfor 2019. These base salary determinations also took into account peer group and other market data from the PMAon competitive assessment discussed below. Ms. Consylman'sIn addition, the increase in base salary reviewed and approved byfor Mr. McCourt in 2020 includes an adjustment to better align his base salary with the external market in his role as the company's president. In April 2020, the compensation and HR committee in November 2017, remained $415,000 for 2018 due to the substantial completion of calendar year 2017 at the time of her promotion to senior vice president and chief financial officer. Mr. Huyett's initial base salary, reviewedalso ratified and approved by2020 base salaries for Mr. Rickard and Dr. Shetzline, in connection with their respective designation as executive officers of the company. In ratifying and approving Mr. Rickard and Dr. Shetzline's respective base salaries, our compensation and HR committee considered a number of factors, including each of Mr. Rickard and Dr. Shetzline's backgrounds, the compensation paid to executives in December 2017, was $465,000. Mr. Huyett did not receive an increase insimilar positions at our peer group companies and other benchmark data, and executive compensation parity within Ironwood, as well as input from Aon.
2021 Proxy Statement 35
Base salary information for 2020 compared to base salary due to the short periodinformation for 2019 for our named executive officers, as applicable, is as follows:
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Named Executive Officer | | 2019 Base Salary | | 2020 Base Salary | | Increase ($) | | Increase (%) | | ||||||||||||
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Mark Mallon | | | $ | 750,000 | | | | $ | 772,500 | | | | $ | 22,500 | | | | 3 | % | | |
Gina Consylman | | | $ | 480,000 | | | | $ | 494,400 | | | | $ | 14,400 | | | | 3 | % | | |
Thomas McCourt | | | $ | 520,000 | | | | $ | 556,400 | | | | $ | 36,400 | | | | 7 | % | | |
Jason Rickard | | | * | | | | $ | 456,750 | | | | * | | | | * | | | |||
Michael Shetzline, M.D., Ph.D. | | | * | | | | $ | 448,050 | | | | * | | | | * | | | |||
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* Mr. Rickard and Dr. Shetzline became executive officers of time between his joining Ironwood and our compensation and HR committee's 2018 base salary review.effective April 17, 2020.
In January 2019,February 2021, our compensation and HR committee reviewed and approved the following base salaries for 2019 for our named executive officers other than Dr. Hecht: Ms. Consylman received a $65,000 increase infor 2021. Base salary information for 2021 compared to base salary from $415,000 to $480,000, Dr. Currie received a $15,000information for 2020 for each of our named executive officers is as follows:
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Named Executive Officer | | 2020 Base Salary | | 2021 Base Salary | | Increase ($) | | Increase (%) | | ||||||||||||
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Gina Consylman | | | $ | 494,400 | | | | $ | 509,400 | | | | $ | 15,000 | | | | 3 | % | | |
Thomas McCourt | | | $ | 556,400 | | | | $ | 573,200 | | | | $ | 16,800 | | | | 3 | % | | |
Jason Rickard | | | $ | 456,750 | | | | $ | 484,200 | | | | $ | 27,450 | | | | 6 | % | | |
Michael Shetzline, M.D., Ph.D. | | | $ | 448,050 | | | | $ | 484,000 | | | | $ | 35,949 | | | | 8 | % | | |
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The compensation and HR committee did not recommend, and the board did not increase, inMr. Mallon's base salary in 2021 because Mr. Mallon had provided notice of his intent to resign from $485,000 to $500,000,the company at the time salary determinations for 2021 were made. Information on Mr. McCourt received a $20,000 increase from $465,000 to $485,000, and Mr. Huyett received a $20,000 increase in base salary from $465,000 to $485,000. The increase in baseMcCourt's salary for Ms. Consylmanhis service as our interim chief executive officer beginning in 2019 includes adjustments to better align her base salary withMarch 2021 is available elsewhere in this proxy statement under the external market and her internal peers.caption Chief Executive Officer Transition.
Cash Bonus
Our cash bonus program is designed to reward the achievement of our annual corporate goals and in the case of our executive officers other than Dr. Hecht, individual goals. The program is also intended to foster and support our performance-driven culture by setting clear, high-value goals, rewarding outstanding performers and making sure our employees know clearly that we value their contributions. Each cashtarget bonus award, expressed as a percentage of an executive's base salary, is madedetermined annually and is based on the extent to which we achieved our corporate goals for the preceding year, as well as the executive's individual performance in that year against his or her individual goals. In 2018, consistent with 2017, each2020, Mr. Mallon's target bonus was 75% of ourhis base salary, Ms. Consylman's target bonus was 50% of her base salary, and Mr. McCourt's target bonus was 60% of his base salary. Upon their designation as executive officers had ain April 2020, the compensation and HR committee ratified and approved Mr. Rickard and Dr. Shetzline's target bonus target ofpercentages for 2020, which for Mr. Rickard was 50% of his or herbase salary and for Dr. Shetzline was 40% of his base salary. We believe that these target bonus percentages align the target cash compensation of our named executive officers with that of our peers, place appropriate emphasis on achievement of our annual performance objectives and facilitate both recruiting, retaining and motivating our executive officers.
Additionally, for36 Ironwood
For each of our named executive officers, other than Dr. Hecht, 70% of each cash bonus award paid in 20192021 for 20182020 performance was based solely on the achievement of our corporate goals and 30% was based on the named executive officer's achievement of his or her individual goals, which, as described above for named executive officers other than Mr. Mallon, included specific accountability for certain of our corporate goals and our executive officers' individual
goals. Therefore, to calculate the bonus amount payable, the bonus target was multipliedIn recommending for approval by the companyboard the amount of Mr. Mallon's cash bonus to be paid in 2021 for 2020 performance, our compensation and HR committee equated Mr. Mallon's individual performance to the company's 2020 performance achievement multiplier of 101%. The board reviewed and 30%followed this recommendation in approving Mr. Mallon's cash bonus award for 2020 performance, which he remained eligible to receive as a result of that figure was further modified by multiplying such amount bybeing employed as our chief executive officer on the executive officers' individual performance achievement multiplier. This approach was intended to closely aligndate cash bonus awards to the achievement of our corporate goals, while taking into account individualfor 2020 performance and providing structure and clarity to the calculation of our executive bonuses. Aswere paid in 2017, in 2018 the company performance achievement multiplier was between 0% and 150% and the individual performance achievement multiplier was between 0% and 200%. 2021.
The following summarizes the calculation of our named executive officers' cash bonus awards paid in 20192021 for 2018 performance, other than Dr. Hecht:2020 performance:
| | | | | | | | | | | | | | | | | | |
Component Calculation | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
Company Performance Only Component (Weighted 70%) | 70% Weighting | × | Target Bonus | |||||||||||||||
× | Achievement Multiplier | |||||||||||||||||
= | Only Component Payout | |||||||||||||||||
+ | ||||||||||||||||||
Company and Individual Performance Component (Weighted 30%) | 30% Weighting | × | Target Bonus | × | Corporate Performance Achievement Multiplier | × | Individual Performance Achievement Multiplier | = | Company and Individual Performance Component Payout | |||||||||
| | | | | | | | | | | | | | | | | | |
Total Annual Bonus Payout | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
This approach was intended to closely align cash bonus award payouts with the achievement of our corporate goals, while taking into account individual performance (or, in the case of Mr. Mallon, equating company performance with individual performance) and making bonus determinations in a transparent way. As described above, the company performance achievement multiplier for 2020 was 101%. In January 2019,February 2021, our compensation and HR committee determined that each of our named executive officers, other than Mr. Mallon, strongly met or exceeded performance expectations for 2020, resulting in the following individual performance achievement multipliers and bonus ratios to target bonus percentage (after applying the 70%/30% weighting and taking into account the company performance achievement multiplier of 101%): Ms. Consylman, 120% individual performance, resulting in actual bonus to target bonus ratio of 107%; Mr. McCourt, 120% individual performance, resulting in actual bonus to target bonus ratio of 107%; Mr. Rickard, 140% individual performance, resulting in actual bonus to target bonus ratio of 113%; and Dr. Shetzline, 125% individual performance, resulting in actual bonus to target bonus ratio of 109%. As described above, our compensation and HR committee also recommended and our board determined that Mr. Mallon's individual performance achievement multiplier was 101% on the basis that such multiplier was equal to the corporate performance achievement multiplier of 101%. The compensation and HR committee (or the board, in the case of Mr. Mallon) reviewed and approved the following bonuses for 20182020 performance for our named executive officers other than Dr. Hecht, each of whom met or exceeded all or substantially all of their respective individual goals for 2018:officers:
Executive Officer | Annual Cash Bonus for 2018 Performance | |||
---|---|---|---|---|
Gina Consylman | $ | 207,500 | ||
Mark G. Currie, Ph.D. | $ | 242,500 | ||
Thomas A. McCourt | $ | 232,500 | ||
William Huyett | $ | 232,500 |
| | | | |||
Named Executive Officer | | Annual Cash Bonus for 2020 Performance | | |||
| | | | |||
Mark Mallon | | | $ | 585,169 | | |
Gina Consylman | | | $ | 264,652 | | |
Thomas McCourt | | | $ | 357,409 | | |
Jason Rickard | | | $ | 258,338 | | |
Michael Shetzline, M.D., Ph.D. | | | $ | 194,588 | | |
| | | |
2021 Proxy Statement 37
In January 2019, Dr. Hecht was awarded aaddition to the annual cash bonus for 2020 performance described above, in January 2020, Dr. Shetzline received a payment of $1,192,500 based primarily$100,000, reflecting the second installment of his sign-on bonus under the terms of his employment offer letter.
Long-Term Equity Awards
Long-term equity incentive compensation granted in 2020 represented, on average, approximately 70% of each named executive officer's total compensation for the year (based on the achievementgrant date fair value of 100%equity awards, with PSU awards measured at target). We believe this emphasis on equity, and particularly performance-based equity, strongly reinforces the principle of "pay for performance", and closely ties our 2018 corporate goals, including certain stretch goals. While our compensation and HR committee has historically granted Dr. Hecht stock options in lieu of an increaseexecutives' pay outcomes to base salary and cash bonus, and to keep his overall compensation competitive with that of his peers, Dr. Hecht accepted a portion of his compensation in the form of the aforementioned cash payment, rather than stock options, due to limitations on annual equity grants to individuals under our equity incentive plans.
Annual Equity Awards
stockholder value creation. We also use equity awards as our incentive vehicle for long-term compensation to attract, reward and motivateretain our named executive officers and to align the interests of our named executive officers with those of stockholders. We typically grant equity awards in a manner that best aligns their interests withthe first quarter of each year based on our stockholders' interests.performance in the prior year. Throughout the year, our compensation and HR committee may award additional grants as circumstances warrant. Our compensation and HR committee does not apply a rigid formula in allocating equity awards to our named executive officers as a group or to any particular named executive officer, but sets thean equity pool each year based on achievement of our corporate goals. Individual equity award amounts are then determined based on, amongpeer group and other factors,market data from the Aon competitive assessment discussed below. In addition to peer group and market data, and our compensation and HR committee adjusts these amounts after consideringalso considers other factors, including input from PM, relative company performanceAon and in the caseamount of our executive officers other than Dr. Hecht, individual performance.
Historically, we have granted such awards in February or March of each year based on our performance in the prior year. Ourunvested equity held by a named executive officers have a choiceofficer, in determining the size of the composition of their annualindividual equity awards and can select from the following choices: 100% stock options; 75% stock options and 25% RSUs; or 50% stock options and 50% RSUs. Throughout the year,awards.
2020 Annual Equity Awards
In 2020, our compensation and HR committee may award additional grants as circumstances warrant.
Tabledecided to introduce PSUs into our 2020 executive equity compensation program in an effort drive accountability to achieve key milestones and deliver stockholder returns. In introducing PSUs in 2020 and providing for an equal number of Contents
We believe that time-based stock options are inherently performance-based, as they provide valuePSUs and RSUs to the recipient only if there is future stock price appreciation and do not provide any value if the stock price declines below the exercise price. This results in a close alignment of our named executive officers' compensation, particularly that of Dr. Hecht, withofficers, the value of our long-term stockholders' investment in Ironwood. Dr. Hecht has long been a substantial stockholder in the company, currently beneficially owning nearly 3.5% of our total outstanding stock as of April 2, 2019 (as calculated in the beneficial ownership table beginning on page 6).
In January 2018, our compensation and HR committee determinedsought to design a 2020 executive equity compensation program that we achieved 84%provides the appropriate combination of equity awards to incentivize performance, align executive interests with those of our 2017 corporate goals. Dr. Hecht was granted an annualstockholders, and encourage executive retention.
To facilitate the transition in 2020 from the use of stock option award of 390,000 shares based primarilyoptions, which vested on this achievement of our corporate goals, as well as an additional stock option award of 190,000 shares in lieu of a cash bonusmonthly basis, to PSUs, which were subject to two or salary increase. Ms. Consylman, Dr. Currie and Mr. McCourt met or exceeded all or substantially all of their respective individual goals in 2017. Each ofthree year performance periods, 2020 RSU grants to our named executive officers other than Dr. Hecht was awarded the following stock option and RSU awards based on performance during 2017:
Executive Officer* | 2018 Annual Stock Option Grant for 2017 Performance (# of Shares of Common Stock Subject to Stock Options) | 2018 Annual RSU Grant for 2017 Performance (# of Shares of Common Stock Subject to RSUs) | |||||
---|---|---|---|---|---|---|---|
Gina Consylman | 60,000 | 30,000 | |||||
Mark G. Currie, Ph.D. | 215,000 | — | |||||
Thomas A. McCourt | 131,250 | 21,875 |
These stock options and RSUs were granted on February 21, 2018 under our 2010 Plan. The stock options have an exercise price of $14.55 per share (the closing price of our common stock on the Nasdaq Global Select Market on the grant date).
In connection with Ms. Consylman's promotion to chief financial officer in November 2017, in January 2018, Ms. Consylman was granted an additional 15,000 stock options and 7,500 RSUs, each for shares of our common stock under our 2010 Plan. The stock options have an exercise price of $15.27 per share (the closing price of our common stock on the Nasdaq Global Select Market on the grant date). Subject to Ms. Consylman's continued employment with the company, (i) the stock options will vest monthly over four years as to 1/48th of the total shares following the date of Ms. Consylman's promotion, and (ii) the RSUs will vest as to 25%approximately 33% of the underlying shares on each approximate anniversary of the grant thereof.
Mr. Huyett was not eligible to receive an annual equity award in fiscal year 2018 due to the substantial completion of fiscal year 2017 when he joined Ironwood in December 2017, and instead received an initial grant in early fiscal year 2018. In January 2018, Mr. Huyett was granted 337,500 stock options and 56,250 RSUs. The stock options have an exercise price of $15.27 per share (the closing price of our common stock on the Nasdaq Global Select Market on the grant date). The stock options will vest over four years as to 25%date of the sharesaward. Performance goals underlying 2020 PSU awards must be achieved over a two to three-year performance period based, in part, on the first anniversary of Mr. Huyett's start date and as to 1/48th of the total shares each month thereafter for the next 36 months, and the RSUs will vest as to 25% of the award on each anniversary of the grant date.
In January 2019, our long-range operating plan. Our compensation and HR committee determined that we achieved 100%selected the following performance goals for our 2020 PSU awards, which were intended to drive executive accountability for delivering value to our stockholders:
38 Ironwood
Dr. Currie, Mr. McCourtThe 2020 PSUs use the following metrics, weighting and Mr. Huyett also met or exceeded all or substantiallyvesting opportunity:
| | | | | | | | | | |
Performance Metric | Weight | Performance Period | Threshold Goals (50% attainment) | Target Goals (100% attainment) | Stretch Goals (200% attainment) | |||||
| | | | | | | | | | |
NDA Acceptance PSUs | 40% | Ending December 2022 | N/A | Acceptance by the U.S. FDA of an NDA for IW-3718 or other internal or external development program | Acceptance by the U.S. FDA of two NDAs, including IW-3718 and/or other internal or external development programs | |||||
Adjusted EBITDA PSUs | 30% | 2020 - 2021 Cumulative Target | Threshold cumulative adjusted organic EBITDA through 2021 | Target cumulative adjusted organic EBITDA through 2021 | Stretch target cumulative adjusted organic EBITDA through 2021 | |||||
2020 rTSR PSUs | 30% | Ending December 2022 | rTSR at the 25th percentile compared to rTSR peer group through 2022 | rTSR at the 50th percentile compared to rTSR peer group through 2022 | rTSR at the 75th percentile compared to rTSR peer group through 2022 | |||||
| | | | | | | | | | |
Our compensation consultant, Aon, assisted our compensation and HR committee with assessing our profile and market characteristics versus several potential benchmarks and then identifying a peer group of commercial pharmaceutical and biotechnology companies for purposes of the 2020 rTSR PSUs. At the time they were designated, the peer group identified for the purposes of the 2020 rTSR PSUs ranged between $750 million and $10 billion in market capitalization; Ironwood's market capitalization at that time was at the 47th percentile relative to this custom peer group. Our compensation and HR committee then approved the following custom rTSR measurement peer group for the 2020 rTSR PSUs, which included all of our executive compensation peers at the time the custom rTSR peer group was designated:
2021 Proxy Statement 39
ACADIA Pharmaceuticals, Inc. | Ionis Pharmaceuticals, Inc. | |
Aerie Pharmaceuticals, Inc. | Jazz Pharmaceuticals plc | |
Agios Pharmaceuticals, Inc. | Karyopharm Therapeutics Inc. | |
Akcea Therapeutics, Inc. | Ligand Pharmaceuticals Incorporated | |
Akebia Therapeutics, Inc. | Momenta Pharmaceuticals, Inc. | |
Alkermes plc | OPKO Health, Inc. | |
Amicus Therapeutics, Inc. | Pacira BioSciences, Inc. | |
Amphastar Pharmaceuticals, Inc. | Perrigo Company plc | |
bluebird bio, Inc. | Portola Pharmaceuticals, Inc. | |
Blueprint Medicines Corporation | Prestige Consumer Healthcare Inc. | |
Catalent, Inc. | PTC Therapeutics, Inc. | |
Coherus BioSciences, Inc. | Radius Health, Inc. | |
Corcept Therapeutics Incorporated | Sage Therapeutics, Inc. | |
Eagle Pharmaceuticals, Inc. | Sarepta Therapeutics, Inc. | |
Emergent BioSolutions Inc. | Spectrum Pharmaceuticals, Inc. | |
Endo International plc | Supernus Pharmaceuticals, Inc. | |
Exelixis, Inc. | Taro Pharmaceutical Industries Ltd. | |
Flexion Therapeutics, Inc. | Theravance Biopharma, Inc. | |
GW Pharmaceuticals plc | Ultragenyx Pharmaceutical Inc. | |
Halozyme Therapeutics, Inc. | United Therapeutics Corporation | |
Heron Therapeutics, Inc. | Vanda Pharmaceuticals Inc. | |
Horizon Therapeutics Public Limited Company | Veracyte, Inc. | |
Insmed Incorporated | Vericel Corporation | |
Intercept Pharmaceuticals, Inc. | ||
| | |
40 Ironwood
In 2020, our named executive officers were granted the following equity awards under our 2019 Plan:
Named Executive Officer | | 2020 Annual PSU Grant (# of Shares of Class A common stock Subject to PSUs) (at target) | | 2020 Annual RSU Grant (# of Shares of Class A common stock Subject to RSUs) | | ||||||
| | | | | | ||||||
Mark Mallon | | | 221,061 | | | | 221,061 | | | ||
Gina Consylman | | | 68,327 | | | | 68,327 | | | ||
Thomas McCourt | | | 100,482 | | | | 100,482 | | | ||
Jason Rickard | | | 60,289 | | | | 60,289 | | | ||
Michael Shetzline, M.D., Ph.D. | | | 48,875 | * | | | 48,875 | * | | ||
| | | | | |
* Comprised of 28,135 PSUs and 28,135 RSUs granted in February 2020, as well as an additional 20,740 PSUs and 20,740 RSUs granted in April 2020 in connection with Dr. Shetzline's designation as an executive officer of the company. The compensation and HR committee approved this additional award based on Aon's input and in order to further align Dr. Shetzline's unvested equity position with that of the other executive officers. The PSUs and RSUs granted to Dr. Shetzline in April 2020 were subject to the same terms as described above related to equity grants to named executive officers in 2020.
In connection with their respective individual goalsdesignation as executive officers of the company in 2018. Accordingly,April 2020, the compensation and HR committee ratified and approved the PSU and RSU grants listed above for Mr. Rickard and Dr. Shetzline.
As of the date of this proxy statement, none of the PSUs granted in January2020 had vested.
2021 Annual Equity Awards
In early 2021, our compensation and HR committee again determined, as it had in 2020, that the annual long-term equity incentive compensation awards for our named executive officers should consist of an approximately even number of PSUs and RSUs. The compensation and HR committee chose rTSR performance as the sole PSU performance metric in our 2021 executive equity compensation program to further tie the compensation of our named executive officers to stockholder value. Aon assisted the compensation and HR committee with identifying a peer group specifically for purposes of the rTSR measurement goal related to the PSUs granted in 2021, or the 2021 rTSR PSUs, which group differed from the peer group selected for the 2020 rTSR PSUs. At the time they were designated, the peer group identified for the purposes of the 2021 rTSR PSUs consisted of commercial pharmaceutical and biotechnology companies that ranged between $750 million and $10 billion in market capitalization; Ironwood's market capitalization at that time was at the 39th percentile relative to this custom peer group. Our compensation and HR committee then approved the following custom rTSR measurement peer group for the 2021 rTSR PSUs, which included all of our executive compensation peers with the exceptions of Akcea Therapeutics, Inc., which was acquired, and Horizon Therapeutics plc, which had exceeded the market capitalization range at the time the 2021 rTSR PSU peer group was designated:
2021 Proxy Statement 41
ACADIA Pharmaceuticals, Inc. | Jazz Pharmaceuticals plc | |
Acceleron Pharma Inc. | Karyopharm Therapeutics Inc. | |
Agios Pharmaceuticals, Inc. | Kronos Bio, Inc. | |
Alkermes plc | Ligand Pharmaceuticals Incorporated | |
Amarin Corporation plc | MannKind Corporation | |
Amicus Therapeutics, Inc. | MiMedx Group, Inc. | |
Amphastar Pharmaceuticals, Inc. | Neurocrine Biosciences, Inc. | |
Biohaven Pharmaceutical Holding Company Ltd. | Ocular Therapeutix, Inc. | |
bluebird bio, Inc. | Omeros Corporation | |
Blueprint Medicines Corporation | OPKO Health, Inc. | |
Coherus BioSciences, Inc. | Pacira BioSciences, Inc. | |
Corcept Therapeutics Incorporated | Perrigo Company plc | |
Deciphera Pharmaceuticals, Inc. | Prestige Consumer Healthcare Inc. | |
Emergent BioSolutions Inc. | PTC Therapeutics, Inc. | |
Endo International plc | Radius Health, Inc. | |
Epizyme, Inc. | Revance Therapeutics, Inc. | |
Esperion Therapeutics, Inc. | Sage Therapeutics, Inc. | |
Exelixis, Inc. | Sorrento Therapeutics, Inc. | |
Global Blood Therapeutics, Inc. | Supernus Pharmaceuticals, Inc. | |
GW Pharmaceuticals plc | Taro Pharmaceutical Industries Ltd. | |
Halozyme Therapeutics, Inc. | Theravance Biopharma, Inc. | |
Harmony Biosciences Holdings, Inc. | United Therapeutics Corporation | |
Heron Therapeutics, Inc. | Veracyte, Inc. | |
Insmed Incorporated | Vericel Corporation | |
Intercept Pharmaceuticals, Inc. | Viela Bio, Inc. | |
Ionis Pharmaceuticals, Inc. | Zogenix, Inc. | |
| | |
In February 2021, our named executive officers (other than Mr. Mallon) were granted RSUs and, in March 2021, our named executive officers (other than Mr. Mallon) were granted PSUs, in each case under our 2019 Plan. Unlike the RSUs granted in 2020, which vest in equal installments over three years to facilitate a transition in 2020 away from stock options that vested on a monthly basis, RSUs granted in 2021 vest as to approximately 25% of the underlying shares on each approximate anniversary of the grant date of the award, which is the vesting schedule typically used for RSU awards granted to employees. As stated previously, the 2021 PSU awards are subject to a single rTSR performance goal, which is measured over a three-year performance period ending December 31, 2023.
42 Ironwood
The RSU and PSUs granted to our named executive officers (other than Mr. Mallon) in February and March of 2021, respectively, were as follows:
Named Executive Officer | 2021 Annual PSU Grant (# of Shares of Class A common stock Subject to PSUs) (at target) | 2021 Annual RSU Grant (# of Shares of Class A common stock Subject to RSUs) | |||||
| | | | | | | |
Gina Consylman | | 84,541 | | 84,951 | |||
Thomas McCourt | 144,927 | 145,631 | |||||
Jason Rickard | | 84,541 | | 84,951 | |||
Michael Shetzline, M.D., Ph.D. | 57,971 | 58,252 | |||||
| | | | | | | |
In making its determinations with respect to the size of equity awards awarded to each of our named executive officers, other than Dr. Hecht was awarded the following stock option and RSU awards under our 2010 Plan based on performance during 2018:
Executive Officer | 2019 Annual Stock Option Grant for 2018 Performance (# of Shares of Common Stock Subject to Stock Options) | 2019 Annual RSU Grant for 2018 Performance (# of Shares of Common Stock Subject to RSUs) | |||||
---|---|---|---|---|---|---|---|
Gina Consylman | 145,000 | 72,500 | |||||
Mark G. Currie, Ph.D. | 600,000 | — | |||||
Thomas A. McCourt | 345,000 | — | |||||
William Huyett | 258,750 | 43,125 |
The stock options have an exercise price of $12.90 per share (the closing price of our common stock on the Nasdaq Global Select Market on the grant date).
Ms. Consylman, Dr. Currie, Mr. McCourt, and Mr. Huyett were each granted 12,000 RSUs in July 2018 in recognition of service to the company in connection with work critical to the Separation. Subject to continued service with the company, the RSUs will vest in full on May 9, 2019.
Executive Severance Agreements
Our board, through our compensation and HR committee periodically assesses our executive severance arrangements to, among other things, ensure that such benefits are competitive with those of our peers. In 2018, our compensation and HR committee made the determination to amend and restate the severance arrangements with each of our executive officers the terms of which had been in place since 2015. Our compensation and HR committee, following discussions with PM, believed the existing severance arrangements were not consistent with those in ourtook into account peer group and other market data from the Aon competitive assessment discussed below, as well as other factors including each executive's current equity holdings, expected future contributions and retention. Mr. Mallon did not reflect our compensation structure, whichreceive equity awards in 2021 because he had historically been more heavily weightedprovided notice of his intent to resign from the company at the time annual equity over cash. We believe the amended and restated arrangements better align our executive severance practices with those of our peers, which is particularly important as we seek to recruit top talent from companies like our peers, to retain our key executives and to foster our performance-driven culture aimed at setting and achieving aggressive, high-value goals.awards were granted.
UnderExecutive Severance Agreements and Benefits in the amended and restatedEvent of a Change of Control
The severance arrangements that we have with our named executive officers, are eligible to receive certain payments andas well as other benefits provided in the event of an involuntary termination without "cause" or a "constructive termination" (each as defined belowchange of control, are described elsewhere in this proxy statement under the captioncaptions Named Executive Officer Severance Arrangements and Benefits in the Event of a Change of Control and Potential Payments Upon Termination or Change of Control—Named Executive Officer Severance Arrangements), and enhanced payments and benefits in the event of a "change of control termination" (as defined below under the captionPotential Payments Upon Termination or Change of Control—Named Executive Officer Severance Arrangements)Control. TheseSeverance benefits are only payable if the named executive officer has complied with all of our rules and policies, has executed a separation agreement that includes a release of claims and complies with his or her post-employment non-disclosure, non-competitionnondisclosure, noncompetition and non-solicitation obligations.
We believe that offering these payments and benefits assists us in recruiting, retaining and motivating executive officers, facilitates the operation of our business, allows our named executive officers to better focus their time, attention and capabilities on our business, and provides for a clear and consistent approach to managing involuntary departures with mutually understood separation benefits. A further description of the severance arrangements is set forth below under the captionPotential Payments Upon Termination or Change of Control—Named Executive Officer Severance Arrangements.
Other Compensation
We maintain broad-based benefits, that are provided to all employees, including health insurance, life and disability insurance, dental insurance, fitness and transportation stipends, and a 401(k) plan with a 75% matching company contribution on the first $8,000 of an employee's annual contribution.contribution, which are provided to all employees.
We also maintain a relocation program under which we make certain benefits available to newly hired and existing employees, including our named executive officers, who are relocating to accept a new position with Ironwood.the company. Our relocation program covers reasonable expenses associated with the move and certain relocation services, including, as applicable, temporary housing assistance payments and a lump-sum relocation allowance, departure home sale assistance, rental assistance, new home search assistance, home purchase assistance, moving of household goods and vehicles assistance, and reimbursement of final trip expenses to the new area. We also provide tax assistance to our relocating employees to cover the costs associated with certain non-deductible relocation expenses, as we believe that this benefit is important to our ability to attract and motivate employees. Under our relocation program, participants are required to pay back the full amount of all relocation reimbursements in the event that they voluntarily terminate their employment or are terminated for "cause" within 12 months following the payment datespecified repayment periods.
2021 Proxy Statement 43
Table of their last relocation reimbursement.Contents
Other than our broad-based benefits, or as otherwise described herein, none of our named executive officers receive perquisites of any nature.
Compensation to Mark MallonChief Executive Officer Transition
Effective March 12, 2021, Mr. Mallon who was recruited to become theresigned from his position as our chief executive officer of Ironwood following the completion of the Separation, joined the company on January 4, 2019. In order to compensate him, in part, for outstanding equity he forfeited by leaving his previous employer and to align his interests with shareholders, his initial compensation includes certain one-time cash and equity awards. The terms of his offer letter provide for the following:
Mr. Mallon became chief executive officer of Ironwood on April 1, 2019did not receive severance in connection with the completiontermination of his employment. In addition, Mr. Mallon forfeited 282,231 options, 354,796 RSUs and 221,061 PSUs in connection with his resignation.
In connection with his appointment as interim chief executive officer effective upon Mr. Mallon's resignation, our compensation and HR committee recommended and our board determined to increase Mr. McCourt's annual base salary from $573,200 to $775,000 and to increase Mr. McCourt's annual cash incentive bonus target from 60% (of $573,200) to 75% (of $775,000). The increase in annual base salary and annual cash incentive bonus target was intended to align Mr. McCourt's compensation for his service as our interim chief executive officer with Mr. Mallon's compensation as our chief executive officer. Mr. McCourt's increased salary and annual cash incentive bonus target will remain in place for a minimum of six months and for so long as Mr. McCourt is serving as our interim chief executive officer. Mr. McCourt's severance arrangements and benefits in the event of a change of control did not change in connection with his appointment as interim chief executive officer. In making its recommendations to the board relating to these compensation changes for Mr. McCourt's service as our interim chief executive officer, the compensation and HR committee considered competitive market practice and a desire to recognize Mr. McCourt for his willingness to assume the interim chief executive officer role and the increased responsibility associated with such role.
2021 Retention Awards
In light of Mr. Mallon's resignation as the company's chief executive officer in March 2021, in an effort to promote business continuity, our compensation and HR committee approved a cash retention bonus and an RSU retention award to our other four named executive officers who remained employed with the company on the date of the Separation. Per his offer letter, upon becoming CEO he received an additional option to purchase 423,049 shares of our common stock and an additional grant of 206,873 RSUs. As with his initial equity grant, 25%grant. Cash retention bonuses were valued at 50% of the options vest onnamed executive officer's 2021 base salary, and RSU awards were valued at 33% of each executive officer's 2021 annual equity target. In establishing the first anniversarysize of these grants, Aon presented market data and assisted our compensation and HR committee with approximating the value that another organization could potentially offer as a sign-on grant to recruit our executive talent relative to the current, unvested Ironwood equity held by our named executive officers.
Cash retention bonuses were awarded in the following amounts: Mr. McCourt (whose cash and RSU retention grants were made in his start date,capacity as president, and not as interim chief executive officer) received a cash retention bonus of $286,600, Ms. Consylman received a cash retention bonus of $254,700, Mr. Rickard received a cash retention bonus of $242,100 and Dr. Shetzline received a cash retention bonus of $242,000. The cash retention bonuses are payable in two equal payments with 1/48th50% of the total shares vestingcash retention bonus paid in September 2021 and 50% of the cash retention bonus paid in June 2022, subject to the officer remaining an employee of the company in good standing on each month thereafter forpayment date. Each executive also will receive both payments in the next 36 months,event of an involuntary termination of employment prior to June 1, 2022.
RSU retention awards were made in the following amounts: Mr. McCourt received 96,638 RSUs, Ms. Consylman received 56,372 RSUs, Mr. Rickard received 56,372 RSUs and Dr. Shetzline received 38,665 RSUs. The RSU retention awards are subject to provisions relating to the RSUs vestacceleration of time-based equity awards under each executive officers' severance agreement, as described elsewhere in this proxy statement under the captions Executive Severance Agreements and Benefits in the Event of a Change of Control and Potential Payments Upon Termination or Change of Control.
44 Ironwood
Executive Officer Stock Ownership Guidelines
Following a competitive assessment of market data related to 25%executive officer stock ownership requirements provided by Aon and guidance published by Investor Advisory Service, in October 2020, our compensation and HR committee recommended and, in December 2020, our board approved, Executive Officer Stock Ownership Guidelines. We believe our Executive Officer Stock Ownership Guidelines further align the interests of our executive officers with those of our stockholders and also incentivize executive officers to focus on maximizing long-term value.
Our Executive Officer Stock Ownership Guidelines, which apply to each of our executive officers as defined in the Exchange Act, provide that our chief executive officer is required to hold shares of the award per year onCompany's Class A common stock with a value equal to at least four (4) times his or her annual base salary and that other executive officers are required to hold shares of the first four anniversariesCompany's Class A common stock with a value equal to one (1) times his or her annual base salary. Executive officers are required to achieve the applicable level of ownership by the later of December 2025 (five years from the date of adoption of the Executive Officer Stock Ownership Guidelines) or the fifth anniversary of the date a person was initially designated as an executive officer of grant. This grant was madethe Company. Shares that count towards satisfaction of the Executive Officer Stock Ownership Guidelines include, among other forms of ownership, shares held outright by the executive officer or a member of his or her immediate family and the in-the-money value of vested stock options and certain other vested and unvested equity awards (other than unearned performance-based awards), net of applicable taxes and the exercise price (if applicable).
Compliance with the stock ownership requirements will be measured on April 1, 2019, the effective date of the Separation.
In addition, the company has entered into an indemnification agreement and an executive severance agreement with Mr. Mallon, the terms of each of which are consistent with the forms of indemnification agreement and executive severance arrangements described elsewhere in this proxy statement. Mr. Mallon's compensation will be included in the Summary Compensation Table next year in the 2020 proxy statement.
Shareholder Engagement and Say-on-Pay Vote Consideration
Our stockholders have the opportunity to cast an advisory (non-binding) vote on named executive officer compensation, or a "say-on-pay" vote, every year. This allows our stockholders to provide us with regular, timely and direct input on executive compensation philosophy, policies and practices. We believe this enables us to further align our compensation programs with our stockholders' interests and to enhance our ability to consider stockholder feedback as part of our annual compensation review process. We sought stockholder input with last year's say-on-pay vote at our 2018 annual meeting of stockholders andover 95% of votes castthe company each year based on the annualized salary then in effect for each officer. Failure to comply with the Executive Officer Stock Ownership Guidelines will (among other things, as may be determined by our stockholders voted in supportthe compensation and HR committee) require executive officers to retain at least 100% of our named executive officer compensationthe shares, net of applicable tax withholding and the payment of any exercise or purchase price (if applicable), received upon the vesting or settlement of equity awards or the exercise of stock options.
Basis for Our Compensation Policies and Decisions |
.Our Values and Goals
In addition to the formal say-on-pay vote, our senior management frequently meets with stockholders informally through regular investor relations channels to discuss topics important to our business, including Ironwood's corporate strategy, capital allocation, governance and executive compensation. In 2018, senior management met with nearly all of Ironwood's largest 20 stockholders, representing approximately 90% of our outstanding shares. We believe that these discussions are essential to understanding the topics that are most important to our stockholders and play a critical role in developing and executing our strategy.
Basis for Our Compensation Policies and Decisions
Compensation Philosophy
The objective of our compensation policies is to provide compensation and incentives that align employee actions and motivations with the interests of our stockholders; attract, retain, motivate and reward outstanding talent across Ironwood through well-communicated programs that are aligned with our core valuesvision and business mission; and support a positive company culture.
Our core values are:
In addition, we have incorporated the concept of "critical success factors" into our performance management and compensation philosophy that we believe provide a useful framework for being a productive and successful member of our team. Among other uses, these success factors enable managers to use a common language of expected behaviors upon which individual performance can be managed and evaluated.
We are guided by the following principles with respect to our compensation determinations:
2021 Proxy Statement 45
Executive Compensation Governance
Highlighted procedures and tools that we use to ensure effective governance of compensation plans and decisions include:
46 Ironwood
directors' recovery rights under this policy will be without prejudice to other remedies the company may have for the recovery or adjustment of incentive compensation. Additionally, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws as a result of misconduct, our chief executive officer and chief financial officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002.
Compensation Determination Process
Historically, our compensation and HR committee has determined our corporate performance for the prior year and also approved the compensation of all executive officers, including our chief executive officer. In December 2020, the board approved updates to our corporate governance guidelines and the charter of the compensation and HR committee to provide that, beginning in 2021, (i) our board would assess the Company's corporate performance and (ii) our compensation and HR committee would recommend, and our board would approve, the compensation determination for our chief executive officer. In determining the compensation of our chief executive officer, the board deliberates and votes on the chief executive officer's compensation outside of the presence of the chief executive officer, and the chief executive officer and any other non-independent directors abstain from such determination. Our compensation and HR committee and board similarly followed this process in 2021 in determining compensation for Mr. McCourt that specifically related to his service as our interim chief executive officer.
In January 2021, our board met and, following the recusal of non-independent directors, our board approved our corporate goal achievement for 2020. Following the board's corporate goal assessment, our compensation and HR committee evaluated the performance of our executive officers (other than Mr. Mallon), including performance against goals and objectives relevant to such executive officers' compensation, and then approved salary increases, cash bonuses and equity awards for our executive officers (other than Mr. Mallon). The compensation and HR committee similarly evaluated Mr. Mallon's performance and made a recommendation to the board relating to Mr. Mallon's bonus for 2020 performance; the compensation and HR committee did not make a recommendation as to go forward compensation for Mr. Mallon as Mr. Mallon had indicated his intent to resign at the time compensation decisions were made. In making these compensation-related decisions or recommendations for 2020 performance, our compensation and HR committee considered the competitive assessment prepared by Aon, as described in more detail below, as well as the other factors described in this Compensation Discussion and Analysis.
At its meeting in March 2021, following the recusal of non-independent directors, the board voted on Mr. Mallon's 2020 bonus; Mr. Mallon was not present for the board's deliberation on his 2020 bonus.
The compensation and HR committee also approves our bonus pool, which is calibrated based on corporate performance, and our equity pools, which are calibrated for competitive market practice, and assigns a portion of each of these pools to all of our employees other than our executive officers. Prior to Mr. Mallon's resignation, the compensation and HR committee delegated allocation of these portions to an RSU committee, which was comprised only of Mr. Mallon; following Mr. Mallon's resignation, allocation decisions will be made by members of senior management designated by our compensation and HR committee.
Our compensation and HR committee also evaluates our compensation policies and individual compensation determinations are evaluated annually, and we taketaking into consideration our results of operations, our long-long and short-term goals, individual goals, market data, the competitive market for our executive officers and general economic factors. Additionally, our compensation and HR committee or board (in the case of the determinations relating to chief executive officer compensation) may recommend or decide, as appropriate, to modify the mix or amount of base salary, bonus, and long-term incentives to best fit an executive
2021 Proxy Statement 47
officer's specific circumstances or, if warranted by competitive market conditions, to attract, retain and motivate skilled personnel. For example, our compensation and HR committee may recommend or decide, and our board may decide with respect to our chief executive officer, to grant additional equity awards to an executive officer if that officer receives a base salary or cash bonus award significantly below that of his or her counterparts in our peer group, despite successful attainment of our corporate goals or his or her individual goals. We believe that this discretion and flexibility allows our compensation and HR committee and board (in the case of determinations of our chief executive officer's compensation) to better achieve our compensation objectives.
Role of the Compensation and HR Committee
As set forth in our compensation and HR committee'sits written charter, our compensation and HR committee has the responsibility for evaluating the performance of our executive officers, taking into account the determination of our board with respect to our corporate performance; reviewing and approving the compensation of our executive officers; annuallyofficers (other than our chief executive officer); reviewing and determiningrecommending to the board our chief executive officer's compensation based on the committee's evaluation of his performance;compensation; recommending to the full board the adoption of new compensation plans; administering our existing plans; reviewing and recommending director and committee compensation to the full board; reviewing and overseeing our Executive Officer Stock Ownership Guidelines; overseeing succession planning for our senior management.management; and reviewing risks associated with our compensation policies and practices. In addition, our compensation and HR committee is responsible for ensuring that our compensation policies are aligned with our compensation philosophy and guiding principles.
In 2018,2020, our compensation and HR committee made all of the compensation determinations with respect to each of our 2020 named executive officers. In making its determinations with respectofficers, including ratifying and approving compensation paid or awarded to Mr. Rickard and Dr. Hecht,Shetzline prior to their designation as executive officers of the company in April 2020. As described above, beginning in 2021, our compensation and HR committee took into account the feedback from the other membersrecommended, and our board approved, compensation determinations for Mr. Mallon, including compensation determinations made in recognition of our board,performance in 2020, as well as the feedback from eachcompensation determinations for Mr. McCourt in 2021 in respect of his service as our otherinterim chief executive officers, and a number of other members of our management team. officer.
In making its determinations with respect to each of our named executive officers other(other than Dr. Hecht,Mr. Mallon) relating to compensation for performance in 2020, our compensation and HR committee took into account the feedback and recommendations from Dr. Hecht,Mr. Mallon, as well as from the named executive officer's direct reports and other members of our management team.
The components of each of our named executive officer's initial compensation package was based on numerous factors, including:
48 Ironwood
Role of the Compensation Consultant: Benchmarking and Peer Group Analysis
Our compensation and HR committee has the authority to select and retain independent advisors and consultants to assist it with carrying out its responsibilities, and we are required to pay any related expenses approved by the committee. For 2018,In 2020, our compensation and HR committee exercised itssuch authority to engage Pearl Meyer & Partners, LLC, or PM,and engaged Aon as aits compensation consultant. PMAon reported directly to our compensation and HR committee throughout the period of its engagement. Other than the purchase of certain benefits surveys and employee compensation benchmarking data from Aon in 2020 and certain other accounting and consulting services related to equity plan matters, including forfeiture rate analysis, PSU award design and 2020 rTSR PSU valuation, Aon did not provide us with any services in 2020 other than those requested by our compensation and HR committee and the review of thisCompensation Discussion and Analysis for conformance with best practices. Based on the scope of our compensation and HR committee's engagements with PM,Aon, it was determined that PM doesAon did not have a conflict of interest in its role as compensation consultant under applicable rules.
In order to assist our compensation and HR committee in setting 20182020 and 2021 compensation, PMrespectively, Aon conducted a competitive assessmentassessments of 20172019 and 2020 target compensation for our named executive officers, which reflected that Dr. Hecht's target total cash compensation was well belowwith a focus on the median forfollowing components of our peer group companies. His equity-based compensation bridged this gap, placing his target total direct compensation within a competitive range of the peer group median. The assessment also reflected that target total direct compensation for our othernamed executive officers was below the peer group median in aggregate, but still within a competitive range. PM's assessment analyzed:officer compensation:
The table below reflectsIn conducting this assessment, Aon analyzed the components of our 2017 targetnamed executive officer compensation listed above, in comparison toeach case measured against the competitive assessment data.
| 2017 Target Compensation vs. Peer Group (pay as percent of median) | ||||||
---|---|---|---|---|---|---|---|
| Chief Executive Officer | Average for Other Executive Officers | |||||
Base Salary | 12 | % | 89 | % | |||
Target Total Cash Compensation | 9 | % | 87 | % | |||
Equity | 129 | % | 92 | % | |||
Target Total Direct Compensation | 107 | % | 93 | % |
25th, 50th and 75th percentiles of our executive compensation peer group. Our peer group is comprised of publicly traded companies in the pharmaceutical, biotechnology and life sciences industries that represent the most likely competitors for our executive talent. In recognition that our peer group companies tend to be larger than us (including with respect to revenues), PM also presented two alternative market perspectives to our compensation and HR committee:
Our compensation and HR committee reviewed the 25th, 50th and 75th percentiles for each of these three market perspectives to better understand how competitive pay varied with company size and other factors. PM also prepared an analysis of incentive program market trends, including analyses
of the short- and long-term elements of compensation as compared to those in our peer group, and a detailed equity usage and dilution analysis of Ironwood as compared with the companies in our peer group.
Our compensation and HR committee considered the results of PM's competitive assessment in evaluating compensation for 2018, and determined that no significant changes to the design of our executive officers' compensation were warranted. The results of PM's assessment have been, and will continue to be, taken into consideration when making compensation decisions, but will not be used to mandate any specific actions.
Our peer group, which was compiled by PM with input from our management team, our board, and our compensation and HR committee, is reviewedat least annually by our compensation and HR committee for composition and appropriateness. We take a rules-based approach in reviewing andcommittee. In setting our peer group, our compensation and applyHR committee applies a qualitative lens to the result to help focus the group on the companies with which we are competing for talent. WeOur compensation and HR committee first identifyidentifies a potential pool of peer companies from a number of sources, including the companies listing Ironwood in their peer groups and the other companies listed in such peer companies' peer groups, as well as companies included in third-partythird party peer group assessments. WeOur compensation and HR committee then considerconsiders certain size filters including market capitalization, revenue, and number of employees, and research and development expense, as well as certain business model filters including productcommercial focus, market capitalization and growth.
Our The peer group that Aon proposed and that the compensation and HR committee used as a reference point in connection with 2020 compensation decisions is composed of the following 1517 companies, which at the time ofthey were designated as our reviewpeer group had a median market capitalization of approximately $3.8
2021 Proxy Statement 49
$2.7 billion, median revenue of approximately $249 million, a median of approximately 545482 employees, and a commercial drug or drug candidate in later stage development:
Agios Pharmaceuticals, Inc. | Horizon Therapeutics plc | |
Akcea Therapeutics, Inc. | Intercept Pharmaceuticals, Inc. | |
Alkermes plc | ||
Amicus Therapeutics, Inc. | PTC Therapeutics, Inc. | |
bluebird bio, Inc. | Radius Health, Inc. | |
Blueprint Medicines Corporation | Supernus Pharmaceuticals, Inc. | |
United Therapeutics Corporation | ||
Corcept Therapeutics Incorporated | ||
| | |
Process for Determining Individual Compensation and Role of Executive Officers
Each January,In assisting our compensation and HR committee in conjunction with our senior management, finalizes itssetting 2020 compensation, Aon also presented proxy peer data and results from the Radford Global Life Sciences Survey, which was comprised of companies that represent a broader market perspective and similar employee population to us, and a Market Composite, which combined the peer group data and Radford Global Life Sciences Survey data by weighting each source equally. Although this competitive assessment of our corporate performance for the prior year. Upon completion of our goal assessment, our bonus and equity pools are calibrated for corporate performance and approved by ourwas not used to mandate any specific compensation and HR committee. Our compensation and HR committee assigns a portion of each of these pools to all of our employees other than our executive officers, and delegates the allocation of these portions to our chief executive officer and our chief financial officer. Our compensation and HR committee also approves any salary increase, cash bonus and equity awards for our chief executive officer and, in consultation with our chief executive officer, for each of our other executive officers. In making these compensation-related decisions, for 2018, our compensation and HR committee and senior management considered the competitiveresults of this assessment prepared by PMwhen making base salary, cash bonus and describedlong-term equity incentive award determinations with respect to our named executive officers in more detailearly 2020.
In October 2020, our compensation and HR committee re-approved the peer group listed above, which peer group the compensation and HR committee continued to use as well asa reference point in making decisions through the other factors described indate of this proxy statement.
Compensation DiscussionTax and Analysis.Accounting Considerations
Additionally,While our compensation and HR committee may decide, as appropriate, to modify the mix or amount of base salary, bonus, and long-term incentives to best fit an executive officer's specific circumstances or, if required by competitive market conditions, to attract and motivate skilled personnel. For example, our compensation and HR committee may decide to grant additional equity awards to an executive officer if that officer receives a base salary or cash bonus award significantly below that of his or her counterparts in our peer group or other market data reviewed by our compensation and HR committee, despite successful attainment of our corporate or his or her individual goals. We believe that this discretion and flexibility allows our compensation and HR committee to better achieve our compensation objectives.
Tax and Accounting Considerations
While our compensation and HR committee generally considersconsider the tax and accounting implications of its executive compensation decisions, neither element was a material consideration in the compensation awarded to our named executive officers in 2018.2020.
Executive Compensation Practices and Risk Assessment
Our compensation and HR committee hasengaged Aon to conduct a formal compensation risk assessment in December 2020. The compensation and HR committee then reviewed our 2020 compensation policies as generally applicable to our employees and believesdetermined that our policies dodid not encourage excessive and unnecessary risk-taking, and that the level of risk that they dodid encourage iswas not reasonably likely to have a material adverse effect on Ironwood. Our compensation and HR committee considered the following, among other factors, in reviewing our compensation policies:policies related to 2020 compensation:
50 Ironwood
Compensation Tables
Summary Compensation Table
The following table sets forth information regarding the compensation paid or accrued to, or earned by, each of our named executive officers during the years ended December 31, 2020, 2019 and 2018, 2017 and 2016.as applicable.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter M. Hecht, Ph.D. | 2018 | 100,000 | 1,192,500 | (4) | — | 3,842,268 | — | 25,348 | 5,160,116 | ||||||||||||||||
Former Chief Executive | 2017 | 100,000 | — | — | 5,887,416 | — | 8,040 | 5,995,456 | |||||||||||||||||
Officer | 2016 | 100,000 | — | — | 4,135,830 | — | 8,065 | 4,243,895 | |||||||||||||||||
Gina Consylman | 2018 | 415,000 | — | 782,385 | (5) | 501,764 | (6) | 207,500 | 8,040 | 1,914,689 | |||||||||||||||
Chief Financial Officer and | 2017 | 334,263 | — | 440,213 | — | 185,000 | 8,040 | 967,516 | |||||||||||||||||
Senior Vice President | 2016 | — | — | — | — | — | — | — | |||||||||||||||||
Mark G. Currie, Ph.D. | 2018 | 485,000 | — | 231,360 | 1,424,289 | 242,500 | 62,271 | 2,445,420 | |||||||||||||||||
Former Senior Vice President, | 2017 | 470,000 | — | — | 1,936,650 | 210,000 | 8,040 | 2,624,690 | |||||||||||||||||
Chief Scientific Officer and | 2016 | 454,000 | — | — | 1,092,045 | 301,000 | 8,040 | 1,855,085 | |||||||||||||||||
President of R&D | |||||||||||||||||||||||||
Thomas A. McCourt | 2018 | 465,000 | — | 549,641 | 869,479 | 232,500 | 34,002 | 2,150,622 | |||||||||||||||||
President | 2017 | 450,000 | — | 440,212 | 1,220,089 | 191,000 | 8,040 | 2,309,341 | |||||||||||||||||
2016 | 435,000 | — | — | 813,225 | 288,000 | 8,040 | 1,544,265 | ||||||||||||||||||
William Huyett* | 2018 | 465,000 | — | 1,090,298 | (7) | 2,346,469 | (8) | 232,500 | 8,040 | 4,142,307 | |||||||||||||||
Former Chief Operating | 2017 | — | — | — | — | — | — | — | |||||||||||||||||
Officer | 2016 | — | — | — | — | — | — | — |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position* | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Mark Mallon* | | 2020 | | 801,173 | | — | | 5,423,731 | | — | | 585,169 | | 11,040 | | 6,821,113 | |||||||||
Former Chief Executive | | 2019 | | 750,000 | | 880,000 | | 3,692,810 | | 3,804,331 | | 797,063 | | 144,596 | | 10,068,800 | |||||||||
Officer | | 2018 | | — | | — | | — | | — | | — | | — | | — | |||||||||
Gina Consylman | 2020 | 512,751 | — | 1,676,402 | — | 264,652 | 11,040 | 2,464,845 | |||||||||||||||||
Chief Financial Officer and | 2019 | 480,000 | 250,000 | 1,467,731 | 888,546 | 358,800 | 8,502 | 3,453,579 | |||||||||||||||||
Senior Vice President | 2018 | 415,000 | — | 782,385 | 501,764 | 207,500 | 8,040 | 1,914,688 | |||||||||||||||||
Thomas McCourt* | | 2020 | | 576,120 | | — | | 2,465,327 | | — | | 357,409 | | 11,040 | | 3,409,896 | |||||||||
President and Interim | | 2019 | | 511,250 | | — | | 1,760,143 | | 2,370,159 | | 454,272 | | 8,502 | | 5,104,327 | |||||||||
Chief Executive Officer | | 2018 | | 465,000 | | — | | 549,641 | | 869,479 | | 232,500 | | 34,002 | | 2,150,622 | |||||||||
Jason Rickard | 2020 | 473,314 | — | 1,479,191 | — | 258,338 | 11,040 | 2,221,883 | |||||||||||||||||
Chief Operating Officer and | 2019 | — | — | — | — | — | — | — | |||||||||||||||||
Senior Vice President | 2018 | — | — | — | — | — | — | — | |||||||||||||||||
Michael Shetzline, M.D., Ph.D. | | 2020 | | 464,681 | | 100,000 | (5) | | 1,121,001 | (6) | | — | | 194,558 | | 11,040 | | 1,891,310 | |||||||
Chief Medical Officer, Senior | | 2019 | | — | | — | | — | | — | | — | | — | | — | |||||||||
Vice President and Head of | | 2018 | | — | | — | | — | | — | | — | | — | | — | |||||||||
Drug Development Development | | | | | | | | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
to our consolidated financial statements for the year ended December 31, 20182020 included in our Annual Report on Form 10-K that we filed with the SEC on February 25, 2019, or our 2018 Form 10-K, and that accompanies this proxy statement.17, 2021. All values reported exclude the effects of potential forfeitures.
2021 Proxy Statement 51
Grants of Plan-Based Awards
The following table sets forth information regarding non-equity and equity awards granted to each of our named executive officers during the year ended December 31, 2018.2020. All non-equity incentive plan awards were made pursuant to our cash bonus program described in more detail aboveelsewhere in this proxy statement under the captionElements of Executive Compensation and Determination of Amounts—Cash Bonus.
We granted RSUs and stock option awardsPSUs to our named executive officers in 2018February 2020. We also granted Dr. Shetzline additional RSUs and PSUs in recognition of performance in 2017; in addition, each named executive officer, other than Dr. Hecht, was granted 12,000 RSUs in July 2018 in recognition of service to IronwoodApril 2020 in connection with work critical tohis designation as an executive officer of the Separation. company.
All RSUs and PSUs granted in 20182020 represented the right to receive shares of our Class A common stock and all stock options granted in 2018 consistedupon the vesting of options to purchase shares of our common stock with an exercise price equal to the fair market value of our common stock on the date of grant. All such equity awards were granted under our 2010 Plan.awards. The vesting schedule of each RSU and each optionsuch award included in the following table is described in the footnotes to theOutstanding Equity Awards at Fiscal Year-End table.
The following table reflects the conversion of our Class B common stock to Class A common stock, which was effective December 31, 2018.
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | | | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Compensation and HR Committee Approval Date (if different than Grant Date) | | All Other Option Awards: Number of Securities Underlying Options (#) | | | ||||||||||||||||
| | All Other Stock Awards: Number of Shares of Stock or Units (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||||||||||||||||
| Grant Date | |||||||||||||||||||||
Name | Target ($) | |||||||||||||||||||||
Peter M. Hecht, Ph.D. | 2/21/2018 | 1/25/2018 | — | — | 580,000 | 14.55 | 3,842,268 | |||||||||||||||
— | — | 50,000 | — | — | — | — | ||||||||||||||||
Gina Consylman | 1/2/2018 | (3) | 11/22/2017 | — | — | 15,000 | 15.27 | 104,288 | ||||||||||||||
2/21/2018 | 2/12/2018 | — | — | 60,000 | 14.55 | 397,476 | ||||||||||||||||
1/2/2018 | (3) | 11/22/2017 | — | 7,500 | — | — | 114,525 | |||||||||||||||
2/21/2018 | 2/12/2018 | — | 30,000 | — | — | 436,500 | ||||||||||||||||
7/31/2018 | (4) | 7/27/2018 | — | 12,000 | — | — | 231,360 | |||||||||||||||
— | — | 207,500 | — | — | — | — | ||||||||||||||||
Mark G. Currie, Ph.D. | 2/21/2018 | 2/12/2018 | — | — | 215,000 | 14.55 | 1,424,289 | |||||||||||||||
7/31/2018 | (4) | 7/27/2018 | 12,000 | — | — | 231,360 | ||||||||||||||||
— | — | 242,500 | — | — | — | — | ||||||||||||||||
Thomas A. McCourt | 2/21/2018 | 2/12/2018 | — | — | 131,250 | 14.55 | 869,479 | |||||||||||||||
2/21/2018 | 2/12/2018 | — | 21,875 | — | — | 318,281 | ||||||||||||||||
7/31/2018 | (4) | 7/27/2018 | — | 12,000 | — | — | 231,360 | |||||||||||||||
— | — | 232,500 | — | — | — | — | ||||||||||||||||
William Huyett | 1/2/2018 | (5) | 11/22/2017 | — | — | 337,500 | 15.27 | 2,346,469 | ||||||||||||||
1/2/2018 | (5) | 11/22/2017 | — | 56,250 | — | — | 858,938 | |||||||||||||||
7/31/2018 | (4) | 7/27/2018 | — | 12,000 | — | — | 231,360 | |||||||||||||||
— | — | 232,500 | — | — | — | — |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and HR Committee Approval Date (if different than | Estimated Future Payouts Under Non- Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3)(#) | All Other Stock Awards: Number of Shares of Stock or | Grant Date Fair Value of Stock | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Grant Date | Grant Date) | Target ($) | Threshold | Target | Maximum | Units (#)(4) | Awards ($)(5) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Mark Mallon | | 2/27/2020 | | 2/20/2020 | | — | | — | | — | | — | | 221,061 | | 2,630,626 | |||||||||
| | 2/27/2020 | | 2/20/2020 | | — | | 66,318 | | 221,061 | | 442,122 | | — | | 2,793,105 | |||||||||
| | — | | — | | 579,375 | | — | | — | | — | | — | | — | |||||||||
Gina Consylman | 2/27/2020 | 2/20/2020 | — | — | — | — | 68,327 | 813,091 | |||||||||||||||||
2/27/2020 | 2/20/2020 | — | 20,498 | 68,328 | 136,656 | — | 863,311 | ||||||||||||||||||
— | — | 247,200 | — | — | — | — | — | ||||||||||||||||||
Thomas McCourt | | 2/27/2020 | | 2/20/2020 | | — | | — | | — | | — | | 100,482 | | 1,195,736 | |||||||||
| | 2/27/2020 | | 2/20/2020 | | — | | 30,145 | | 100,482 | | 200,964 | | — | | 1,269,591 | |||||||||
| | — | | — | | 333,840 | | — | | — | | — | | — | | — | |||||||||
Jason Rickard | 2/27/2020 | — | (1) | — | — | — | — | 60,289 | 717,439 | ||||||||||||||||
2/27/2020 | — | (1) | — | 18,087 | 60,289 | 120,578 | — | 761,752 | |||||||||||||||||
— | — | 228,375 | — | — | — | — | — | ||||||||||||||||||
Michael Shetzline, | | 2/27/2020 | | — | (1) | | — | | — | | — | | — | | 28,135 | | 334,807 | ||||||||
M.D., Ph.D. | | 2/27/2020 | | — | (1) | | — | | 8,441 | | 28,135 | | 56,270 | | — | | 355,487 | ||||||||
| | 4/24/2020 | (6) | | 4/18/2020 | | — | | — | | — | | — | | 20,740 | | 213,207 | ||||||||
| | 4/24/2020 | (6) | | 4/18/2020 | | — | | 6,222 | | 20,740 | | 41,480 | | — | | 217,500 | ||||||||
| | — | | — | | 179,220 | | — | | — | | — | | — | | — | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
52 Ironwood
on the achievement of certain performance goals over a two or three-year performance period, as described elsewhere in this proxy statement under the caption 2020 Annual Equity Awards.
718, excluding the effects of potential forfeitures, with the grant date fair value of PSUs determined based on the probable outcome of the performance conditions (target) associated with such awards on the grant date. For a discussion of the assumptions used in the valuation of the time-based RSU awards and stock optionPSU awards granted to our named executive officers in 2018,2020, see footnote 1 to theSummary Compensation Table above.
2021 Proxy Statement 53
Outstanding Equity Awards at Fiscal Year-End
As described in our proxy statement relating to our 2020 annual meeting of stockholders, filed with the SEC on April 21, 2020, portions of certain Ironwood equity awards were converted into Cyclerion equity awards in connection with the Separation. The following table setstables set forth information regarding outstanding Ironwood and Cyclerion equity awards held by each of our named executive officers on December 31, 2018,2020, the last day of our last fiscal year. The following table reflectsInformation presented has been adjusted, as necessary, to reflect the conversionimpact of our Class B common stock to Class A common stock, which was effective December 31, 2018.the Separation.
Ironwood Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | |||||||||||||||
Peter M. Hecht, Ph.D. | 110,000 | — | — | 4.89 | 2/11/2019 | (3) | — | — | ||||||||||||||
20,000 | — | 20,000 | 5.48 | 7/28/2019 | (4) | — | — | |||||||||||||||
125,000 | — | — | 11.25 | 2/2/2020 | (3) | — | — | |||||||||||||||
175,000 | — | — | 11.11 | 2/1/2021 | (3) | — | — | |||||||||||||||
300,000 | — | — | 14.72 | 2/1/2022 | (3) | — | — | |||||||||||||||
375,000 | — | — | 13.08 | 2/1/2023 | (3) | — | — | |||||||||||||||
325,000 | — | — | 14.11 | 3/3/2024 | (5) | — | — | |||||||||||||||
553,229 | 11,771 | — | 15.62 | 3/16/2025 | (5) | — | — | |||||||||||||||
648,958 | 241,042 | — | 10.24 | 3/1/2026 | (5) | — | — | |||||||||||||||
364,166 | 395,834 | — | 16.77 | 2/27/2027 | (5) | — | — | |||||||||||||||
132,916 | 447,084 | — | 14.55 | 2/21/2028 | (5) | — | — | |||||||||||||||
Gina Consylman | 40,000 | — | — | 15.48 | 7/1/2024 | (6) | — | — | ||||||||||||||
8,322 | 178 | — | 15.62 | 3/16/2025 | (5) | — | — | |||||||||||||||
4,062 | 938 | — | 11.45 | 9/16/2025 | (5) | — | — | |||||||||||||||
21,875 | 8,125 | — | 10.24 | 3/1/2026 | (5) | — | — | |||||||||||||||
4,062 | 10,938 | — | 15.27 | 1/2/2028 | (5) | — | — | |||||||||||||||
13,750 | 46,250 | — | 14.55 | 2/21/2028 | (5) | — | — | |||||||||||||||
— | — | — | — | — | 81,749 | 846,920 | ||||||||||||||||
Mark G. Currie, Ph.D. | — | — | 20,000 | 5.48 | 7/28/2019 | (4) | — | — | ||||||||||||||
8,888 | — | — | 11.25 | 2/2/2020 | (3) | — | — | |||||||||||||||
41,041 | — | 11.11 | 2/1/2021 | (3) | ||||||||||||||||||
110,000 | — | — | 14.72 | 2/1/2022 | (3) | — | — | |||||||||||||||
200,000 | — | — | 13.08 | 2/1/2023 | (3) | — | — | |||||||||||||||
85,000 | — | — | 14.11 | 3/3/2024 | (5) | — | — | |||||||||||||||
25,000 | — | 25,000 | 15.62 | 3/16/2025 | (7) | |||||||||||||||||
128,515 | 2,735 | — | 15.62 | 3/16/2025 | (5) | — | — | |||||||||||||||
88,124 | 63,646 | — | 10.24 | 3/1/2026 | (5) | — | — | |||||||||||||||
119,791 | 130,209 | — | 16.77 | 2/27/2027 | (5) | — | — | |||||||||||||||
49,270 | 165,730 | — | 14.55 | 2/21/2028 | (5) | — | — | |||||||||||||||
— | — | — | — | — | 17,468 | 180,686 | ||||||||||||||||
Thomas A. McCourt | 90,000 | — | 40,000 | 5.48 | 9/7/2019 | (8) | — | — | ||||||||||||||
130,000 | — | — | 5.48 | 9/7/2019 | (6) | — | — | |||||||||||||||
20,000 | — | — | 11.25 | 2/2/2020 | (3) | — | — | |||||||||||||||
95,000 | — | — | 11.11 | 2/1/2021 | (3) | — | — | |||||||||||||||
95,000 | — | — | 14.72 | 2/1/2022 | (3) | |||||||||||||||||
110,000 | — | — | 13.08 | 2/1/2023 | (3) | — | — | |||||||||||||||
80,000 | — | — | 14.11 | 3/3/2024 | (5) | — | — | |||||||||||||||
95,468 | 2,032 | — | 15.62 | 3/16/2025 | (5) | — | — | |||||||||||||||
127,604 | 47,396 | — | 10.24 | 3/1/2026 | (5) | — | — | |||||||||||||||
75,468 | 82,032 | — | 16.77 | 2/27/2027 | (5) | — | — | |||||||||||||||
30,077 | 101,173 | — | 14.55 | 2/21/2028 | (5) | |||||||||||||||||
— | — | — | — | — | 57,624 | 596,985 | ||||||||||||||||
William Huyett | 84,375 | 253,125 | — | 15.27 | 1/2/2028 | (6) | — | — | ||||||||||||||
— | — | — | — | — | 54,187 | 561,377 |
| | | | | | | | | | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Share, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mark Mallon | | 92,349 | | 100,380 | | — | | 10.97 | | 1/9/2029 | (2) | | — | | — | | — | | — | |||||||||
| | 202,711 | | 200,338 | | — | | 14.02 | | 4/1/2029 | (2) | | — | | — | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | 221,061 | (8) | | 2,517,885 | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | 233,556 | (9) | | 2,660,203 | | | | | |||||||||
| | — | | — | | — | | — | | — | | — | | — | | 198,954 | (10) | | 2,266,086 | |||||||||
Gina Consylman | 43,563 | — | — | 13.78 | 7/1/2024 | (2) | ||||||||||||||||||||||
8,500 | — | — | 13.91 | 3/16/2025 | (3) | |||||||||||||||||||||||
5,077 | — | — | 10.20 | 9/16/2025 | (3) | |||||||||||||||||||||||
30,695 | — | — | 9.12 | 3/1/2026 | (3) | |||||||||||||||||||||||
12,374 | 3,862 | — | 13.60 | 1/2/2028 | (3) | |||||||||||||||||||||||
46,840 | 18,259 | — | 12.95 | 2/21/2028 | (3) | |||||||||||||||||||||||
76,947 | 84,857 | — | 11.49 | 1/29/2029 | (3) | |||||||||||||||||||||||
— | — | — | — | — | 41,150 | (7) | 468,699 | — | — | |||||||||||||||||||
— | — | — | — | — | 68,327 | (8) | 778,245 | — | — | |||||||||||||||||||
— | — | — | — | — | 87,429 | (9) | 995,816 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 61,494 | (10) | 700,417 | |||||||||||||||||||
Thomas McCourt | | 95,971 | | — | | — | | 13.11 | | 2/1/2022 | (4) | | | | | | | | | |||||||||
| | 110,962 | | — | | — | | 11.65 | | 2/1/2023 | (4) | | | | | | | | | |||||||||
| | 80,504 | | — | | — | | 12.56 | | 3/3/2024 | (3) | | | | | | | | | |||||||||
| | 97,500 | | — | | — | | 13.91 | | 3/16/2025 | (3) | | | | | | | | | |||||||||
| | 179,056 | | — | | — | | 9.12 | | 3/1/2026 | (3) | | | | | | | | | |||||||||
| | 162,331 | | 3,687 | | — | | 14.93 | | 2/27/2027 | (3) | | | | | | | | | |||||||||
| | 102,463 | | 39,941 | | — | | 12.95 | | 2/21/2028 | (3) | | | | | | | | | |||||||||
| | 183,082 | | 201,900 | | — | | 11.49 | | 1/29/2029 | (3) | | | | | | | | | |||||||||
| | 18,091 | | 27,613 | | — | | 11.78 | | 5/1/2029 | (3) | | | | | | | | | |||||||||
| | — | | — | | — | | — | | — | | 115,220 | (7) | | 1,312,356 | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | 100,482 | (8) | | 1,144,490 | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | 36,800 | (9) | | 419,152 | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | — | | — | | 90,435 | (10) | | 1,030,055 | |||||||||
Jason Rickard | 18,041 | — | — | 11.65 | 2/1/2023 | (3) | ||||||||||||||||||||||
7,754 | — | — | 11.76 | 6/10/2023 | (3) | |||||||||||||||||||||||
10,309 | — | — | 9.66 | 12/16/2023 | (3) | |||||||||||||||||||||||
40,834 | — | — | 12.02 | 11/3/2024 | (3) | |||||||||||||||||||||||
— | — | 11,236 | 13.11 | 2/1/2022 | (5) | |||||||||||||||||||||||
2,000 | — | — | 13.11 | 2/1/2022 | (6) | |||||||||||||||||||||||
15,550 | — | — | 13.91 | 3/16/2025 | (3) | |||||||||||||||||||||||
6,046 | — | — | 9.79 | 9/1/2025 | (3) | |||||||||||||||||||||||
17,956 | — | — | 9.12 | 3/1/2026 | (3) | |||||||||||||||||||||||
39,535 | 43,598 | — | 11.49 | 1/29/2029 | (3) | |||||||||||||||||||||||
5,426 | 8,285 | — | 11.78 | 5/1/2029 | (3) | |||||||||||||||||||||||
— | — | — | — | — | 41,153 | (7) | 468,733 | — | — | |||||||||||||||||||
— | — | — | — | — | 60,289 | (8) | 686,692 | — | — | |||||||||||||||||||
— | — | — | — | — | 60,616 | (9) | 690,416 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 54,261 | (10) | 618,033 | |||||||||||||||||||
Michael Shetzline, M.D., Ph.D. | | 44,418 | | 48,280 | | — | | 13.19 | | 3/1/2029 | (3) | | | | | | | | | |||||||||
| | — | | — | | — | | — | | — | | 43,869 | (7) | | 499,668 | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | 48,875 | (8) | | 556,686 | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | 11,586 | (9) | | 131,965 | | — | | — | |||||||||
| | — | | — | | — | | — | | — | | — | | — | | 43,989 | (10) | | 501,035 | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
54 Ironwood
2021 Proxy Statement 55
Options ExercisedCyclerion Equity Awards at Fiscal Year-End
The Cyclerion equity awards reflected in the following table were granted to Ms. Consylman and Messrs. McCourt and Rickard in connection with the Separation. Each Ironwood equity award that was converted into a Cyclerion equity award is subject to substantially the same terms and vesting conditions as were applicable to the Ironwood equity awards prior to the distribution. Neither Mr. Mallon nor Dr. Shetzline hold any Cyclerion equity awards.
| | | | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | |||||||
| | | | | | | | | | |
Gina Consylman | | 1,117 | | 17.05 | | 7/1/2024 | ||||
| | 850 | | 17.20 | | 3/16/2025 | ||||
| | 437 | | 12.61 | | 9/16/2025 | ||||
| | 2,437 | | 11.28 | | 3/1/2026 | ||||
| | 500 | | 16.82 | | 1/2/2028 | ||||
| | 1,875 | | 16.02 | | 2/21/2028 | ||||
| | 906 | | 14.21 | | 1/29/2029 | ||||
Thomas McCourt | 5,464 | 12.24 | 2/1/2021 | |||||||
8,713 | 16.21 | 2/1/2022 | ||||||||
10,221 | 14.40 | 2/1/2023 | ||||||||
7,591 | 15.54 | 3/3/2024 | ||||||||
9,750 | 17.20 | 3/16/2025 | ||||||||
14,218 | 11.28 | 3/1/2026 | ||||||||
8,859 | 18.47 | 2/27/2027 | ||||||||
4,101 | 16.02 | 2/21/2028 | ||||||||
2,156 | 14.21 | 1/29/2029 | ||||||||
Jason Rickard | | 200 | | 16.21 | | 2/1/2022 | ||||
| | 857 | | 14.40 | | 2/1/2023 | ||||
| | 543 | | 14.55 | | 6/10/2023 | ||||
| | 750 | | 11.95 | | 12/16/2023 | ||||
| | 3,324 | | 14.87 | | 11/3/2024 | ||||
| | 1,555 | | 17.20 | | 3/16/2025 | ||||
| | 562 | | 12.11 | | 9/1/2025 | ||||
| | 1,425 | | 11.28 | | 9/1/2026 | ||||
| | 465 | | 14.21 | | 1/29/2029 | ||||
| | | | | | | | | | |
56 Ironwood
Option Exercises and Stock Vested Table
The following table sets forth certain information regarding the exercise of options to purchase our Class A common stock and the vesting of RSUs that were held by our named executive officers during the year ended December 31, 2018. The following table reflects the conversion of our Class B common stock to Class A common stock, which was effective December 31, 2018.2020.
| Option Awards | Stock Awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | |||||||||
Peter M. Hecht, Ph.D. | — | — | — | — | |||||||||
Gina Consylman | — | — | 16,500 | 234,578 | |||||||||
Mark G. Currie, Ph.D. | 488,301 | (3) | 4,953,961 | 5,469 | 81,160 | ||||||||
Thomas A. McCourt | 30,000 | (4) | 435,600 | 10,625 | 157,675 | ||||||||
William Huyett | — | — | 14,063 | 169,881 |
| | | | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |
Option Awards | Stock Awards | ||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | |||||||||
| | | | | | | | | | | | | |
Mark Mallon | | — | | — | | 77,853 | | 839,334 | |||||
Gina Consylman | — | — | 45,435 | 535,562 | |||||||||
Thomas McCourt | | 119,988 | (3) | $ | 284,331 | | 19,232 | | 220,407 | ||||
Jason Rickard | — | — | 31,074 | 363,220 | |||||||||
Michael Shetzline, M.D., Ph.D. | | — | | — | | 3,863 | | 46,395 | |||||
| | | | | | | | | | | | | |
Potential Payments Upon Termination or Change of Control
Except as described below, there are currently no other agreements or arrangements pursuant to which our named executive officers would receive severance benefits in the event of a separation from Ironwood.
Named Executive Officer Severance Arrangements and Benefits in the Event of a Change of Control
We have entered into severance arrangements with each of our named executive officers. Under the severance arrangements, our named executive officers are eligible to receive certain payments and benefits in the event of an involuntary termination without "cause" or a "constructive termination,termination." andEach of our executives is also eligible to receive enhanced payments and benefits in the event of a change of control plus an actual or constructive involuntary termination of employment (such double trigger event, a "change of control termination" (as defined below)). For additional information, please see the definition of "change of control termination," below. The following descriptions reflect the payments and benefits that would have been payable to each of our named executive officers as of December 31, 2020 under their respective severance arrangements.
The benefits for our named executive officers described elsewhere in this proxy statement under the captions Severance Benefits not in Connection with a Change of Control and Change of Control Severance Benefits are only payable if the named executive officer complies with all of Ironwood's rules and policies, executes a separation agreement that includes a release of claims and complies with any post employment non-disclosure, non-competition and non-solicitation obligations. The executive severance agreements further provide that in connection with the sale of all or substantially all of the assets of Ironwood, Ironwood would cause the acquirer of such assets to assume the executives' severance arrangements.
2021 Proxy Statement 57
Severance Benefits not in Connection with a Change of Control
In the event of a termination without cause or a constructive termination not qualifying as a change of control termination, each of our named executive officers would be entitled to receive (i) a lump-sum payment equal to 12 months of his or her base salary for the year of termination, plus an amount equal to a maximum of six months of his or her base salary for anythe period beginning as of the first anniversary of his or her termination date, provided he or she has not secured new, reasonably similar full-time employment (for Dr. Hecht,our former chief executive officer, a lump-sum payment equal to 18 months of his base salary for the year of termination); (ii) a lump-sum payment equal to his or her target cash bonus for the year of termination, pro-rated based on the percentage of the year worked prior to the triggering event; (iii) a lump-sum payment equal to his or her actual bonus for the prior year if not yet paid as of the termination date; (iv) a lump-sum payment equal to his or her full target cash bonus for the year of termination (for Dr. Hecht,our former chief executive officer, multiplied by 1.5); (v) 12 months of subsidized COBRA benefits, plus up to an additional six months of subsidized COBRA benefits for anythe period beginning as of the first anniversary of his or her termination date, provided he or she has not been eligible to participate in the group medical plan of another employer (for Dr. Hecht,our former chief executive officer, 18 months of subsidized COBRA benefits); and (vi) outplacement assistance benefits. The non-equity based severance benefits described in items (i) through (vi) of this paragraph, collectively, are referred to as the "Non Equity Severance Benefits."
In addition, each executive severance agreement provides that any outstanding equity awards subject solely to time-based vesting would vest as to (1) the portion of the equity award that would have vested if the named executive officer had remained employed for 18 months (for Dr. Hecht,our former chief executive officer, 24 months) following the termination date and (2) an additional portion of the equity award that would have vested on the next regular vesting date after such 18-month period (for Dr. Hecht,our former chief executive officer, such 24-month24 month period) as if the equity award vested on a daily basis from the last regular award vesting date occurring prior to the end of the 18-month18 month period (for Dr. Hecht,our former chief executive officer, the 24-month24 month period) through such next regular vesting date. Any equity awards that do not vest pursuant to the preceding sentence would remain outstanding and eligible to vest upon the occurrence of a change of control termination (as defined below) in the time periods described below for such a termination. Further, the exercisability of any outstanding vested stock options held by the named executive officer as of the termination date (including, other than for our former chief executive officer and Dr. Shetzline, any vested options to purchase Cyclerion common stock that were granted in connection with the Separation in substitution for or replacement of vested options to purchase Ironwood Class A common stock) would be extended through the earlier of 24 months (for Dr. Hecht,our former chief executive officer, 36 months) following the termination date (or, in the event that Ironwood publicly announced it was conducting negotiations leading to a change of control or entered into a definitive agreement that would have resulted in a change of control during such 24-month24 month period (for Dr. Hecht,our former chief executive officer, such 36-month36 month period), the later of (i)(A) the expiration of the 24-month24 month period (for Dr. Hecht,our former chief executive officer, the 36-month36 month period) or (ii)(B) the first to occur of the date that is three months following the change of control and 30 days following the date on which Ironwood announced that such definitive agreement had been terminated or that Ironwood's efforts to consummate the change of control contemplated by the previously-announcedpreviously announced negotiations or by a previously executed definitive agreement had been abandoned) or the stock option's final expiration date. The equity-based severance benefits described in this paragraph are referred to as the "Equity Severance Benefits."
Moreover, with respect to PSUs, in the event of the named executive officer's involuntary termination without cause or constructive termination (collectively, a "qualifying termination"), the awards, to the extent then outstanding, will not terminate upon such termination of employment and instead will remain eligible to vest based on the attainment of the applicable performance goals. Specifically, the NDA Acceptance PSUs will generally remain outstanding and eligible to vest based upon the achievement of an NDA performance goal until
58 Ironwood
the earlier of (A) the end of the performance period or (B) the twelve (12)-month period following the date of the qualifying termination. The Adjusted EBITDA PSUs and the 2020 rTSR PSUs will generally remain outstanding and eligible to vest based upon the achievement of the cumulative adjusted organic EBITDA and rTSR performance goals, respectively, until the end of the applicable performance period, with the number of PSUs actually delivered subject to proration based on the number of days the named executive officer remained employed during the applicable performance period.
Change of Control Severance Benefits
In the event of a change of control termination, each of our named executive officers would be entitled to receive the following benefits under his or her executive severance agreement: (i)(1) a lump-sum payment in an amount equal to 18 months (for Dr. Hecht,our chief executive officer, 24 months) of his or her base salary as of the time of termination; (ii)(2) a lump-sum payment of his or her target cash bonus for the year of termination, pro-rated based on the percentage of the year worked prior to the triggering event; (iii)(3) a lump-sum payment equal to his or her actual bonus for the prior year if not yet paid as of the termination date; (iv)(4) a lump-sum payment equal to his or her full target cash bonus for the year of termination, multiplied by 1.5 (for Dr. Hecht,our former chief executive officer, multiplied by 2.0); (v)(5) 18 months (for Dr. Hecht,our former chief executive officer, 24 months) of subsidized COBRA benefits; and (vi)(6) outplacement assistance benefits.
In addition, in the event of a change of control termination, each executive severance agreement provides for acceleration of all outstanding equity awards subject solely to time-based vesting as of the later of (1) the termination date or (2) the change of control. Further, the exercisability of any outstanding vested stock options held by the named executive officer as of the termination date (including, other than for our former chief executive officer and Dr. Shetzline, any vested options to purchase Cyclerion common stock granted in connection with the Separation in substitution for or replacement of vested options to purchase Ironwood Class A common stock) would be extended through the earlier of 24 months (for Dr. Hecht,our former chief executive officer, 36 months) following the termination date (or, if later the date that was three months following the change of control) or the stock option's final expiration date.
Under each executive severance agreement, a "change of control termination" consists of an involuntary termination without "cause" or a "constructive termination" (each as defined in the agreement), in either event during the period commencing six months prior to the earlier of (1) the date that Ironwood first publicly announces it is conducting negotiations leading to a change of control, or (2) the date that Ironwood enters into a definitive agreement that would result in a change of control, and ending on the earlier of (i)(A) the date on which Ironwood announces that the definitive agreement has been terminated or the negotiations have been abandoned or (ii)(B) the date that is 24 months after the change of control. Under each executive severance agreement, a change of control occurs when: (i)(I) any person becomes, pursuant to a transaction or a series of transactions not approved by the Ironwood board of directors, the beneficial owner, directly or indirectly, of Ironwood securities representing more than 50% of the total voting power; (ii)(II) a merger or consolidation of Ironwood occurs, whether or not approved by the Ironwood board of directors, which results in the holders of Ironwood's voting securities holding less than 50% of the combined voting power of the surviving entity immediately after such merger or consolidation; (iii)(III) the sale or disposition of more than two-thirds of the assets of Ironwood; or (iv)(IV) the date a majority of members of the Ironwood board of directors is replaced during any 12-month period by directors whose appointment or election was not endorsed by a majority of members of the Ironwood board of directors before the date of the appointment or election.
Treatment of PSUs in the Event of a Change of Control
In the event of a change of control of Ironwood, the performance- and service-based vesting conditions applicable to the PSUs, to the extent then outstanding, will generally be treated as follows: the NDA Acceptance
2021 Proxy Statement 59
PSUs and Adjusted EBITDA PSUs will become earned at target (and subject to vesting as described below) as of immediately prior to the change of control, provided that if the NDA Acceptance PSUs had already been earned at target as of the change of control, no additional portion of such NDA Acceptance PSUs will become earned as a result of the change of control. The benefits2020 rTSR PSUs will become earned at target (and subject to vesting as described below) as of immediately prior to the change of control, provided that if the resulting rTSR percentile rank, determined after accounting for the stock price performance of Ironwood stock in connection with the change of control, would result in the 2020 rTSR PSUs being earned above target, the 2020 rTSR PSUs will be deemed to be earned (and subject to vesting as described below) at such higher level in accordance with the terms of the award.
Any PSUs that become earned in connection with a change of control as described above for ourshall vest in equal installments on a quarterly basis over the remaining portion of the applicable performance period, generally subject to a named executive officers are only payable ifofficer's continued employment on each such vesting date. In the event of the occurrence of a qualifying termination in connection with or during the 24-month period immediately following the change of control and prior to the completion of the performance period, any earned but unvested PSUs held by the named executive officer complies with all of Ironwood's rules and policies, executes a separation agreement that includes a release of claims and complies with his or her post-employment non-disclosure, non-competition and non-solicitation obligations. The executive severance agreements further provide thatwill immediately vest in full in connection with such qualifying termination. If a named executive officer underwent a qualifying termination prior to a change of control, any outstanding PSUs held by the sale of all or substantially allnamed executive officer as of the assetstime of Ironwood, Ironwoodthe change of control would causebecome earned as described in the acquirerpreceding paragraph but, in the case of such assetsthe Adjusted EBITDA PSUs and the 2020 rTSR PSUs, remain subject to assumeproration based on the arrangements.number of days the named executive officer remained employed during the applicable performance period.
Treatment of Equity in the Event of Death or Permanent Disability
For all employees, including our named executive officers, outstanding stock option and RSU awards subject solely to time-based vesting accelerate in full in the event of the death of the award holder. This term applies to all outstanding time-based stock option and RSU awards made under our equity incentive plans, including the 20102019 Plan. Further, ourOur current form of stock option and RSU
agreements for awards issued under our 20102019 Plan include similar provision for the acceleration of unvested time-based awards upon the death of an award holder, including our named executive officers. In addition, the post-termination exercise window of all vested stock options held by a participant that were granted under our Amended and Restated 2005 Stock2010 Employee, Director and Consultant Equity Incentive Plan and 20102019 Plan is extended to one year (or the stock option's final expiration date, if earlier) following the participant's termination of employment by reason of his or her death.
With respect to PSUs, in the event of a termination of the named executive officer's employment as a result of his or her death or permanent disability, the awards, to the extent then outstanding, will not terminate and will remain eligible to vest based on the attainment of the applicable performance goals. Specifically, the NDA Acceptance PSUs will generally remain outstanding and eligible to vest based upon the achievement of the NDA acceptance performance goal until the earlier of (A) the end of the performance period or (B) the twelve (12)-month period following the death or permanent disability. The Adjusted EBITDA PSUs and 2020 rTSR PSUs will generally remain outstanding and eligible to vest based upon the achievement of applicable performance goals until the end of the applicable performance period, with the number of PSUs actually delivered subject to proration based on the number of days the named executive officer remained employed during the applicable performance period.
Employee Proprietary Information, Intellectual Property and Non-competition Agreements
The employee proprietary information, intellectual property and non-competition agreement that the company entered into with our former chief executive officer provides that, in the event the company determined to enforce the non-competition restriction included therein and a court determined that such provision was
60 Ironwood
unenforceable for lack of consideration, the company will provide for the payment of at least 50% of the former chief executive officer's highest annualized base salary in the last two years prior to the last day of our chief executive officer's employment for the length of the non-competition period as additional consideration for such non-competition provisions. In addition, the employee proprietary information, intellectual property and non-competition agreements that the company entered into with Mr. McCourt and Dr. Shetzline provide for an extended exercisability period for vested, unexercised nonqualified stock options for one year from the last date of employment in the event that the company determines to enforce the non-competition restriction included in such agreement.
2021 Proxy Statement 61
Potential Payments Upon Termination or Change of Control
Except as described in this proxy statement, there are currently no other agreements or arrangements pursuant to which our named executive officers would receive severance or other benefits in the event of a termination of employment or change of control of Ironwood. The following table presents our estimate of the amount of severance and other benefits to which each of our named executive officers would be entitled if a terminationtriggering event described below occurred on December 31, 2018 under the circumstances set forth in the column headings.2020. The closing price of our Class A common stock as listed on the Nasdaq Global Select Market on December 31, 20182020 was $10.36$11.39 per share. As described above, Mr. Mallon terminated employment on March 12, 2021 and, in connection with such termination, did not receive any severance benefits from the company.
Name | Executive Payments and Benefits upon Termination | Involuntary Termination without Cause or a Constructive Termination(1) | Termination Following Change of Control | Death(2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter M. Hecht, Ph.D. | Cash Severance | $ | 150,000 | $ | 200,000 | $ | — | |||||
Non-Equity Incentive Plan Compensation | $ | 125,000 | $ | 150,000 | $ | — | ||||||
Equity Acceleration | ||||||||||||
Options | $ | 28,925 | (4) | $ | 28,925 | (4) | $ | 28,925 | ||||
RSUs | $ | — | $ | — | $ | — | ||||||
Other Benefits(5) | $ | 92,517 | $ | 92,517 | $ | — | ||||||
Total | $ | 396,442 | $ | 471,442 | $ | 28,925 | ||||||
Gina Consylman | Cash Severance(3) | $ | 622,500 | $ | 622,500 | $ | — | |||||
Non-Equity Incentive Plan Compensation | $ | 415,000 | $ | 518,750 | $ | — | ||||||
Equity Acceleration | $ | — | ||||||||||
Options | $ | 975 | (4) | $ | 975 | (4) | $ | 975 | ||||
RSUs | $ | 639,906 | (4) | $ | 846,920 | (4) | $ | 846,920 | ||||
Other Benefits(5) | $ | 83,344 | $ | 83,344 | $ | — | ||||||
| | | | | | | | | | | | |
Total | $ | 1,761,725 | $ | 2,072,489 | $ | 847,895 | ||||||
Mark G. Currie, Ph.D. | Cash Severance(3) | $ | 727,500 | $ | 727,500 | $ | — | |||||
Non-Equity Incentive Plan Compensation | $ | 485,000 | $ | 606,250 | $ | — | ||||||
Equity Acceleration | ||||||||||||
Options | $ | 7,638 | (4) | $ | 7,638 | (4) | $ | 7,638 | ||||
RSUs | $ | 180,968 | (4) | $ | 180,968 | (4) | $ | 180,968 | ||||
Other Benefits(5) | $ | 70,790 | $ | 70,790 | $ | — | ||||||
Total | $ | 1,471,896 | $ | 1,593,146 | $ | 188,606 | ||||||
Thomas A. McCourt | Cash Severance(3) | $ | 697,500 | $ | 697,500 | $ | — | |||||
Non-Equity Incentive Plan Compensation | $ | 465,000 | $ | 581,250 | $ | — | ||||||
Equity Acceleration | ||||||||||||
Options | $ | 5,688 | (4) | $ | 5,688 | (4) | $ | 5,688 | ||||
RSUs | $ | 460,419 | (4) | $ | 596,985 | (4) | $ | 596,985 | ||||
Other Benefits(5) | $ | 69,615 | $ | 69,615 | $ | — | ||||||
| | | | | | | | | | | | |
Total | $ | 1,698,222 | $ | 1,951,038 | $ | 602,673 | ||||||
William Huyett | Cash Severance(3) | $ | 697,500 | $ | 697,500 | $ | — | |||||
Non-Equity Incentive Plan Compensation | $ | 465,000 | $ | 581,250 | $ | — | ||||||
Equity Acceleration | ||||||||||||
Options | $ | — | $ | — | $ | — | ||||||
RSUs | $ | 364,206 | (4) | $ | 561,377 | (4) | $ | 561,377 | ||||
Other Benefits(5) | $ | 58,125 | $ | 58,125 | $ | — | ||||||
Total | $ | 1,584,831 | $ | 1,898,252 | $ | 561,377 |
| | | | | | | | | | | | |
Involuntary Termination without Cause or a Constructive Termination (1) | Qualifying Termination In Connection with or Following a Change of Control | Death(2) | ||||||||||
| | | | | | | | | | | | |
Mark Mallon | Cash Severance | $ | 1,158,750 | $ | 1,545,000 | | — | |||||
| Non-Equity Incentive Plan Compensation | $ | 1,448,438 | $ | 1,738,125 | | — | |||||
| Equity Acceleration(4) | | | | | | | |||||
| Options | $ | 41,942 | $ | 42,160 | $ | 42,160 | |||||
| RSUs | $ | 4,786,089 | $ | 5,178,088 | $ | 5,178,088 | |||||
| PSUs | | — | $ | 2,517,885 | | — | |||||
| Other Benefits(5) | $ | 99,139 | $ | 112,185 | | | |||||
| Total | $ | 7,534,358 | $ | 11,133,442 | $ | 5,220,247 | |||||
Gina Consylman | Cash Severance(3) | $ | 741,600 | $ | 741,600 | — | ||||||
Non-Equity Incentive Plan Compensation | $ | 494,400 | $ | 618,000 | — | |||||||
Equity Acceleration(4) | ||||||||||||
Options | — | — | — | |||||||||
RSUs | $ | 1,921,482 | $ | 2,242,759 | $ | 2,242,759 | ||||||
PSUs | — | $ | 778,245 | — | ||||||||
Other Benefits(5) | $ | 99,139 | $ | 99,139 | ||||||||
Total | $ | 3,256,621 | $ | 4,479,743 | $ | 2,242,759 | ||||||
Thomas McCourt | Cash Severance(3) | $ | 834,600 | $ | 834,600 | | — | |||||
| Non-Equity Incentive Plan Compensation | $ | 667,680 | $ | 834,600 | | — | |||||
| Equity Acceleration(4) | | | | | | | |||||
| Options | | — | | — | | — | |||||
| RSUs | $ | 2,568,992 | $ | 2,875,998 | $ | 2,875,998 | |||||
| PSUs | | — | $ | 1,144,490 | | — | |||||
| Other Benefits(5) | $ | 74,144 | $ | 74,144 | | — | |||||
| Total | $ | 4,145,416 | $ | 5,763,832 | $ | 2,875,998 | |||||
Jason Rickard | Cash Severance(3) | $ | 685,125 | $ | 685,125 | — | ||||||
Non-Equity Incentive Plan Compensation | $ | 456,750 | $ | 570,938 | — | |||||||
Equity Acceleration(4) | ||||||||||||
Options | — | — | — | |||||||||
RSUs | $ | 1,598,040 | $ | 1,845,841 | $ | 1,845,841 | ||||||
PSUs | — | $ | 686,692 | — | ||||||||
Other Benefits(5) | $ | 57,094 | $ | 57,094 | — | |||||||
Total | $ | 2,797,009 | $ | 3,845,689 | $ | 1,845,841 | ||||||
Michael Shetzline, M.D., Ph.D. | Cash Severance(3) | $ | 672,075 | $ | 672,075 | | — | |||||
| Non-Equity Incentive Plan Compensation | $ | 358,440 | $ | 448,050 | | — | |||||
| Equity Acceleration(4) | | | | | | | |||||
| Options | | — | | — | | — | |||||
| RSUs | $ | 1,020,066 | $ | 1,188,319 | $ | 1,118,319 | |||||
| PSUs | | — | $ | 556,686 | | — | |||||
| Other Benefits(5) | $ | 53,766 | $ | 53,766 | | — | |||||
| Total | $ | 2,104,347 | $ | 2,918,896 | $ | 1,188,319 | |||||
| | | | | | | | | | | | |
62 Ironwood
executive as of December 31, 2018,2020, and that all 20172019 bonus amounts have been paid as of such date, in each case, as would be consistent with Ironwood's historical practice.
2021 Proxy Statement 63
CEO Pay Ratio
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to disclose the median of the annual total compensation of our employees, the annual total compensation of our principal executive officer Dr. Hecht,on December 31, 2020, Mr. Mallon, and the ratio of these two amounts. For 2018,2020, our last completed fiscal year:
Based on this information for 2018,2020, we estimate that the ratio of the annual total compensation of Dr. HechtMr. Mallon to the median annual total compensation of all employees was 26approximately 31 to 1. We believe this pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records, and the methodology described below. Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee's annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for Ironwood, as other companies have employees based in different locations (including other countries), have different business models and employee needs, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and Dr. Hecht,Mr. Mallon, we took the following steps:
We did not make any cost-of-living adjustments in identifying the "median employee."
Once we identified ourthe median employee, we combined allfor purposes of the elements of such employee'spay ratio, we calculated his or her compensation in the same manner as we do for 2018 in accordance with applicable SEC rules, resulting in annual total compensation of $197,044. The difference between such employee's salary and wages, bonuses, and the grant date fair value of the employee's equity grants, and the employee's annual total compensation represents the estimated value of such employee's transportation and fitness stipends and 401(k) matching contributions.
64 Ironwood
Compensation Committee Report
We have:
By the Compensation and HR Committee, | ||
Jon R. Duane Marla L. Kessler |
PROPOSAL NO. 2—ADVISORY VOTE ONNAMED EXECUTIVE OFFICERCOMPENSATION
Our board recommends that you approve thecompensation of our named executive officers asdisclosed in this proxy statement.
Proposal No. 2 |
At our 20192021 annual meeting, we are providing our stockholders with the opportunity to cast an advisory (non-binding) vote on named executive officer compensation, or a "say-on-pay" vote. This is a non-binding vote on the compensation of our "named executive officers," as described in theCompensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure, all as set forth in this proxy statement.
The objectivesobjective of our compensation policies areis to provide compensation and incentives that align employee actions and motivations with the interests of our stockholders,stockholders; attract, retain, motivate and reward outstanding talent across our companyIronwood through well-communicated programs that are aligned with our core valuesvision and business mission,mission; and support a positive company culture. In 2018,2020, the compensation program for our named executive officers consisted principally of base salary, cash bonus and long-term equity incentive compensation in the form of performance-based restricted stock optionsunits and restricted stock units. While we offer reasonably competitive base salaries and cash bonuses, our compensation program is weighted toward long-term equity incentive compensation as opposed to short-term or cash-based compensation. We believe this better aligns the interests of our executivesnamed executive officers and our stockholders and serves to further focus our executivesnamed executive officers on the creation of long-term stockholder value. If we achieve our corporate goals over the long term, we expect our stock price to reflect our performance and the equity awards currently held by our named executive officers to become an even more significant component of overall compensation. Our compensation and HR committee and board believes that this approach to executive compensation links compensation directly to continuous improvements in corporate performance and, ultimately our stock price, orand demonstrates our "pay for performance."performance" compensation philosophy.
Our previous say-on-pay vote was at our 20182020 annual meeting and was approved by more than 95%approximately 84% of the votes cast on such matter. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the provisions of Section 14A of the Exchange Act, we must hold the advisory (non-binding) vote on named executive officer compensation at least once every three years. Based on the recommendation of our stockholders in 2017, our board of directors determined to provide our stockholders the opportunity to vote (on an advisory basis) on named executive officer compensation on an annual basis to allow our stockholders to provide us with regular, timely and direct input on our executive compensation philosophy, policies and practices as disclosed in the proxy statement each year. We believe this practice allows us to further align our compensation programs with our stockholders' interests as stockholder feedback may be taken into consideration as part of the compensation review process.
Vote Required
Because this proposal seeks a non-binding, advisory vote, there is no "required vote" that would constitute approval. However, our board of directors, including our compensation and HR committee, values the opinions of our stockholders and, to the extent there are a substantial number of votes cast against the executive officer compensation as disclosed in this proxy statement, we will consider our stockholders' concerns and evaluate which actions may be appropriate to address those concerns. Broker nominees do not have discretion to vote on this proposal without your instruction; if you do not instruct your broker nominee how to vote on this proposal, your broker nominee will not vote your shares with respect to this proposal. Any shares that are not voted, whether by abstention, broker non-votes or otherwise, will not affect the outcome of this proposal.
2021 Proxy Statement 67
Security Ownership of Certain Beneficial Owners and Management
Our board recommends that you approve theamendment to our certificate of incorporationto declassify the board of directors
Currently, our Eleventh Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, provides for a classified board of directors divided into three classes of directors,The following table sets forth certain information with each class elected for a three-year term. The classification of the board of directors results in staggered elections, with each class of directors standing for election every third year. One class consists of members whose terms expire upon the election and qualification of their successors at the 2019 Annual Meeting, or the Class III directors, one class consists of members whose terms expire at the 2020 annual meeting of stockholders, or the Class I directors, and one class consists of members whose terms expire at the 2021 annual meeting of stockholders, or the Class II directors.
After careful consideration, the board of directors has determined that it is advisable and in the best interests of the company and its stockholders to amend our Certificate of Incorporation to declassify the board of directors to allow our company's stockholders to vote on the election of the entire board of directors on an annual basis, rather than on a staggered basis.
The general description of the proposed amendment to our Certificate of Incorporation set forth in this Proposal 3 is qualified in its entirety by referencerespect to the text thereof, which is attached as Appendixbeneficial ownership of our Class A to this proxy statement. Additions to our Certificate of Incorporation are indicated by bolded underlined text and deletions are indicated by strikethroughs.
Declassification of the Board of Directors
If this Proposal 3 is approved by Ironwood's stockholderscommon stock at the annual meeting, the declassification of the board of directors will be phased in as follows:March 31, 2021 for:
Under the proposed amendment, the annual electionThe number of directors will be phased in gradually to assure a smooth transition. If this Proposal 3shares beneficially owned by each stockholder is approveddetermined under rules issued by the requisite voteSEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Each of Ironwood'sthe stockholders any director electedlisted has sole voting and investment power with respect to fill a vacancythe shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
The percentage of Class A common stock beneficially owned by each person is based on 161,931,012 shares of Class A common stock outstanding on March 31, 2021. Shares of Class A common stock that did not arise from an increasemay be acquired within 60 days following March 31, 2021 pursuant to the exercise of options or the vesting of RSUs, are included in the sizeholdings of the board of directors will hold officeeach stockholder, as applicable, and are deemed to be outstanding for the term that remains forpurpose of computing the applicable vacating director, and any director elected to fill a vacancy that resulted from an increasepercentage ownership of such holder. Such amounts, however, are not included in the sizeholdings of the board of directors will be elected to serve until the next annual meeting of stockholders. As required by Delaware law, the amendment also reflects that, once the board of directors is declassified, stockholders may remove directors with or without cause.
If this Proposal 3 is not approved by the requisite vote of Ironwood's stockholders, the board of directors will remain classified, with each class of directors serving a term expiring at the annual meeting of stockholders heldany other stockholder in the third year followingtable below and are not deemed to be outstanding for computing the yearpercentage ownership of their election.any other holder shown in the table below. Beneficial ownership representing less than one percent is denoted with an "*."
68 Ironwood
If this Proposal 3 is passed byUnless otherwise indicated, the requisite vote of Ironwood's stockholders, it will become effective when we file the amendment to the Certificate of Incorporation with the Secretary of Stateaddress for each of the Statestockholders in the table below is c/o Ironwood Pharmaceuticals, Inc., 100 Summer Street, Suite 2300, Boston, Massachusetts 02110.
| | | | | |
Name of Beneficial Owner | Number of Shares of our Class A Common Stock | Percentage | |||
| | | | | |
Named Executive Officers and Directors | | ||||
Mark Mallon(1) | 449,356 | * | |||
Gina Consylman(2) | | 363,076 | * | ||
Thomas McCourt(3) | 1,201,420 | * | |||
Jason Rickard(4) | | 306,016 | * | ||
Michael Shetzline, M.D., Ph.D.(5) | 72,505 | * | |||
Mark G. Currie, Ph.D.(6) | | 1,352,404 | * | ||
Andrew Dreyfus | 109,097 | * | |||
Jon R. Duane | | 47,421 | * | ||
Marla L. Kessler | 47,421 | * | |||
Julie H. McHugh | | 125,607 | * | ||
Catherine Moukheibir | 48,994 | * | |||
Lawrence S. Olanoff, M.D., Ph.D. | | 68,629 | * | ||
Edward P. Owens | 218,954 | * | |||
Alexander J. Denner, Ph.D.(7) | | 16,429,079 | 10.1% | ||
Jay P. Shepard | 35,557 | * | |||
All current executive officers and directors as a group (14 persons)(8) | | 20,426,180 | 12.6% | ||
| | | | | |
5% Security Holders | |||||
Wellington Management Group LLP(9) | | 21,653,549 | 13.4% | ||
Brown Capital Management, LLC(10) | 20,150,463 | 12.4% | |||
Sarissa Capital Management LP(11) | | 16,390,000 | 10.1% | ||
The Vanguard Group(12) | 15,892,347 | 9.8% | |||
BlackRock, Inc.(13) | | 13,044,650 | 8.1% | ||
Westfield Capital Management Company, LP(14) | 8,488,043 | 5.2% | |||
| | | | | |
2021 Proxy Statement 69
SinceDecember 31, 2020. According to this Schedule 13G/A, (i) Brown Capital has sole voting power with respect 12,680,378 of these shares, sole dispositive power with respect to all of these shares, and does not have shared voting power or shared dispositive power with respect to any of these shares, and (ii) Brown Capital Small Fund has sole voting and sole dispositive power with respect to 9,980,218 of these shares and does not have shared voting or shared dispositive power with respect to any of these shares. The address of the Brown Capital Entities is 1201 N. Calvert Street, Baltimore, MD 21202.
In determining whether to support declassification of the board of directors, the board of directors carefully considered the advantages and disadvantages of the current classified board structurethese shares, and has determined that itsole dispositive power with respect to 15,368,035 of these shares, shared voting power with respect to 373,334 of these shares, and shared dispositive power with respect to 524,312 of these shares. The address of Vanguard is advisable and100 Vanguard Blvd., Malvern, PA 19355.
Vote Required
The approval of this proposal requires a majority of our outstanding common stockSchedule 13G/A filed on January 29, 2021, reporting as of the record date. Broker nominees doDecember 31, 2020. According to this Schedule 13G/A, Blackrock has sole voting power with respect to 12,844,041 of these shares, sole dispositive power with respect to all of these shares, and does not have discretionshared voting or shared dispositive power with respect to voteany of these shares. The address of BlackRock is 55 East 52nd Street, New York, NY 10055.
70 Ironwood
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTEFOR THE ADOPTION OF THE PROPOSED AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS.
Since January 1, 2020, except as described below, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which, with respect to our directors and named executive officers are described under the captions PROPOSAL NO. 4—APPROVAL OF OUR 2019 EQUITY INCENTIVE PLAN
Our Board of Directors—How We Are Paid and Executive Compensation appearing elsewhere in this proxy statement.
Indemnification Agreements |
Our board recommendsWe have entered into indemnification agreements with each of our current directors and certain of our officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that youvotemay arise by reason of their service to approveus and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We intend to enter into indemnification agreements with our future directors and executive officers.
The Separation |
On April 1, 2019, we completed the adoptionSeparation. The Separation was effected by means of a distribution of all of the outstanding shares of common stock of Cyclerion through a dividend in-kind of Cyclerion's common stock, with no par value, to our2019 Equity Incentive Plan.
We are asking stockholders to approveof record as of the Ironwood Pharmaceuticals, Inc. 2019 Equity Incentive Plan, orclose of business on March 19, 2019. In connection with the 2019 Plan. OurSeparation, we and Cyclerion entered into certain agreements that effected the separation of Cyclerion's business from us and govern our relationship with Cyclerion after the Separation. The following is a summary of the terms of the material agreements that we have entered into with Cyclerion in connection with the Separation. Dr. Currie, our former senior vice president, chief scientific officer and president of R&D and current member of our board of directors, upon the recommendationwas president and chief scientific officer of the compensation and HR committee, approved the 2019 Plan, subject to stockholder approval, to replace our Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan, or the 2010 Plan, on the date the 2019 Plan is approved by our stockholders, or the Effective Date. Upon the Effective Date, we will no longer make grants under the 2010 Plan. The material features of the 2019 Plan are described underSummary of the 2019 Plan below.
We believe that the 2019 Plan will advance the interests of our stockholdersCyclerion in 2020 and is consistentcurrently a senior advisor to Cyclerion.
Separation Agreement
In connection with principlesthe Separation, Ironwood entered into a separation agreement with Cyclerion, dated as of good corporate governance, includingMarch 30, 2019, that, among other things, set forth our agreements with Cyclerion regarding the following:
Reasons for Seeking Stockholder Approval
Our board of directors believes that our company's success and long-term progress are dependent upon attracting and incentivizing qualified individuals who can serve as directors, officers, employees, consultants, and advisers, and aligning the interests of such individuals with those of our stockholders. Our board of directors approved the 2019 Plan because it believes that this plan gives us the flexibility to continue to use various forms of incentive awards, including stock options and restricted stock units,Cyclerion as part of our company's overall compensation programs.the Separation, and it provided for when and how these transfers, assumptions and assignments would occur. The separation agreement was intended to provide for those transfers of assets and assumptions of liabilities that were necessary so that after the Separation, Ironwood and Cyclerion would have the assets necessary to operate their respective businesses and retain or assume the liabilities related to those assets. Each of Ironwood and Cyclerion agreed to releases, with respect to pre-distribution claims, and cross indemnities, with respect to post-distribution claims, that, except as otherwise provided in the separation agreement, were principally designed to place financial responsibility for the obligations and liabilities allocated to Ironwood under the separation agreement with Ironwood and financial responsibility for the obligations and liabilities allocated to Cyclerion under the separation agreement with Cyclerion.
2021 Proxy Statement 71
With inputIronwood and Cyclerion also were each subject to two-year non-solicit and non-hire restrictions, which ended on April 1, 2021. In addition, the parties agreed to certain non-competition restrictions, including Ironwood's agreement not to engage, for three years following the Separation, in the business of discovering, researching, developing, importing, exporting, manufacturing, marketing, distributing, promoting or selling any pharmaceutical product (a) for the diagnosis, prevention or treatment of diabetic nephropathy, heart failure with preserved ejection fraction or sickle cell disease or (b) that contains one or more soluble guanylate cyclase, or sGC, stimulators.
Development Agreement
We entered into a development agreement with Cyclerion whereby Cyclerion provided us with certain research and development services with respect to certain products and product candidates, including without limitation MD-7246 (linaclotide delayed release) and IW-3718. Such research and development activities were governed by a joint steering committee comprised of representatives from Pearl Meyer & Partners, LLC, or PM, the independent compensation consultantboth Cyclerion and Ironwood. We paid Cyclerion fees for such research and development services as mutually agreed upon by us and Cyclerion as provided under this development agreement with certain allowances for specified overages. This agreement terminated effective March 31, 2021. We incurred approximately $6.9 million under this agreement.
Transition Services Agreements
Ironwood Transition Services
Prior to the compensationSeparation, we provided Cyclerion with certain corporate and HR committee, our board of directors determinedshared services and resources related to corporate functions such as finance, human resources, internal audit, research and development, financial reporting and information technology, which we refer to collectively as the number of shares that should be available under the 2019 Plan so that we may continue"Ironwood Services." Pursuant to grant equity awards in line with our historical practices for approximately two to three years.
In setting the sizethis agreement, each of the share pool under the 2019 Plan at 10,000,000 shares, which is smaller than the share pool remaining availableIronwood Services was to grant under the 2010 Plan, our boardcontinue for an initial term of directors considered the historical amounts of equity awards granted by the company in the last threeup to two years the total number of shares of our common stock underlying equity awards outstanding as of December 31, 2018, as further shown in the chart below, and the expected number of eligible plan participants following the Seperation. Based on an analysis by PM of the remaining shares available under the 2010 Plan (which was 10,692,400 as of April 2, 2019)(as applicable), the number of shares of our common stock underlying equity awards outstanding under the 2010 Plan, our historic and projected burn rate, current and proposed plan features, including the elimination of the evergreen feature that was included in our 2010 Plan, the equity plan guidelines established by proxy advisory firms and the impact of the Separation, the board of directors approved the 2019 Plan and the share pool authorized under itunless earlier terminated or extended according to ensure that we continue to have the ability to provide competitive levels of equity compensation.
If the 2019 Plan is not approved by our stockholders, the 2019 Plan will not become effective, the 2010 Plan will expire on December 17, 2019, and we will no longer be able to grant equity awards to our employees and other service providers following such date. We believe that the inability to grant equity awards will materially affect our ability to attract and retain key talent. We also believe that the terms of the 2019 Plan, including its share pool, are reasonable, appropriate, andtransition services agreement. This agreement terminated effective March 31, 2020. We received approximately $313,428 in total fees for the best interestsIronwood Services under this agreement, which fees were based on our cost of our stockholders.providing the Ironwood Services.
Existing Equity Plan InformationCyclerion Transition Services
The table below sets forth information with regardWe also entered into a second transition services agreement whereby Cyclerion provided certain finance, procurement and facilities services to securities authorizedus, which we refer to herein collectively as the "Cyclerion Services." Pursuant to this agreement, each of the Cyclerion Services were available to us for issuance under our equity compensation plans asa term of Decemberone year; this agreement terminated effective March 31, 2018, and reflects2020. We paid approximately $105,060 in total fees for the conversion of our Class B common stock to Class A common stock, which was effective December 31, 2018. As of December 31, 2018, we had two active equity compensation plans, both of which were approved by our stockholders:
In addition, although we no longer grant awards under our Amended and Restated 2005 Stock Incentive Plan, there remain awards outstanding that were grantedCyclerion Services under this plan.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| (a) | (b) | (c) | |||||||
Equity compensation plans approved by security holders | 23,515,345 | $ | 13.47 | 16,712,852 | ||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||
Total | 23,515,345 | $ | 13.47 | 16,712,852 |
Intellectual Property License Agreement
We entered into an intellectual property license agreement with Cyclerion pursuant to which each party granted a license to the other party to certain know-how. We granted Cyclerion a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license to certain know-how to allow Cyclerion to use such know-how in connection with Cyclerion's ongoing and future research and development activities related to sGC stimulator products in any field. Cyclerion granted us a perpetual, worldwide, non-exclusive, royalty-free, fully paid-up license to certain know-how for use outside of shares subject to issuance upon exercisethe research and development of 20,457,537 outstanding stock optionssGC stimulator products, including in our existing products and vestingproduct candidates. Such licenses between the parties generally allow current or future uses of 3,057,808 RSUs.
72 Ironwood
SummaryTax Matters Agreement
We entered into a tax matters agreement with Cyclerion that governs Ironwood's and Cyclerion's respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the 2019 Plandistribution of Cyclerion common stock to Ironwood stockholders and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters.
The following is a brief summarytax matters agreement imposed certain restrictions on Cyclerion and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the material featuresdistribution and certain related transactions. The tax matters agreement also provided special rules that allocate tax liabilities in the event the distribution, together with certain related transactions, is not tax-free. In general, under the tax matters agreement, each party is expected to be responsible for any taxes imposed on Ironwood or Cyclerion that arise from the failure of the 2019 Plan. A copydistribution, together with certain related transactions, to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the 2019 Plan is attached as Appendix B to this proxy statement, and we urge stockholders to read it in its entirety. The following summary is qualified in its entirety by referenceCode, to the full textextent that the failure to so qualify is attributable to an acquisition of stock or assets of, or certain actions, omissions or failures to act of, such party. If both Cyclerion and Ironwood are responsible for such failure, liability will be shared according to relative fault. U.S. tax otherwise resulting from the failure of the 2019 Plan.distribution, together with certain related transactions, to qualify as a transaction that is tax-free generally is the responsibility of Ironwood.
Purpose.Employee Matters Agreement The purpose of the 2019 Plan is to advance the interests of the company by providing for the grant to participants of stock, stock-based
We entered into an employee matters agreement with Cyclerion, which allocated assets, liabilities and other incentive awards, all as more fully described below.
Administration. The 2019 Plan is administered by our compensation and HR committee, which has the discretionary authority to, among other things, interpret the 2019 Plan, determine eligibility for and grant awards, determine, modify or waive the terms and conditions of any award, determine the form of settlement of awards, prescribe forms, rules and proceduresresponsibilities relating to the 2019 Plan and awards and otherwise do all things necessary or desirable to carry out the purposes of the 2019 Plan. Determinations of theemployment, compensation, and HR committee under the 2019 Plan will be conclusiveemployee benefits of Ironwood and bind all persons. The compensation and HR committee may delegate certain of its powers under the 2019 Plan to, among others, one or more of its members or members of our board of directors. As used herein, the term compensation and HR committee refers to our compensation and HR committee or its authorized delegates, as applicable.
Eligibility. Employees, directors of and consultants and advisors to the company and its subsidiaries are eligible to participate in the 2019 Plan. Eligibility for stock options intended to be incentive stock options, or ISOs, is limited to employees of the company or certain affiliates. As of April 2, 2019, we estimate that approximately 331Cyclerion employees, and 8 non-employee directors would be eligible to participate in the 2019 Plan.
Authorized Shares. Subject to adjustment as described below, the maximum number of shares of our common stock that may be delivered in satisfaction of awards under the 2019 Plan is 10,000,000 shares, plus any shares that are subject to awards under the company's Amended and Restated 2005 Stock Incentive Plan or the company's Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan that are forfeited, expired or are cancelled without the delivery of shares of stock, or the Share Pool. The following rules apply in respect of the Share Pool:
Procedures for Related Party Transactions |
Under our code of business conduct and ethics, our employees, officers and directors are discouraged from entering into any transaction that may create or give the appearance of a conflict of interest. In addition, they must report any potential conflict of interest, including related party transactions, to certain members of our management or the chair of our audit committee. Pursuant to its charter, our audit committee must approve any related party transactions, including those transactions involving our directors. In approving or rejecting a proposed transaction, the audit committee considers the relevant facts and circumstances available to and deemed relevant by the audit committee, including the material terms of the transaction, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director's independence. Our audit committee will approve only those transactions that, in light of known circumstances, are in, or are not reduceinconsistent with, our best interests, as our audit committee determines in the Share Pool.good faith exercise of its discretion. A copy of our code of business conduct and ethics and our audit committee charter are available through the Investors section of our website at
www.ironwoodpharma.com
2021 Proxy Statement 73
Shares that may be delivered under the 2019 Plan may either be (i) authorized but unissued shares of common stock or (ii) previously issued shares of common stock acquired by the company. The closing price of our common stock as reported on the Nasdaq Market on April 2, 2019 was $12.31 per share.
Individual Limits. With respect to any person in any calendar year, the maximum number of shares for which stock options may be granted, the maximum number of shares subject to SARs that may be granted, and the maximum number of shares subject to awards other than stock options, SARs and awards that may be paid or settled in cash that may be granted is, in each case, 2,000,000 shares.
Director Limits. The aggregate value of all compensation granted or paid to any non-employee director with respect to any calendar year, including awards under the 2019 Plan and other compensation paid by the company for the director's service to our board of directors, may not exceed $600,000.
Types of Awards. The 2019 Plan provides for the grant of stock options, SARs, restricted and unrestricted stock and stock units, performance awards, and other awards that are convertible into or otherwise based on our common stock. Dividend equivalents may also be provided in connection with awards under the 2019 Plan.
Vesting; Terms of Awards. Our compensation and HR committee determines the terms of all awards granted under the 2019 Plan, including the time or times when an award vests or becomes exercisable, the terms on which awards will remain exercisable and the effect of termination of a participant's employment or service on outstanding awards. Our compensation and HR committee may at any time accelerate the vesting or exercisability of an award.
No Repricing.
Transferability of Awards. Except as our compensation and HR committee may otherwise determine, awards may not be transferred other than by will or by the laws of descent and distribution.
Performance Criteria. The 2019 Plan provides for grants of performance awards subject to "performance criteria," which may relate to any, or any combination of, the following (measured either absolutely or comparatively (including, without limitation, by reference to an index or indices or the performance of one or more companies) and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof), among any other criteria determined by our compensation and HR committee: achievement of research, clinical trial or other drug development objectives; achievement of regulatory objectives; achievement of manufacturing and/or supply chain or other operational objectives; sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures, licenses, collaborations and strategic alliances; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; or any other objectives determined by our compensation and HR committee. Performance criteria and any related targets need not be based on an increase, a positive or improved result or avoidance of loss. Our compensation and HR committee may provide that one or more of the "performance criteria" specified above will be adjusted to reflect events (including, but not limited to, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the applicable performance period that affect the applicable performance criterion or criteria.
Effect of Certain Transactions. In the event of a consolidation, merger or similar transaction in which the company is not the surviving corporation, the sale of all or substantially all of the company's assets or common stock, or a dissolution or liquidation of the company, our compensation and HR committee may, with respect to outstanding awards, provide for:
In the case of shares of restricted stock, our compensation and HR committee may require that any amounts delivered, exchanged or otherwise paid in respect of those shares in connection with the
transaction be placed in escrow or otherwise made subject to restrictions determined by our compensation and HR committee.
Adjustment Provisions. In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in our capital structure, our compensation and HR committee will make appropriate adjustments to the maximum number of shares that may be delivered under the 2019 Plan; the individual award limits; the number and kind of securities subject to, and, if applicable, the exercise or purchase price of, outstanding awards; and any other provisions affected by such event.
Clawback. Our compensation and HR committee may provide that outstanding awards and proceeds from the disposition of awards or stock acquired under awards will be subject to forfeiture and disgorgement to the company, with interest and other related earnings, if the participant violates any restrictive covenants by which the participant is bound or any applicable company policy that provides for such forfeiture or disgorgement, or to the extent required by law or applicable stock exchange listing standards and any related company policy.
Effective Date, Amendments and Termination. Our board of directors adopted the 2019 Plan on April 10, 2019, subject to approval by our stockholders. If the 2019 Plan is approved by our stockholders, the 2019 Plan will become effective as of the date of such approval. No awards will be granted after the tenth anniversary of the date the 2019 Plan was adopted by our board of directors. Our compensation and HR committee may at any time amend the 2019 Plan or any outstanding award and may at any time terminate the 2019 Plan as to future grants. However, except as expressly provided in the 2019 Plan, our compensation and HR committee may not alter the terms of an award so as to materially and adversely affect a participant's rights without the participant's consent (unless our compensation and HR committee expressly reserved the right to do so at the time the award was granted). Any amendments to the 2019 Plan will be conditioned on stockholder approval to the extent required by law or applicable stock exchange requirements.
Certain Federal Income Tax Consequences
The following discussion summarizes certain federal income tax consequences associated with certain awards granted under the 2019 Plan under the law as in effect on the date of this proxy statement. The summary does not purport to cover federal employment tax or other U.S. federal tax consequences that may be associated with the 2019 Plan, nor does it cover state, local or non-U.S. taxes.
ISOs. In general, an optionee realizes no taxable income upon the grant or exercise of an ISO. However, the exercise of an ISO may result in an alternative minimum tax liability to the optionee. With certain exceptions, a disposition of shares purchased under an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the optionee (and a deduction to company) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is treated as a capital gain for which company is not entitled to a deduction. If the optionee does not dispose of the shares until after the expiration of these one- and two-year holding periods, any gain or loss recognized upon a subsequent sale is treated as a long-term capital gain or loss for which the company is not entitled to a deduction.
NSOs. In general, in the case of an NSO, the optionee has no taxable income at the time of grant but realizes income in connection with the exercise of the option in an amount equal to the excess (at the time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price; a corresponding deduction is available to the company. Upon a subsequent sale or exchange of the shares, any recognized gain or loss after the date of exercise is treated as a capital gain or loss for which the company is not entitled to a deduction.
In general, an ISO that is exercised by the optionee more than three months after termination of employment is treated as an NSO. ISOs are also treated as NSOs to the extent they first become exercisable by an individual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000.
SARs. In general, the grant of a SAR does not itself result in taxable income, nor does taxable income result merely because a SAR becomes exercisable. In general, a participant who exercises a SAR for shares of stock or receives payment in cancellation of a SAR will have ordinary income equal to the amount of any cash and the fair market value of any stock received. A corresponding deduction is generally available to the company.
Unrestricted Stock Awards. A participant who purchases or is awarded unrestricted stock generally has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the company.
Restricted Stock Awards. A participant who is awarded or purchases shares subject to a substantial risk of forfeiture generally does not have income until the risk of forfeiture lapses. When the risk of forfeiture lapses, the participant has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the company. However, a participant may make an election under Section 83(b) of the Code to be taxed on restricted stock when it is acquired rather than later, when the substantial risk of forfeiture lapses. A participant who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of acquisition less any price paid for the shares. A corresponding deduction will generally be available to the company. If a participant makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions.
For purposes of determining capital gain or loss on a sale of shares awarded under the 2019 Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. The participant's tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. However, if a participant makes an effective 83(b) election and later forfeits the shares, the tax loss realized as a result of the forfeiture is limited to the excess of what the participant paid for the shares (if anything) over the amount (if any) realized in connection with the forfeiture.
Restricted Stock Units. In general, the grant of a restricted stock unit does not itself result in taxable income. Instead, the participant is generally taxed upon vesting (and a corresponding deduction is generally available to the company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is cash settled) under Section 409A of the Code. If the shares delivered are restricted for tax purposes, the participant will instead be subject to the rules described above for restricted stock.
Certain Change in Control Payments. Under Section 280G of the Code, the vesting or accelerated exercisability of options or the vesting and payments of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards may be subject to an additional 20% federal tax and may be non-deductible to the company.
New Plan Benefits
The future benefits or amounts that would be received under the 2019 Plan by executive officers, non-executive directors and non-executive officer employees are discretionary and are therefore not determinable at this time.
Vote Required
The approval of this proposal requires a majority of the votes cast for or against the proposal. Abstentions and broker non-votes will not affect the outcome of this proposal. Broker nominees do not have discretion to vote on this proposal without your instruction; if you do not instruct your broker nominee how to vote on this proposal, your broker nominee will deliver a broker non-vote. Any shares that are not voted, whether by abstention, broker non-votes, or otherwise, will not affect the outcome of this proposal.
PROPOSAL NO. 5—RATIFICATION OF OUR SELECTION OF AUDITORS
Our board recommends that you ratify the selection ofErnst & Young LLP as our auditors for fiscal year 2019.
Proposal No. 3 |
Our audit committee has appointed Ernst & Young LLP to serve as our auditors for the fiscal year ending December 31, 2019.2021. The firm of Ernst & Young LLP, an independent registered public accounting firm, has audited the books and accounts of Ironwoodserved as Ironwood's auditor since 1998 and has audited our financial statements for the years ended December 31, 2018, 20172020, 2019 and 2016.2018. Detailed disclosure of the audit, audit-related, tax and other fees we paid tobilled for services rendered by Ernst & Young LLP in 20182020 and 20172019 are set forth below. Based on these disclosures and information in the audit committee report beginning on page 2119 of this proxy statement, our audit committee is satisfied that our auditors are sufficiently independent of management to perform their duties properly. Although not legally required to do so, our board of directors considers it desirable to seek, and recommends, stockholder ratification of its selection of auditors for fiscal year 2019.2021.
Representatives of Ernst & Young LLP are expected to attend the virtual annual meeting to answer any questions and they will have the opportunity to make a statement if they wish.
The table below presents aggregate fees for professional audit services rendered by Ernst & Young LLP for the years ended December 31, 2018 and 2017 for the audits of our annual financial statements for the years ended December 31, 2020 and 2019 and fees billed for other services rendered by Ernst & Young LLP during those periods. It is the audit committee's policy that all audit and non-audit services to be performed by Ernst & Young LLP be pre-approved. The audit committee annually reviews and pre-approves the permissible services that may be provided by Ernst & Young LLP to assure the provision of such services does not impair the auditor's independence. In accordance with the pre-approval policy, our management informs the audit committee of each service performed by Ernst & Young LLP pursuant to the pre-approval policy. Requests to provide services that require separate approval by the audit committee are submitted to the audit committee or its designee by both our chief financial officer, or chief accounting officer or controller and Ernst & Young LLP. All of the services described in the following fee table were approved in conformity with the audit committee's pre-approval policy.
| | | | | | | | |||||||
| 2018 | 2017 | 2020 | 2019 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | |||||||
Audit | $ | 994,154 | $ | 1,027,904 | $ | 1,372,342 | $ | 1,840,900 | ||||||
Audit-related | $ | 1,564,161 | $ | 65,000 | $ | — | $ | — | ||||||
Tax | $ | — | $ | — | $ | — | $ | — | ||||||
All other | $ | 6,910 | $ | 307,700 | $ | 6,860 | $ | 1,735 | ||||||
| | | | | | | | $ | 1,379,202 | $ | 1,842,635 | |||
$ | 2,565,225 | $ | 1,400,604 | |||||||||||
| | | | | | | | | | | | | | |
| | | | | ||||||||||
| | | | | | |
Audit fees for 20182020 and 20172019 were for professional services rendered for the audits of our financial statements and internal controls over financial reporting, including accounting consultation,consultations and reviews of quarterly financial statements, as well as for services that are normally provided in connection with regulatory filings or engagements, including auditor consents.
Audit-related Additionally we incurred approximately $198,000 of audit fees related to the Separation which were reimbursed by Cyclerion pursuant to the Tax Matters Agreement. Audit fees for 20182020 were principally comprised ofsignificantly lower than they were in 2019 due to services provided in 2019 in connection with the Separation, including the review and/or audit of Cyclerion carveout financial statements. Audit-related fees for 2018discontinued operations, as well as accounting review of certain collaboration and 2017 included accounting consultations associated with the anticipated adoption of new accounting standards. All audit-related fees were approved by the audit committee.co-promotion agreements and debt-related transactions.
Other services includedin 2020 and 2019 include license fees for a web-based accounting research tool in 2018 and due diligence activities performed during 2017. All other fees were approved by the audit committee.
Table of Contentstool.
Other than the foregoing, Ernst & Young LLP did not provide any other services to us in 20182020 or 2017.2019.
Vote Required
The approval of the proposal to ratify the selection of Ernst & Young LLP as our auditors requires a majority of the votes cast for or against the proposal. Because we believe this matter to be routine, a broker nominee may vote on your behalf if you do not otherwise provide instructions. As a result, we do not expect there will be any broker non-votes on this matter. Abstentions will not affect the outcome of this proposal.
2021 Proxy Statement 75
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Table of Contents
Our board of directors executive officersis soliciting proxies for the 2021 annual meeting of stockholders. This proxy statement explains the agenda, voting information and procedures for the meeting. Please read it carefully. This proxy statement and related materials are first being made available to stockholders on or about April 22, 2021, and the notice of internet availability of proxy materials is first being sent to our stockholders on the same day. All stockholders will also have the ability to access the proxy materials online through the Investors section of our website at www.ironwoodpharma.com, under the heading Financial Information—SEC Filings.
Who can vote
Only stockholders of record of our Class A common stock at the close of business on April 12, 2021 can vote at the meeting.
Quorum
In order to hold and complete the business of the annual meeting, we must have a majority of the votes entitled to be cast represented at the meeting or by proxy. On our record date, April 12, 2021, we had 161,935,176 shares of our Class A common stock outstanding and entitled to vote. With respect to all matters that will come before the meeting, each share is entitled to one vote.
Notice of internet availability of proxy materials
Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials via the internet. Accordingly, we are sending a notice of internet availability of proxy materials to our stockholders. All stockholders will have the ability to access the proxy materials on the website referenced in the notice and to request to receive a printed set of the proxy materials by mail. Instructions on how to access the proxy materials over the internet and how to request a printed copy may be found in the notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We encourage stockholders to take advantage of the availability of the proxy materials on the internet or through email to help reduce the environmental impact of our annual meetings.
Voting procedures—stockholders of record and beneficial owners
You are a stockholder of record if your shares of our stock are registered directly in your own name with our transfer agent, Computershare Trust Company, N.A., or Computershare. You are a beneficial owner if a brokerage firm, bank, trustee or other agent, called a "nominee," holds your stock. This is often called ownership in "street name" because your name does not appear in the records of Computershare. If you hold your shares in street name, you should receive a voting instruction form from your nominee.
How to vote your shares.
If you are a stockholder of record, there are four ways to vote:
76 Ironwood
16-digit control number that is on either the notice of internet availability of proxy materials or the proxy card when voting.
If you are a beneficial owner of shares held in street name, there are four ways to provide voting instructions:
How you may revoke your proxy or voting instructions. If you are a stockholder of record, you may revoke or amend your proxy before it is voted at the annual meeting by writing to us directly in a timely manner "revoking" your earlier proxy, submitting a new proxy in a timely manner with a later date by mail, over the telephone or on the internet, or by attending the meeting and voting. Your last dated proxy timely received prior to or vote cast at the annual meeting will be counted.
What if you receive more than 10%one notice of internet availability of proxy materials, proxy card or voting instruction form? This means that you may have more than one account at Computershare and/or with a nominee. Your notice of internet availability of proxy materials, proxy card or voting instruction form lists the number of shares you are voting. Please vote the shares on all notices of internet availability of proxy materials, proxy cards and voting instruction forms that you receive.
We recommend you consolidate your holdings under the same name, address and tax identification number, if possible. This will eliminate some duplication of mailings and reduce costs. Please contact your nominee to consolidate accounts, or our transfer agent, Computershare, at (800) 368-5948, as applicable.
Householding of proxy materials. SEC rules concerning the delivery of proxy materials allow us or your broker to send a single notice or, if applicable, a single set of our common stockproxy materials to any household at which two or more of our stockholders reside, if we or your broker believe that the stockholders are required under Section 16(a)members of the same family, unless we have received contrary instructions from one or more of the stockholders. This practice, referred to as "householding," benefits both you and us. It reduces the volume of duplicate information received at your
2021 Proxy Statement 77
household and helps to reduce our expenses. The rule applies to our notices, annual reports, proxy statements and information statements.
We will undertake to deliver promptly, upon written request, a separate copy to a stockholder at a shared address to which a single copy of the notice of internet availability of proxy materials was delivered. You may make a written request by sending a notification to our Secretary at the address below, providing your name, your shared address, and the address to which we should direct the additional copy of the notice of internet availability of proxy materials. Multiple stockholders sharing an address who have received one copy of a mailing and would prefer us to mail each stockholder a separate copy of future mailings should contact us at the below address, as well. Additionally, if current stockholders with a shared address received multiple copies of a mailing and would prefer us to mail one copy of future mailings to stockholders at the shared address, notification of that request may also be sent to us at the below address. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.
Any request relating to receipt of proxy materials should be sent to: Secretary, Ironwood Pharmaceuticals, Inc., 100 Summer Street, Suite 2300, Boston, Massachusetts 02110.
Abstentions and "broker non-votes." If you are a stockholder of record and you vote "abstain" or "withhold" on any matter, your shares will not be voted on that matter and will not be counted as votes cast in the final tally of votes on that matter. However, your shares will be counted for purposes of determining whether a quorum is present. If you are a beneficial owner holding shares through a broker nominee, you may instruct your broker nominee that you wish to abstain from voting on a proposal or withhold authority to vote for one or more nominees for director.
A broker nominee generally may not vote on "non-routine" matters without receiving your specific voting instructions. A "broker non-vote" occurs when a broker nominee holding shares in street name votes shares on some matters at the meeting but not others. Like abstentions, broker non-votes are counted as present and entitled to vote for quorum purposes, but are not counted as votes cast. Broker nominees who hold shares for the accounts of their clients have discretionary authority to vote shares if specific instructions are not given with respect to routine matters. Although the determination of whether a broker nominee will have discretionary voting power for a particular item is typically determined only after proxy materials are filed with the SEC, we expect that at the annual meeting of stockholders your broker nominee will not be able to submit a vote on the election of directors or the advisory votes on named executive officer compensation unless it receives your specific instructions, but will be able to vote on the ratification of the selection of our independent auditors even if it does not receive your instructions. As a result, if your broker nominee does not receive your specific instructions for these proposals, it will submit a broker non-vote on the election of directors or the advisory votes on named executive officer compensation and may vote on the ratification of the selection of our independent auditors even if it does not receive your instructions.
Discretionary authority. If you are a stockholder of record and you properly submit your proxy card without making any specific selections, your shares will be voted on each matter before the annual meeting in the manner recommended by our board of directors. If other matters not included in this proxy statement properly come before the annual meeting, the persons named on the proxy card, or otherwise designated, will have the authority to vote on those matters for you as they determine, to the extent permitted by Rule 14a-4(c)(1) of the Exchange ActAct. If you are a beneficial owner of shares held in street name, please see the discussion above regarding broker non-votes and the rules related to voting by broker nominees.
Vote required
The required vote for each of the proposals expected to be acted upon at the annual meeting is described below.
78 Ironwood
Proposal No. 1—Election of Class I and Class II Directors:
The seven nominees for director with the highest number of affirmative votes will be elected as directors to serve for one-year terms and until their successors are duly elected and qualified or until their death, resignation or removal. We expect that broker nominees will not have discretion to vote on this proposal without your instruction; if you do not instruct your broker nominee how to vote on this proposal, your broker nominee will deliver a broker non-vote. Because there is no minimum vote required, abstentions and broker non-votes will not affect the outcome of this proposal.
Proposal No. 2—Advisory (non-binding) Vote on Named Executive Officer Compensation, or "Say-on-Pay":
Because this proposal calls for a non-binding, advisory vote there is no "required vote" that would constitute approval. However, our board of directors, including our compensation and HR committee, values the opinions of our stockholders and, to the extent there are a substantial number of votes cast against the named executive officer compensation disclosed in this proxy statement, we will consider our stockholders' concerns and evaluate what actions may be appropriate to address those concerns. We expect that broker nominees will not have discretion to vote on this proposal without your instruction; if you do not instruct your broker nominee how to vote on this proposal, your broker nominee will deliver a broker non-vote. Any shares that are not voted, whether by abstention, broker non-votes or otherwise, will not affect the outcome of this proposal.
Proposal No. 3—Ratification of Auditors:
The approval of this proposal requires a majority of the votes cast for or against the proposal. Abstentions and broker non-votes will not affect the outcome of this proposal. Further, because we believe this matter to be routine, a broker nominee may vote on your behalf if you do not otherwise provide instructions. As a result, we do not expect there will be any broker non-votes on this matter.
Results of the voting. We expect to announce the preliminary voting results at the annual meeting. The final voting results will be tallied by the inspector of election and published in a Current Report on Form 8-K, which we are required to file reports of ownership and changes in ownership of our securities with the SEC. Our staff assists our directorsSEC, within four business days following the annual meeting.
Costs of solicitation and executive officers in preparing ownership reports and reporting ownership changes, and typically files these reports on their behalf. Based on a reviewsolicitation participants. We will pay the costs of soliciting proxies. These costs also include support for the hosting of the copies of reports filedvirtual meeting. We will solicit proxies by usemail from stockholders who are our employees or who previously requested to receive proxy materials electronically. Our directors, our officers and our employees also may solicit proxies on our behalf, personally, electronically or by telephone, facsimile or mail or other means, without additional compensation. We may request that brokerage firms, banks and other agents forward proxy materials to beneficial owners and we would reimburse such institutions for their out-of-pocket expenses incurred.
We may also utilize the assistance of third parties in connection with our 10% stockholdersproxy solicitation efforts and representationswe would compensate such third parties for their efforts. We have engaged one such third party, MacKenzie Partners, to assist in the solicitation of proxies and provide related advice and informational support, for service fees of up to $12,500 and the reimbursement of certain expenses.
Additional Meeting Information
We encourage you to access the meeting prior to the start time. Please allow sufficient time for online log-in, which begins at 8:45 a.m. Eastern Time. You may check your browser's compatibility any time prior to the meeting at www.virtualshareholdermeeting.com/IRWD2021. If you want to submit a question you may do so electronically starting at the time of check-in or during the meeting.
If you have technical difficulties or trouble accessing the virtual meeting, there will be technicians ready to assist you. If you encounter any technical difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that no other reports were required, we believe that during 2018 our directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements.will be posted on the virtual stockholder meeting log in page.
2021 Proxy Statement 79
STOCKHOLDER COMMUNICATIONS, PROPOSALS AND NOMINATIONS FOR DIRECTORSHIPS
Table of Contents
Communications |
A stockholder may send general communications to our board of directors, any committee of our board of directors or any individual director by directing such communication to General Counsel,Secretary, Ironwood Pharmaceuticals, Inc., 301 Binney100 Summer Street, Cambridge,Suite 2300, Boston, Massachusetts 02142.02110. All communications will be reviewed by our general counselSecretary and, if requested by the stockholder, forwarded to our board of directors or an individual director, as applicable. Our general counselSecretary reserves the right not to forward to our board of directors or any individual director any abusive, threatening or otherwise inappropriate materials.
Any request for materials or other communications directed to our Secretarysecretary should be sent to: Secretary, Ironwood Pharmaceuticals, Inc., 301 Binney100 Summer Street, Cambridge,Suite 2300, Boston, Massachusetts 02142.02110.
Proposals and Nominations
Proposals and Nominations |
Stockholders who wish to present a proposal for inclusion in our proxy materials for our 20202022 annual meeting should follow the procedures prescribed in Rule 14a-8 under the Exchange Act and our bylaws. Those procedures require that we receive a stockholder proposal in writing no later than [ ]December 23, 2021 in order for such proposal to be included in our proxy materials.
Under our bylaws, stockholders who wish to nominate a director or include a proposal in our 20202022 annual meeting of stockholders (but do not wish to include such proposal in our proxy materials) must give us timely notice. To be timely, a notice of director nomination or other proposal for the 20202022 annual meeting of stockholders must be received by us no earlier than March 1, 20204, 2022 and no later than March 31, 2020,April 3, 2022, unless the date of the 20202022 annual meeting of stockholders is more than 30 days from the anniversary date of the 20192021 annual meeting of stockholders, in which event the notice must be received by us on or before 15 days after the day on which the date of the 20202022 annual meeting of stockholders is first disclosed in a public announcement. The notice must contain specified information that is prescribed in our bylaws about you and the director nominee or the proposal, as applicable. If any director nomination or stockholder proposal is submitted after March 31, 2020,April 3, 2022, our bylaws provide that the nomination or the proposal shall be disregarded.
80 Ironwood
We file annual, quarterly and current reports, as well as other information with the SEC. You can obtain any of them from the SEC at its website atwww.sec.gov or at its Public Reference Room at 100 F Street, N.E., Washington, DC 20549.. The documents are also available from us without charge by requesting them in writing or by telephone from Ironwood Pharmaceuticals, Inc., 301 Binney100 Summer Street, Cambridge,Suite 2300, Boston, Massachusetts 02142,02110, Attention: Corporate Communications, telephone: (617) 621-7722.
Table621-7722, or by visiting the Investors section of Contents
Proposed Amendment to our Certificate of Incorporation
The proposed amendment to the Company's Certificate of Incorporation would revise Article VII, Sections B and C thereof as shown below (new language is indicated by bolded underlined text, and deletions are indicated by strikethroughs):
B.website at www.ironwoodpharma.comDirectors; Election; Term of Office.
IRONWOOD PHARMACEUTICALS, INC.2019 EQUITY INCENTIVE PLAN
1.DEFINED TERMS
Exhibit A, which is incorporated by reference, defines the terms used in the Plan and includes certain operational rules related to those terms.
2.PURPOSE
The Plan has been established to advance the interests of the Company by providing for the grant to Participants of Stock, Stock-based and other incentive Awards. The Plan is effective as of the Effective Date.
3.ADMINISTRATION
The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; determine the form of settlement of Awards (whether in cash, shares of Stock, or other property); prescribe forms, rules and procedures relating to the Plan and Awards; and otherwise do all things necessary or desirable to carry out the purposes of the Plan. Determinations of the Administrator made under the Plan are conclusive and bind all persons.
4.LIMITS ON AWARDS UNDER THE PLAN
(a)Number of Shares. Subject to adjustment as provided in Section 7(b), the maximum number of shares of Stock that may be issued in satisfaction of Awards under the Plan is (1) 10,000,000 shares, plus (2) any shares of Stock underlying awards that are forfeited, expired or are cancelled without the delivery of shares of Stock under the Company's Amended and Restated 2005 Stock Incentive Plan or the Company's Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan on and following the Effective Date (each, a "Prior Plan Award"). Up to the total number of shares of Stock set forth in the preceding sentence may be issued in satisfaction of ISOs, but nothing in this Section 4(a) will be construed as requiring that any, or any fixed number of, ISOs be awarded under the Plan. Further, (i) any shares of Stock withheld by the Company in payment of the exercise price or purchase price of an Award or Prior Plan Award in satisfaction of tax withholding requirements with respect to an Award or Prior Plan Award, (ii) the full number of shares covered by a SAR any portion of which is settled in Stock (and not only the number of shares of Stock delivered in settlement), and (iii) the number of shares of Stock underlying any Awards or Prior Plan Awards that are settled in cash, expire, become unexercisable, terminate or are forfeited to or repurchased by the Company without the issuance of Stock will not be available for grant under the Plan. For the avoidance of doubt, the number of shares of Stock available for delivery under the Plan will not be increased by any shares of Stock delivered under the Plan that are subsequently repurchased using proceeds directly attributable to Stock Option exercises. The limits set forth in this Section 4(a) will be construed to comply with Section 422.
(b)Substitute Awards. The Administrator may grant Substitute Awards under the Plan. To the extent consistent with the requirements of Section 422 and the regulations thereunder and other applicable legal requirements (including applicable stock exchange requirements), Stock issued under Substitute Awards will be in addition to and will not reduce the number of shares available for Awards under the Plan set forth in Section 4(a), but, notwithstanding anything in Section 4(a) to the contrary, if any Substitute Award is settled in cash, expires, becomes unexercisable, terminates or is forfeited to or repurchased by the Company without the issuance of Stock, the shares of Stock previously subject to
such Award will not be available for future grants under the Plan. The Administrator will determine the extent to which the terms and conditions of the Plan apply to Substitute Awards, if at all,provided, however, that Substitute Awards will not be subject to, or counted toward, the per-Participant Award limits described in Section 4(d) below.
(c)Type of Shares. Stock delivered by the Company under the Plan may be authorized but unissued Stock, treasury Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be delivered under the Plan.
(d)Individual Limit.
(1) Awards comprising no more than 2,000,000 shares of Stock may be granted to any person under the Plan in any calendar year. In applying the foregoing limit, (i) all Awards granted to the same person in the same calendar year are aggregated and made subject to one limit; (ii) the limit as applicable to Stock Options and SARs refers to the number of shares of Stock underlying those Awards; and (iii) the share limit as applicable to Awards other than Stock Options and SARs refers to the maximum number of shares of Stock that may be delivered, or the value of which could be paid in cash or other property, under an Award or Awards assuming a maximum payout.
(2) Notwithstanding the foregoing limit, the aggregate value of all compensation granted or paid to any Director with respect to any calendar year, including Awards granted under the Plan and cash fees or other compensation paid by the Company to such Director outside of the Plan, for his or her services as a Director during such calendar year may not exceed $600,000 in the aggregate, calculating the value of any Awards based on the grant date fair value in accordance with the Accounting Rules, assuming a maximum payout.
5.ELIGIBILITY AND PARTICIPATION
The Administrator shall select Participants from among Employees and Directors of, and consultants and advisors to, the Company and its subsidiaries. Eligibility for ISOs is limited to individuals described in the first sentence of this Section 5 who are employees of the Company or of a "parent corporation" or "subsidiary corporation" of the Company as those terms are defined in Section 424 of the Code. Eligibility for Stock Options, other than ISOs, and SARs is limited to individuals described in the first sentence of this Section 5 who are providing direct services on the date of grant of the Award to the Company or to a subsidiary of the Company that would be described in the first sentence of Treas. Regs. §1.409A-1(b)(5)(iii)(E).
6.RULES APPLICABLE TO AWARDS
(a)All Awards.
(1)Award Provisions. The Administrator shall determine the terms of all Awards, subject to the limitations provided herein. By accepting (or, under such rules as the Administrator may prescribe, being deemed to have accepted) an Award, the Participant will be deemed to have agreed to the terms of the Award and the Plan. Notwithstanding any provision of this Plan to the contrary, Substitute Awards may contain terms and conditions that are inconsistent with the terms and conditions specified herein, as determined by the Administrator.
(2)Term of Plan. No Awards may be made after 10 years from the Date of Adoption, but previously granted Awards may continue beyond that date in accordance with their terms.
(3)Transferability. Neither ISOs nor, except as the Administrator otherwise expressly provides in accordance with the third sentence of this Section 6(a)(3), other Awards may be transferred other than by will or by the laws of descent and distribution. During a Participant's lifetime, ISOs and, except as the Administrator otherwise expressly provides in accordance with the third sentence of this Section 6(a)(3), SARs and NSOs may be exercised only by the Participant.
The Administrator may permit the gratuitous transfer (i.e., transfer not for value) of Awards other than ISOs, subject to applicable securities and other laws and such limitations as the Administrator may impose.
(4)Vesting. The Administrator shall determine the time or times at which an Award vests or becomes exercisable and the terms on which a Stock Option or SAR remains exercisable. Without limiting the foregoing, the Administrator may at any time accelerate the vesting or exercisability of an Award, including, but not limited to, in connection with providing consideration for a restrictive covenant, regardless of any adverse or potentially adverse tax or other consequences resulting from such acceleration. Unless the Administrator expressly provides otherwise, the following rules will apply if a Participant's Employment ceases:
(A) Except as provided in (B) and (C) below, immediately upon the cessation of the Participant's Employment each Stock Option and SAR that is then held by the Participant or by the Participant's permitted transferees, if any, will cease to be exercisable and will terminate and all other Awards that are then held by the Participant or by the Participant's permitted transferees, if any, to the extent not already vested will be forfeited.
(B) Subject to (C) and (D) below, all Stock Options and SARs held by the Participant or the Participant's permitted transferees, if any, immediately prior to the cessation of the Participant's Employment, to the extent then exercisable, will remain exercisable for the lesser of (i) a period of three months or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6(a)(4), and will thereupon immediately terminate.
(C) Subject to (D) below, all Stock Options and SARs held by a Participant or the Participant's permitted transferees, if any, immediately prior to the cessation of the Participant's Employment due to death or Disability, to the extent then exercisable, will remain exercisable for the lesser of (i) the one-year period ending with the first anniversary of the Participant's cessation of Employment or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6(a)(4), and will thereupon immediately terminate. In addition, if the Participant's Employment ceases for any reason other than pursuant to (D) below and in the three months following such cessation of Employment the Participant dies or experiences a Disability, the exercisability of all Stock Options and SARs held by the Participant or the Participant's permitted transferees, if any, will automatically be extended upon such event and will remain exercisable for the lesser of (i) the one-year period ending with the first anniversary of the Participant's cessation of Employment or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6(a)(4), and will thereupon immediately terminate.
(D) All Stock Options and SARs (whether or not exercisable) held by a Participant or the Participant's permitted transferees, if any, immediately prior to the cessation of the Participant's Employment will immediately terminate upon such cessation of Employment if the termination is for Cause or occurs in circumstances that in the determination of the Administrator would have constituted grounds for the Participant's Employment to be terminated for Cause.
(5)Recovery of Compensation. The Administrator may provide in any case that outstanding Awards (whether or not vested or exercisable) and the proceeds from the exercise or disposition of Awards or Stock acquired under Awards will be subject to forfeiture and disgorgement to the Company, with interest and other related earnings, if the Participant to whom the Award was granted violates (i) a non-competition, non-solicitation, no-hire, non-disparagement, confidentiality, invention assignment or other restrictive covenant by which he or she is bound, or (ii) any
Company policy applicable to the Participant that provides for forfeiture or disgorgement with respect to incentive compensation that includes Awards under the Plan. In addition, the Administrator may require forfeiture and disgorgement to the Company of outstanding Awards and the proceeds from the exercise or disposition of Awards or Stock acquired under Awards, with interest and other related earnings, to the extent required by law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Exchange Act, or any related Company policy. Each Participant, by accepting or being deemed to have accepted an Award under the Plan, agrees or will be deemed to have agreed to cooperate fully with the Administrator, and to cause any and all permitted transferees of the Participant to cooperate fully with the Administrator, to effectuate any forfeiture or disgorgement required hereunder. Neither the Administrator nor the Company nor any other person, other than the Participant and his or her permitted transferees, if any, will be responsible for any adverse tax or other consequences to a Participant or his or her permitted transferees, if any, that may arise in connection with this Section 6(a)(5).
(6)Taxes. The delivery, vesting and retention of Stock, cash or other property under an Award are conditioned upon full satisfaction by the Participant of all tax withholding requirements with respect to the Award. The Administrator shall prescribe such rules for the withholding of taxes with respect to any Award as it deems necessary, including, but not limited to, (a) providing that the Administrator may hold back shares of Stock from an Award, (b) permitting a Participant to tender previously owned shares of Stock in satisfaction of tax withholding requirements, or (c) permitting an authorized broker-dealer to sell shares of Stock subject to an Award and remit the cash proceeds of such sale to the Company to satisfy any tax withholding requirements related to such Award (provided that such arrangements will not result in withholding in excess of the maximum withholding amount consistent with the award being subject to equity accounting treatment under the Accounting Rules).
(7)Dividends and Dividend Equivalents. The Administrator may provide for the payment of amounts (on terms and subject to conditions established by the Administrator) in lieu of cash dividends or other cash distributions with respect to Stock subject to an Award whether or not the holder of such Award is otherwise entitled to share in the actual dividend or distribution in respect of such Award; provided, however, that (a) dividends or dividend equivalents relating to an Award that, at the dividend payment date, remains subject to a risk of forfeiture (whether service-based or performance-based) shall be subject to the same risk of forfeiture as applies to the underlying Award and (b) no dividends or dividend equivalents shall be payable with respect to Options or SARs. Any entitlement to dividend equivalents or similar entitlements will be established and administered either consistent with an exemption from, or in compliance with, the requirements of Section 409A. Dividends or dividend equivalent amounts payable in respect of Awards that are subject to restrictions may be subject to such limits or restrictions as the Administrator may impose.
(8)Rights Limited. Nothing in the Plan may be construed as giving any person the right to be granted an Award or to continued employment or service with the Company or any of its subsidiaries, or any rights as a stockholder except as to shares of Stock actually issued under the Plan. The loss of existing or potential profit in Awards will not constitute an element of damages in the event of termination of Employment for any reason, even if the termination is in violation of an obligation of the Company or any of its subsidiaries to the Participant.
(9)Coordination with Other Plans. Awards under the Plan may be granted in tandem with, or in satisfaction of or substitution for, other Awards under the Plan or awards made under other compensatory plans or programs of the Company or any of its subsidiaries. For example, but without limiting the generality of the foregoing, awards under other compensatory plans or programs of the Company or any of its subsidiaries may be settled in Stock (including, without
limitation, Unrestricted Stock) under the Plan if the Administrator so determines, in which case the shares delivered will be treated as awarded under the Plan (and will reduce the number of shares thereafter available under the Plan in accordance with the rules set forth in Section 4).
(10)Section 409A.
(A) Without limiting the generality of Section 11(b) hereof, each Award will contain such terms as the Administrator determines and will be construed and administered, such that the Award either qualifies for an exemption from the requirements of Section 409A or satisfies such requirements.
(B) Notwithstanding Section 9 of this Plan or any other provision of this Plan or any Award agreement to the contrary, the Administrator may unilaterally amend, modify or terminate the Plan or any outstanding Award, including but not limited to changing the form of the Award, if the Administrator determines that such amendment, modification or termination is necessary or advisable to avoid the imposition of an additional tax, interest or penalty under Section 409A.
(C) If a Participant is deemed on the date of the Participant's termination of Employment to be a "specified employee" within the meaning of that term under Section 409A(a)(2)(B), then, with regard to any payment that is considered nonqualified deferred compensation under Section 409A, to the extent applicable, payable on account of a "separation from service", such payment will be made or provided on the date that is the earlier of (i) the expiration of the six-month period measured from the date of such "separation from service" and (ii) the date of the Participant's death (the "Delay Period"). Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 6(a)(10)(C) (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) will be paid on the first business day following the expiration of the Delay Period in a lump sum and any remaining payments due under the Award will be paid in accordance with the normal payment dates specified for them in the applicable Award agreement.
(D) For purposes of Section 409A, each payment made under this Plan will be treated as a separate payment.
(E) With regard to any payment considered to be nonqualified deferred compensation under Section 409A, to the extent applicable, that is payable upon a change in control of the Company or other similar event, to avoid the imposition of an additional tax, interest or penalty under Section 409A, no amount will be payable unless such change in control constitutes a "change in control event" within the meaning of Section 1.409A-3(i)(5) of the Treasury Regulations.
(b)Stock Options and SARs.
�� (1)Time and Manner of Exercise. Unless the Administrator expressly provides otherwise, no Stock Option or SAR will be deemed to have been exercised until the Administrator receives notice of exercise in a form acceptable to the Administrator that is signed by the appropriate person and accompanied by any payment required under the Award. Any attempt to exercise a Stock Option or SAR by any person other than the Participant will not be given effect unless the Administrator has received such evidence as it may require that the person exercising the Award has the right to do so.
(2)Exercise Price. The exercise price (or the base value from which appreciation is to be measured) of each Award requiring exercise must be no less than 100% (in the case of an ISO granted to a 10-percent stockholder within the meaning of subsection (b)(6) of Section 422, 110%)
of the Fair Market Value of the Stock subject to the Award, determined as of the date of grant, or such higher amount as the Administrator may determine in connection with the grant.
(3)Payment of Exercise Price. Where the exercise of an Award is to be accompanied by payment, payment of the exercise price must be by cash or check acceptable to the Administrator or, if so permitted by the Administrator and if legally permissible, (i) through the delivery of previously acquired unrestricted shares of Stock, or the withholding of unrestricted shares of Stock otherwise deliverable upon exercise, in either case that have a Fair Market Value equal to the exercise price, (ii) through a broker-assisted exercise program acceptable to the Administrator, (iii) by other means acceptable to the Administrator, or (iv) by any combination of the foregoing permissible forms of payment. The delivery of previously acquired shares in payment of the exercise price under clause (i) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.
(4)Maximum Term. The maximum term of Stock Options and SARs must not exceed 10 years from the date of grant (or five years from the date of grant in the case of an ISO granted to a 10-percent stockholder described in Section 6(b)(2) above).
(5)No Repricing. Except in connection with a corporate transaction involving the Company (which term includes, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares) or as otherwise contemplated by Section 7 below, the Company may not, without obtaining stockholder approval, (A) amend the terms of outstanding Stock Options or SARs to reduce the exercise price or base value of such Stock Options or SARs, (B) cancel outstanding Stock Options or SARs in exchange for Stock Options or SARs with an exercise price or base value that is less than the exercise price or base value of the original Stock Options or SARs, or (C) cancel outstanding Stock Options or SARs that have an exercise price or base value greater than the Fair Market Value of a share of Stock on the date of such cancellation in exchange for cash or other consideration.
7.EFFECT OF CERTAIN TRANSACTIONS
(a)Covered Transactions. Except as otherwise expressly provided in an Award agreement, another agreement between the Company and a Participant, or the Company's Change of Control Severance Plan or otherwise by the Administrator, the following provisions will apply in the event of a Covered Transaction:
(1)Assumption or Substitution. If the Covered Transaction is one in which there is an acquiring or surviving entity, the Administrator may provide for (A) the assumption or continuation of some or all outstanding Awards or any portion thereof or (B) the grant of new awards in substitution therefor by the acquiror or survivor or an affiliate of the acquiror or survivor.
(2)Cash-Out of Awards. Subject to Section 7(a)(5) below, the Administrator may provide for payment (a "cash-out"), with respect to some or all Awards or any portion thereof, equal in the case of each affected Award or portion thereof to the excess, if any, of (A) the Fair Market Value of one share of Stock times the number of shares of Stock subject to the Award or such portion, over (B) the aggregate exercise or purchase price, if any, under the Award or such portion (in the case of a SAR, the aggregate base value above which appreciation is measured), in each case on such payment terms (which need not be the same as the terms of payment to holders of Stock) and other terms, and subject to such conditions, as the Administrator determines;provided, however, for the avoidance of doubt, that if the exercise or purchase price (or base value) of an
Award is equal to or greater than the Fair Market Value of one share of Stock, the Award may be cancelled with no payment due hereunder or otherwise in respect of such Award.
(3)Acceleration of Certain Awards. Subject to Section 7(a)(5) below, the Administrator may provide that any Award requiring exercise will become exercisable, in full or in part, and/or that the delivery of any shares of Stock remaining deliverable under any outstanding Award of Stock Units (including Restricted Stock Units and Performance Awards to the extent consisting of Stock Units) will be accelerated, in full or in part, in each case on a basis that gives the holder of the Award a reasonable opportunity, as determined by the Administrator, following exercise of the Award or the delivery of the shares, as the case may be, to participate as a stockholder in the Covered Transaction.
(4)Termination of Awards upon Consummation of a Covered Transaction. Except as the Administrator may otherwise determine in any case, each Award will automatically terminate (and in the case of outstanding shares of Restricted Stock, will automatically be forfeited) immediately upon consummation of the Covered Transaction, other than any Award that is assumed or substituted pursuant to Section 7(a)(1) above.
(5)Additional Limitations. Any share of Stock and any cash or other property or other award delivered pursuant to Section 7(a)(1), Section 7(a)(2) or Section 7(a)(3) above with respect to an Award may, in the discretion of the Administrator, contain such restrictions, if any, as the Administrator deems appropriate to reflect any performance or other vesting conditions to which the Award was subject and that did not lapse (and were not satisfied) in connection with the Covered Transaction. For purposes of the immediately preceding sentence, a cash-out under Section 7(a)(2) above or an acceleration under Section 7(a)(3) above will not, in and of itself, be treated as the lapsing (or satisfaction) of a performance or other vesting condition. In the case of Restricted Stock that does not vest and is not forfeited in connection with the Covered Transaction, the Administrator may require that any amounts delivered, exchanged or otherwise paid in respect of such Stock in connection with the Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate to carry out the intent of the Plan.
(b)Changes in and Distributions with Respect to Stock.
(1)Basic Adjustment Provisions. In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Company's capital structure that constitutes an equity restructuring within the meaning of the Accounting Rules, the Administrator shall make appropriate adjustments to the maximum number of shares of Stock specified in Section 4(a) that may be issued under the Plan and to the maximum share limits described in Section 4(d), and shall make appropriate adjustments to the number and kind of shares of stock or securities underlying Awards then outstanding or subsequently granted, any exercise or purchase prices (or base values) relating to Awards and any other provision of Awards affected by such change.
(2)Certain Other Adjustments. The Administrator may also make adjustments of the type described in Section 7(b)(1) above to take into account distributions to stockholders other than those provided for in Section 7(a) and 7(b)(1), or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan, having due regard for the qualification of ISOs under Section 422 and the requirements of Section 409A, to the extent applicable.
(3)Continuing Application of Plan Terms. References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7.
8.LEGAL CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously delivered under the Plan until: (i) the Company is satisfied that all legal matters in connection with the issuance and delivery of such shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of delivery listed on any stock exchange or national market system, the shares to be delivered have been registered with the U.S. Securities and Exchange Commission and listed or authorized to be listed on such exchange or system upon official notice of issuance; and (iii) all conditions of the Award have been satisfied or waived. The Company may require, as a condition to the exercise of an Award or the delivery of shares of Stock under an Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of the Securities Act of 1933, as amended, or any applicable state or non-U.S. securities law. Any Stock required to be issued to Participants under the Plan will be evidenced in such manner as the Administrator may deem appropriate, including book-entry registration or delivery of stock certificates. In the event that the Administrator determines that stock certificates will be issued to Participants under the Plan or the Shares will be evidenced by book-entry, the Administrator may require that any certificates evidencing Stock issued under the Plan or the book-entry reflecting the issuance of Stock under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock, and the Company may hold any such certificates pending lapse of the applicable restrictions.
9.AMENDMENT AND TERMINATION
The Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Awards;provided, however, that except as otherwise expressly provided in the Plan the Administrator may not, without the Participant's consent, alter the terms of an Award so as to affect materially and adversely the Participant's rights under the Award, unless the Administrator expressly reserved the right to do so at the time the Award was granted. Any amendments to the Plan will be conditioned upon stockholder approval only to the extent, if any, such approval is required by law (including the Code) or applicable stock exchange requirements, as determined by the Administrator.
10.OTHER COMPENSATION ARRANGEMENTS
The existence of the Plan or the grant of any Award will not affect the Company's right to award a person bonuses or other compensation in addition to Awards under the Plan.
11.MISCELLANEOUS
(a)Waiver of Jury Trial. By accepting or being deemed to have accepted an Award under the Plan, each Participant waives (or will be deemed to have waived), to the maximum extent permitted under applicable law, any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting or being deemed to have accepted an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit disputes arising under the terms of the Plan or any Award made hereunder to binding arbitration or as limiting the ability of the Company to require any eligible individual to agree to submit such disputes to binding arbitration as a condition of receiving an Award hereunder.
(b)Limitation of Liability. Notwithstanding anything to the contrary in the Plan, neither the Company, nor any of its subsidiaries, nor the Administrator, nor any person acting on behalf of the Company, any of its subsidiaries, or the Administrator, will be liable to any Participant, to any permitted transferee, to the estate or beneficiary of any Participant or any permitted transferee, or to any other holder of an Award by reason of any acceleration of income, or any additional tax (including any interest or penalties), asserted by reason of the failure of an Award to satisfy the requirements of Section 422 or Section 409A or by reason of Section 4999 of the Code, or otherwise asserted with respect to an Award.
12.ESTABLISHMENT OF SUB-PLANS
The Administrator may at any time and from time to time establish one or more sub-plans under the Plan (for local-law compliance purposes or other administrative reasons determined by the Administrator) by adopting supplements to the Plan containing, in each case, such limitations on the Administrator's discretion under the Plan, and such additional terms and conditions, as the Administrator deems necessary or desirable. Each supplement so established will be deemed to be part of the Plan but will apply only to Participants within the group to which the supplement applies (as determined by the Administrator).
13.GOVERNING LAW
(a)Certain Requirements of Corporate Law. Awards will be granted and administered consistent with the requirements of applicable Delaware law relating to the issuance of stock and the consideration to be received therefor, and with the applicable requirements of the stock exchanges or other trading systems on which the Stock is listed or entered for trading, in each case as determined by the Administrator.
(b)Other Matters. Except as otherwise provided by the express terms of an Award agreement, under a sub-plan described in Section 12 or as provided in Section 13(a) above, the domestic substantive laws of the State of Delaware govern the provisions of the Plan and of Awards under the Plan and all claims or disputes arising out of or based upon the Plan or any Award under the Plan or relating to the subject matter hereof or thereof without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
(c)Jurisdiction. By accepting (or being deemed to have accepted) an Award, each Participant will be deemed to (a) have submitted irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Award; (b) agree not to commence any suit, action or other proceeding arising out of or based upon the Plan or an Award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware; and (c) waive, and agree not to assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that he or she is not subject personally to the jurisdiction of the above-named courts that his or her property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or an Award or the subject matter thereof may not be enforced in or by such court.
The following terms, when used in the Plan, have the meanings and are subject to the provisions set forth below:
"Accounting Rules": Financial Accounting Standards Board Accounting Standards Codification Topics 505 and 718, as applicable, or any successor provision.
"Administrator": The Compensation Committee, except that the Compensation Committee may delegate (i) to one or more of its members (or one or more other members of the Board, including the full Board) such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant Awards to the extent permitted by Section 152 or 157(c) of the Delaware General Corporation Law; and (iii) to such Employees or other persons as it determines such ministerial tasks as it deems appropriate. In the event of any delegation described in the preceding sentence, the term "Administrator" will include the person or persons so delegated to the extent of such delegation. Notwithstanding the foregoing, only the Board or the Compensation Committee shall be authorized to grant an Award to any director of the Company or to any "officer" of the Company (as defined by Rule 16a-1 under the Exchange Act).
"Award": Any or a combination of the following:
(i) Stock Options.
(ii) SARs.
(iii) Restricted Stock.
(iv) Unrestricted Stock.
(v) Stock Units, including Restricted Stock Units.
(vi) Performance Awards.
(vii) Awards (other than Awards described in (i) through (vi) above) that are convertible into or otherwise based on Stock.
"Board": The Board of Directors of the Company.
"Cause": With respect to a Participant, (i) dishonesty with respect to the Company or any affiliate of the Company, (ii) insubordination, substantial malfeasance or non-feasance of duty, (iii) unauthorized disclosure of confidential information, (iv) breach by a Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any affiliate of the Company, and (v) conduct substantially prejudicial to the business of the Company or any affiliate of the Company; provided, however, that this definition of "Cause" shall be superseded by (a) the definition of "Cause" contained in an agreement between a Participant and the Company or any affiliate of the Company that is in effect at the time of such termination, with respect to that Participant and (b) the definition of "Cause" contained in the Company's Change of Control Severance Benefit Plan to the extent such plan is in effect at the time of such termination, the Participant is a participant in such plan and such termination occurs within the period during which the Participant is eligible for enhanced severance benefits under the Company's Change of Control Severance Benefit Plan. The determination of the Administrator as to the existence of Cause will be conclusive on the Participant and the Company; provided, however, that if the determination is made within the period during which the Participant is eligible for enhanced severance benefits under the Company's Change of Control Severance Benefit Plan, then the determination will be subject to de novo review.
"Code": The U.S. Internal Revenue Code of 1986, as from time to time amended and in effect, or any successor statute as from time to time in effect.
"Compensation Committee": The Compensation and HR Committee of the Board.
"Company": Ironwood Pharmaceuticals, Inc., a Delaware corporation.
"Covered Transaction": Any of (i) a consolidation, merger or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company's then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company's assets, or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction will be deemed to have occurred upon consummation of the tender offer.
"Date of Adoption": The earlier of the date the Plan was approved by the Company's stockholders or adopted by the Board, as determined by the Committee.
"Director": A member of the Board who is not an Employee.
"Disability": A disability that would entitle a Participant to long-term disability benefits under the Company's long-term disability plan in which the Participant participates. If a Participant does not participate a long-term disability plan of the Company, Disability means a permanent and total disability as defined in Section 22(e)(3) of the Code.
"Effective Date": The date on which the Plan is first approved by the Company's stockholders.
"Employee": Any person who is employed by the Company or any of its subsidiaries.
"Employment": A Participant's employment or other service relationship with the Company or any of its subsidiaries. Employment will be deemed to continue, unless the Administrator expressly provides otherwise, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 5 to, the Company or any of its subsidiaries. If a Participant's employment or other service relationship is with any subsidiary of the Company and that entity ceases to be a subsidiary of the Company, the Participant's Employment will be deemed to have terminated when the entity ceases to be a subsidiary of the Company unless the Participant transfers Employment to the Company or any of its remaining subsidiaries. Notwithstanding the foregoing, in construing the provisions of any Award relating to the payment of "nonqualified deferred compensation" (subject to Section 409A) upon a termination or cessation of Employment, references to termination or cessation of employment, separation from service, retirement or similar or correlative terms will be construed to require a "separation from service" (as that term is defined in Section 1.409A-1(h) of the Treasury Regulations) from the Company and from all other corporations and trades or businesses, if any, that would be treated as a single "service recipient" with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations. The Company may, but need not, elect in writing, subject to the applicable limitations under Section 409A, any of the special elective rules prescribed in Section 1.409A-1(h) of the Treasury Regulations for purposes of determining whether a "separation from service" has occurred. Any such written election will be deemed a part of the Plan.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Fair Market Value": �� As of a particular date, (i) the closing price for a share of Stock reported on the Nasdaq Stock Market (or any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the immediately preceding date on which a closing price was reported or (ii) in the event that the Stock is
not traded on a national securities exchange, the fair market value of a share of Stock determined by the Administrator consistent with the rules of Section 422 and Section 409A to the extent applicable.
"ISO": A Stock Option intended to be an "incentive stock option" within the meaning of Section 422. Each Stock Option granted pursuant to the Plan will be treated as providing by its terms that it is to be an NSO unless, as of the date of grant, it is expressly designated as an ISO.
"NSO": A Stock Option that is not intended to be an "incentive stock option" within the meaning of Section 422.
"Participant": A person who is granted an Award under the Plan.
"Performance Award": An Award subject to Performance Criteria.
"Performance Criteria": Specified criteria, other than the mere continuation of Employment or the mere passage of time, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. A Performance Criterion and any targets with respect thereto need not be based upon an increase, a positive or improved result or avoidance of loss and may be applied to the Participant individually, or to a business unit or division or the Company as a whole and may relate to any or any combination of the following (measured either absolutely or by reference to an index or indices or the performance of one or more companies and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, product or product candidate, project or geographical basis or in combinations thereof), among any other criteria determined by the Administrator: achievement of research, clinical trial or other drug development objectives; achievement of regulatory objectives; achievement of manufacturing and/or supply chain or other operational objectives; sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures, licenses, collaborations and strategic alliances; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; or any other objectives determined by the Administrator. The Administrator may provide that one or more of the Performance Criteria applicable to such Award will be adjusted to reflect events (including, but not limited to, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the applicable performance period that affect the applicable Performance Criterion or Criteria.
"Plan": The Ironwood Pharmaceuticals, Inc. 2019 Equity Incentive Plan, as from time to time amended and in effect.
"Restricted Stock": Stock subject to restrictions requiring that it be forfeited, redelivered or offered for sale to the Company if specified service or performance-based conditions are not satisfied.
"Restricted Stock Unit": A Stock Unit that is, or as to which the delivery of Stock or cash in lieu of Stock is, subject to the satisfaction of specified performance or other vesting conditions.
"SAR": A right entitling the holder upon exercise to receive an amount (payable in cash or in shares of Stock of equivalent value at the discretion of the Administrator) equal to the excess of the Fair Market Value of the shares of Stock subject to the right over the base value from which appreciation under the SAR is to be measured.
"Section 409A": Section 409A of the Code.
"Section 422": Section 422 of the Code.
"Stock": Class A common stock of the Company, par value $0.001 per share.
"Stock Option": An option entitling the holder to acquire shares of Stock upon payment of the exercise price.
"Stock Unit": An unfunded and unsecured promise, denominated in shares of Stock, to deliver Stock or cash measured by the value of Stock in the future.
"Substitute Awards": Awards issued under the Plan in substitution for equity awards of an acquired company that are converted, replaced or adjusted in connection with the acquisition.
"Unrestricted Stock": Stock not subject to any restrictions under the terms of the Award.
PRELIMINARY – SUBJECT TO COMPLETION VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com UseYou may use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. IRONWOOD PHARMACEUTICALS, INC. 301 BINNEY100 SUMMER STREET, CAMBRIDGE,SUITE 2300 BOSTON, MA 0214202110 During The Meeting - Go to www.virtualshareholdermeeting.com/IRWD2021 You may also vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E75744-P22797D43110-P53341 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY IRONWOOD PHARMACEUTICALS, INC. The Board of Directors recommends you vote FOR the following: 1.Election of Directors Nominees: For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. All All Except! !! 1. Election of Directors Nominees: Class I 01) Andrew Dreyfus 02) Julie H. McHugh 03) EdwardMark G. Currie, Ph.D. Alexander J. Denner, Ph.D. Jon R. Duane Class II 04) 05) 06) 07) Marla L. Kessler Catherine Moukheibir Lawrence S. Olanoff, M.D., Ph.D. Jay P. OwensShepard For Against Abstain The Board of Directors recommends you vote FOR the following proposals: For Against Abstain! ! ! ! ! ! 2. Approval, by non-binding advisory vote, of the compensation paid to the named executive officers. 3. Approval of an amendment to the Company's Certificate of Incorporation to declassify the Board of Directors. 4. Approval of the Company's 2019 Equity Incentive Plan. 5. Ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2019.2021. NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. Please indicate if you plan to attend this meeting. Yes No Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice, Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. E75745-P22797 PRELIMINARY – SUBJECT TO COMPLETIOND43111-P53341 IRONWOOD PHARMACEUTICALS, INC. Annual Meeting of Stockholders Thursday, May 30, 2019Wednesday, June 2, 2021 9:00 AM Eastern Time This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Mark MallonThomas McCourt and Gina Consylman, or either of them, as proxies, each with the power to appoint his or her substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of IRONWOOD PHARMACEUTICALS, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 AM, Eastern Time on Thursday, May 30, 2019Wednesday, June 2, 2021 via live webcast at Ironwood Pharmaceuticals, Inc., 301 Binney Street, Cambridge, MA 02142,www.virtualshareholdermeeting.com/IRWD2021, and any adjournment or postponement thereof. The stockholder(s) hereby revoke(s) any proxy previously given and acknowledge(s) receipt of the notice and proxy statement for the Annual Meeting of Stockholders. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendations of the Board of Directors. Continued and to be signed on reverse side