SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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o | Soliciting Material under §240.14a-12 |
Zogenix, Inc.
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(Name of Person(s) Filing Proxy Statement, if other Than the Registrant)
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April , 2021
Dear Fellow Shareholders,
At Zogenix, we are deeply motivated by the needs of rare disease patients and their families. Guided by our values of compassion, courage, collaboration, and excellence, our team had a very productive 2020 – despite the disruptions brought on by the COVID-19 pandemic. With our first rare disease therapy, FINTEPLA® (fenfluramine) oral solution now approved and launched in the U.S. and European Union for Dravet syndrome, we are proud to begin 2021 with the successful commercialization of this transformative therapy well underway.
This will be another pivotal year for Zogenix as we expand the geographic availability of FINTEPLA and invest in research and development to further advance our pipeline. Our plans include expanding the epilepsy indications for FINTEPLA while also advancing MT1621, our potential breakthrough investigational therapy for a debilitating and often fatal mitochondrial disease called TK2 deficiency for which there are no approved therapies. Looking ahead to next-generation therapies, we are proud to have initiated an early-stage collaboration with Tevard Biosciences to identify and develop promising gene therapies for rare genetic epilepsies.
All of us at Zogenix are excited by the progress we are making and appreciate the strong support we continue to receive from the communities treating and affected by these diseases. Under the strategic leadership of our expanded Board of Directors and Executive Team, we believe that our focus on becoming a leading rare disease company driven by our heartfelt commitment to patients, positions the company for long-term success and shareholder value. This position is further enhanced by our commitment to diversity and inclusion led by a partnership between our DEI Committee and Human Resources.
We look forward to your participation in this year’s live WebEx on Thursday, May 27, 2021 at 9am Pacific time. Your vote is important. Whether you plan to participate in this year’s meeting or not, we encourage you to vote by mail or online, as outlined in this proxy.
Sincerely, | |
Stephen J. Farr, Ph.D. | |
Chief Executive Officer and Director |
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NOTICE OF ANNUAL MEETING OF
Meeting Date: | Thursday, May 27, 2021 | Meeting Place: | Exclusively online at www.virtualshareholdermeeting.com/ZGNX2021 | |
Meeting Time: | 9:00 a.m., Pacific Time | |||
Record Date: | March 29, 2021 |
Voting Methods
Via the Internet During the Meeting at: www.virtualshareholdermeeting.com/ZGNX2021 Via the Internet Before the Meeting at: www:proxyvote.com | Call Toll-Free: 1-800-690-6903 | Mail Signed Proxy Card Using the Provided Postage-Paid Envelope |
Meeting Agenda
The annual meeting of stockholders of Zogenix, Inc. is being convened for the following purposes: | ||
1. | To elect three |
2. | To consider and vote upon the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
3. | To |
4. | To consider and vote upon the approval of an amendment and restatement of our 2010 Equity Incentive Award Plan; | |
5. | To consider and vote upon the approval of an amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 100,000,000 to 200,000,000; and | |
6. | To transact such other business as may be properly brought before the meeting or any adjournment or postponement thereof. |
Our board of directors has fixed the close of business on May 16, 2016March 29, 2021 as the record date for the determination of stockholders entitled to notice of, and to vote at, the annual meeting or any adjournment or postponement thereof. For our annual meeting, we have elected to use the Internetinternet as our primary means of providing our proxy materials to stockholders. Consequently, most stockholders will not receive paper copies of our proxy materials. We will instead send to these stockholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our proxy statement and annual report, the matters to be acted upon at the meeting and for votingour board of directors’ recommendation with regard to each matter, and how to vote your shares via the Internet.internet or by telephone. The Notice of Internet Availability of Proxy Materials also provides information on how stockholders may obtain paper copies of our proxy materials free of charge, if they so choose. The electronic delivery of our proxy materials will significantly reduce our printing and mailing costs and the environmental impact of the circulation of our proxy materials.
Whether or not you expect to attend ourthe virtual annual meeting, please vote via the internet or by Internet or telephone as describedinstructed in the enclosed proxythese materials, or sign and return your proxy card prior to the meeting in order to ensure your representation at the meeting. Even if you request that thehave voted by proxy, materials be mailed to you, by signing, dating and returning the proxy card enclosed with those materials. If you plan to attend our annual meeting and wish to vote your shares personally, you may do so at any time beforestill vote electronically during the proxy is voted.
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By Order of the Board of Directors, | |
/s/ | |
Executive |
Emeryville, California
April , 2016
Your vote is important. Please vote your shares whether or not you plan to attend the virtual annual meeting.
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TABLE OF CONTENTS Proxy Statement Summary This summary highlights information contained in this Proxy Statement. It does not contain all information you should consider, and you should read the entire Proxy Statement carefully before voting. Annual Meeting of Shareholders Virtual Meeting available at: www.virtualshareholdermeeting.com/ZGNX2021 Agenda and Voting Recommendations Board of Directors and Director Nominees The following table provides summary information about each director and nominee for Class II director. Each director is elected by a majority of votes cast. Corporate Governance Highlights The Company is committed to good corporate governance practices, which we believe recognize shareholder interests and support the success of our business. Our corporate governance practices are highlighted below: 5959 Horton Street, Suite PROXY STATEMENT The board of directors of Zogenix, Inc. is soliciting In accordance with SEC rules, we are making our proxy materials available at Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on WHAT AM I There are Proposal 1: To elect three (3) directors: Proposal 3: To Proposal 4: Approval of an amendment and restatement to our 2010 Equity Incentive Plan. Proposal 5: Approval of an amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock WHO CAN VOTE AT THE MEETING? Only stockholders who owned our common stock on HOW MANY VOTES DO I Each share of our common stock that you own as of WHY DID I In accordance with SEC rules, and in unless you request one by following the instructions provided in the Notice. Should you request it, a printed set of proxy materials will be provided free of charge. Requests for a WHY IS ZOGENIX HOSTING THE ANNUAL MEETING IN A VIRTUAL MEETING FORMAT ONLY? In HOW DO I ATTEND THE VIRTUAL ANNUAL MEETING? Stockholders of record as of March 29, 2021 will be able to attend and participate in the annual meeting online by accessing www.virtualshareholdermeeting.com/ZGNX2021. To join the annual meeting, you will need to have your 16-digit control number which is included on your Notice or your proxy card (if you received a printed copy of the proxy materials). Even if you plan to attend the annual meeting online, we recommend that you also vote by proxy as described herein so that your vote will be counted if you subsequently decide not to attend the annual meeting. Access to the Audio Webcast of the Annual Meeting. The live audio webcast of the annual meeting will begin promptly at 9:00 a.m. Pacific Time on May 27, 2021. We encourage our stockholders Log in Procedures. To attend the virtual annual meeting, visit www.virtualshareholdermeeting.com/ZGNX2021 to log in. Stockholders will need their unique 16-digit control number which appears on Submitting Questions at the Virtual Annual Meeting. Stockholders may submit questions during the annual meeting after logging into www.virtualshareholdermeeting.com/ZGNX2021. Stockholders will need their 16-digit control number which appears on their Notice and proxy card (printed in the box and marked by the arrow) and the instructions that accompanied the proxy materials. As part of the annual meeting, we will hold a live question and answer session, during which we intend to answer questions submitted during the meeting in accordance with the annual meeting’s rules of conduct that are pertinent to Zogenix and the meeting matters, as time permits. In order to promote fairness, efficient use of time and in order to give an opportunity for all interested stockholders to Technical Assistance. Beginning 30 minutes prior to the start of and during the HOW DO I With respect to the election of directors, The manner in which your shares may be voted depends on how your shares are held. Stockholders of Record: Shares Registered in Your Name If you are a stockholder of record (i.e. you hold shares directly in your name), there are several ways for you to vote your shares. Whether or not you VOTE BY INTERNET: VOTE BY TELEPHONE:You may vote using a touch-tone telephone by calling 1-800-690-6903, 24 hours a day, seven days a week. Use the Company Number and Account Number shown on your Notice, proxy card or voting instructions form that was sent to you. Votes submitted by telephone must be received by 11:59 p.m., Eastern Time, on May 26, 2020. VOTE BY MAIL:If you are a stockholder of record, and you elect to receive your proxy materials by mail, you may vote using your proxy card by completing, signing, dating and returning the proxy card in the self-addressed, postage-paid envelope provided. You should mail the proxy card in plenty of time to allow delivery prior to the meeting. Do not mail the proxy card if you are voting via the internet or by telephone. If you properly complete your proxy card and send it in time to vote, your proxy (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your shares, as permitted, will be voted as recommended by our board of directors. If any other matter is presented at the annual meeting, your proxy (one of the individuals named on your proxy card) will vote in accordance with his or her best judgment. As of the date of this proxy statement, we knew of no matters that needed to be acted on at the meeting, other than those discussed in this proxy statement. Beneficial Owners: Shares Registered in the name of a Broker or Banks If on March 29, 2021 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, agent or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice is being forwarded to you by that organization rather than from Zogenix. Simply follow the voting instructions in the Notice to ensure that your vote is counted. You are also invited to virtually attend the annual meeting and vote during the meeting by following the instructions above under the heading “Vote by Internet – During the Virtual Annual Meeting.” MAY I If you give us your proxy, you may revoke it at any time before it is exercised. You may revoke your proxy in any one of the three following ways: WHAT CONSTITUTES A QUORUM? The presence at the annual meeting, in person or by proxy, of holders representing a majority of our outstanding common stock as of WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL? Proposal 1: Election of Directors. The cast in person or by proxy) will be elected. Only votes “For” or “Withheld” will affect the outcome. Proposal 2: Ratification of Independent Registered Public Accounting Firm. The ratification of the appointment of Ernst & Young LLP must receive “For” votes from the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote at the annual meeting. Proposal 3: Approval of Proposal 4: Approval of either in person or by proxy, from holders of a majority of the Proposal 5: Approval of an Amendment to the Company’s Amended and Restated Certificate of Incorporation to Increase the Authorized Number of Shares of Common Stock. The approval of an amendment to our Amended and Restated Certificate of Incorporation must receive “For” votes, either in person or by proxy, from the Voting results will be tabulated and certified by Broadridge Financial WHAT IS THE EFFECT OF ABSTENTIONS AND BROKER NON-VOTES? Shares of common stock held by persons attending the annual meeting but not voting, and shares represented by proxies that reflect abstentions as to a particular proposal, will be counted as present for purposes of determining the presence of a quorum. Abstentions are treated as shares present in person or by proxy and entitled to vote, so abstaining has the same effect as a negative vote for purposes of determining whether our stockholders have ratified the appointment of Ernst & Young LLP, our independent registered public accounting firm, Shares represented by proxies that reflect a “broker non-vote” will be counted for purposes of determining whether a quorum exists. A “broker non-vote” occurs when a nominee holding shares for a beneficial owner has not received instructions from the beneficial owner and does not have discretionary authority to vote the shares for certain non-routine matters. With regard to the election of directors, the advisory vote to approve the compensation of the named executive officers and the WHO IS PAYING THE COSTS OF SOLICITING THESE PROXIES? We will pay all of the costs of soliciting these proxies. We have engaged Okapi Partners as the proxy solicitor for the annual meeting for a fee of $12,500 plus out-of-pocket expenses. Our directors, officers and other employees may also solicit proxies in person or by telephone, fax or email. We will not pay our directors, officers or other employees any additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses. Our costs for forwarding proxy materials will not be significant. HOW DO I If you would like a copy of our annual report on Form 10-K for the fiscal year ended December 31, Zogenix, Inc. 5959 Horton Street, Emeryville, California 94608 Attn: Corporate Secretary All of our SEC filings are also available free of charge in the investor relations section of our website at www.zogenix.com. HOW CAN I Preliminary voting results will be announced at the annual meeting. Final voting results will be published in our current report on Form 8-K to be filed with the SEC within four business days after the annual meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results. ELECTION OF DIRECTORS Our board of directors is divided into three classes, with one class of our directors standing for election each year, generally for a three-year term. The current term of The nominees for Class If no contrary indication is made, proxies in the accompanying form will be voted for the nominees, or in the event that any nominee is not a candidate or is unable to serve as a director at the time of the election (which is not currently expected), for any nominee who is designated by our board of directors to fill the vacancy. All of our directors bring to the board of directors significant leadership experience derived from their professional experience and service as executives or board members of other corporations and/or venture capital firms. The process undertaken by the nominating/corporate governance committee in recommending qualified director candidates is described below under “Director Nominations Process.” Certain individual qualifications and skills of our directors that contribute to the board of directors’ effectiveness as a whole are described in the following paragraphs. Information Regarding Directors The information set forth below as to the directors and nominees for director has been furnished to us by the directors and nominees for director: Nominees for Election to the Board of Directors For a Three-Year Term Expiring at the Stephen J. Farr, Ph.D. is one of our co-founders and has served as our President and as a member of our board of directors since our inception in May 2006. Dr. Farr has served as our Chief Executive Officer since April 2015 and served as our Chief Operating Officer from our inception to March 2013. From 1995 to August 2006, Dr. Farr held positions of increasing responsibility within Aradigm Corporation, and he served most recently as Senior Vice President and Chief Scientific Officer with responsibility for research and development as well as business development. From 1986 to 1994, Dr. Farr was a tenured professor at the Welsh School of Pharmacy, Cardiff University, United Kingdom, concentrating in the area of biopharmaceutics. Dr. Farr currently is chair of the board of directors of Cerebral Therapeutics, Inc. and serves on the board of directors of Tevard Biosciences, Inc. and Flow Pharma, Inc. Dr. Farr served on the board of directors of SteadyMed Therapeutics, Inc. from 2012 until its acquisition by United Therapeutics Corporation in 2018. Dr. Farr is an adjunct Professor in the Department of Pharmaceutics, School of Pharmacy, Virginia Commonwealth University. Dr. Farr is a registered pharmacist in the United Kingdom and obtained his Ph.D. degree in Pharmaceutics from the University of Wales. As one of our co-founders and having served as our President since May 2006, Dr. Farr’s extensive knowledge of our business, its history and its culture, as well as his significant experience in research and development and thorough knowledge of the pharmaceutical product development process, contributed to our board of directors’ conclusion that he should serve as a director of our company. Mary E. Stutts has served as a member of our board of directors since September 2020. Ms. Stutts has served as Senior Vice President, Corporate Relations of Sumitovant Biopharma Ltd. since 2020. Previously, Ms. Stutts served as Chief Inclusion, Diversity & Health Equity Officer at Stanford Health Care from 2017 to 2020. Prior to that role, she served as Vice President, External Affairs at Comcast NBCUniversal from 2013 to 2017. Ms. Stutts has also served as Vice President, Corporate Communications at Bristol-Myers Squibb from 2011 to 2013, Senior Vice President, Corporate Relations of Elan Pharmaceuticals LLC from 2008 to 2011, Vice President, Corporate Communications at UnitedHealth Group Incorporated from 2007-2008 and in various roles of increasing responsibility at Genetech, Inc. from 2001 to 2007. From 1998 to 2001 she served as Global Director Public Policy & Communications at Bayer Corporation and from 1990 to 1998, in various roles of increasing responsibility at Kaiser Permanente. Ms. Stutts holds a Masters of Health Administration from the University of Southern California and a B.A. from the University of Louisiana. Ms. Stutts’ extensive experience in the healthcare industry, her executive leadership in multiple pharmaceutical companies and her expertise in corporate communications, contributed to our board of directors’ conclusion that she should serve as a director of our company. Members of the Board of Directors Continuing in Office Term Expiring at the 2022 Annual Meeting of Stockholders (Class III) Erle T. Mast has served as a member of our board of directors since May 2008. Mr. Mast expertise in management, accounting, treasury, and finance functions, contributed to our board of directors’ conclusion that he should serve as a director of our company. Renee P. Tannenbaum, Pharm.D. has served as a member of our board of directors since February 2015. Dr. Tannenbaum currently serves as Denelle J. Waynick has served as a member of our board of directors since September 2020. Ms. Waynick has more than 25 years of experience as a legal and strategic advisor across multiple sectors, including the biopharmaceutical industry. Ms. Waynick has served as General Counsel and Corporate Secretary of MyoKardia, Inc. since June 2020. Previously, Ms. Waynick served as Vice President, Legal Affairs, U.S. General Counsel, Secretary & Head of Global Enterprise Risk Management at UCB, Inc. from 2014 through June 2020. Prior to UCB, Ms. Waynick oversaw legal operations as Vice President, Legal Affairs, Global Brands at Actavis, Inc. (now AbbVie) from 2008 to 2014. She also served as Chief of Staff for the Office of the Term Expiring at the Louis C. Bockhas served as a member of our board of directors since August 2006. Since August 2014, Mr. Bock has and nominating/corporate governance committees, contributed to our board of directors’ conclusion that he should serve as a director of our company. Cam L. Garneris one of our co-founders and has served as chairman of our board of directors since August 2006. Mr. Garner co-founded specialty pharmaceutical companies Cadence Pharmaceuticals, Inc. (acquired by Mallinckrodt plc in March 2014), Somaxon Pharmaceuticals, Inc. (sold to Pernix Therapeutics in March 2013), Evoke Pharma, Inc., Elevation Pharmaceuticals, Inc. (sold to Sunovion Pharmaceuticals Inc. in 2012), DJ Pharma (sold to Biovail Corporation in 2000), Verus Pharmaceuticals, Inc., Xcel Pharmaceuticals, Inc. (acquired by Valeant Pharmaceuticals International in 2005), Neurelis, Inc., Meritage Pharma, Inc. (sold to Shire plc in February 2015), and most recently, Kalyra Pharmaceuticals, Inc., OrPro Therapeutics, Inc., Alastin SkinCare and Zavante, Inc. He previously served as chairman of Cadence from May 2004 until March 2014, and served as chairman of Verus, Elevation and Meritage until their acquisition and Evoke since January 2007. Mr. Garner was Chief Executive Officer of Dura Pharmaceuticals, Inc. from 1989 to 1995 and its Chairman and Chief Executive Officer from 1995 to 2000, when it was sold to Elan. In addition to Zogenix, Mr. Garner Caroline M. Loewy has served as a member of our board of directors since September 2020. Ms. Loewy serves on public company boards, provides strategic advisory services, and has more than 25 years of experience in the biotechnology industry. Previously, she co-founded and served as Chief Financial Officer and Chief Business Officer of Achieve Life Sciences, Inc. from 2015 to 2017. Prior to that, she served as Chief Financial Officer of several life sciences companies, including Tobira Therapeutics, Inc. from 2012 to 2014, Corcept Therapeutics Incorporated from 2008 to 2011 and Poniard Pharmaceuticals, Inc. from 2006 to 2008. Ms. Loewy was also a senior biotechnology equity research analyst at Morgan Stanley, Inc. from 2000 to 2004 and Prudential Securities, Inc. from 1996 to 1999. She is a founding board member of the Global Genes Project and she is a member of the Steering Committee of the Forum for Collaborative Research in Rare Diseases. She is also a founding board member of the KCNQ2 Cure Alliance Foundation. Ms. Loewy serves on the boards of directors of CymaBay Therapeutics, Inc., Aptose Biosciences Inc., PhaseBio Pharmaceuticals, Inc. and Locust Walk Acquisition Corp. Ms. Loewy holds a B.A. from the University of California, Berkeley, and M.B.A./M.S. degrees from Carnegie Mellon University. Ms. Loewy’s extensive experience in the biotechnology industry, her executive leadership as chief financial officer of multiple biotechnology companies and her expertise in in finance, contributed to our board of directors’ conclusion that she should serve as a director of our company. Mark Wiggins has served as a member of our board of directors since May 2011. Since May 2018, Mr. Wiggins has served as Chief Business Officer of Tracon Pharmaceuticals, Inc., a clinical stage biopharmaceutical company. Before his current position, Mr. Wiggins was Senior Vice President of Independence of The Board Of Directors As required under the Our Board undertook a review of the Stephen J. Farr, Ph.D., our Chief Executive Officer and BOARD LEADERSHIP STRUCTURE Our board of directors is currently led by its chairman, Cam L. Garner. Our board of directors recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as the company continues to grow. We separate the roles of chief executive officer and chairman of the board in recognition of the differences between the two roles. The chief executive officer is responsible for setting the strategic direction for the company and the day-to-day leadership and performance of the company, while the chairman of the board of directors provides guidance to the chief executive officer and presides over meetings of the full board of directors. We believe that this separation of responsibilities provides a balanced approach to managing the board of directors and overseeing the company. THE BOARD’S ROLE IN RISK OVERSIGHT Our board of directors has responsibility for the oversight of the company’s risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our board to understand the company’s risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk. The audit committee reviews information regarding liquidity and operations, and oversees our management of financial risks. BOARD OF DIRECTORS MEETINGS During Committees We have three standing committees: the audit committee, the compensation committee and the nominating/corporate governance committee. Each of these committees has a written charter approved by our board of directors. A copy of each charter can be found under the Investor Relations-Corporate Governance section of our website at www.zogenix.com. Audit Committee The audit committee of our board of directors currently consists of Messrs. Mast (chairman and audit committee financial expert), Bock and Wiggins. The audit committee met Both our external auditor and internal financial personnel meet privately with the audit committee and have unrestricted access to this committee. Compensation Committee The compensation committee of our board of directors currently consists of Nominating/Corporate Governance Committee The nominating/corporate governance committee of our board of directors currently consists of Messrs. Bock (chairman), REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS The audit committee oversees the company’s financial reporting process on behalf of our board of directors. Management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the audit committee reviewed the audited financial statements in the company’s annual report with management, including a discussion of any significant changes in the selection or application of accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and the effect of any new accounting initiatives. The audit committee reviewed with Ernst & Young LLP, which is responsible for expressing an opinion on the conformity of the company’s audited financial statements with generally accepted accounting principles in the United States of America and as to the effectiveness of the Company’s internal control over financial reporting, its judgments as to the quality, not just the acceptability, of the company’s accounting principles and such other matters as are required to be discussed with the audit committee The audit committee met with Ernst & Young LLP to discuss the overall scope of its services, the results of its audit and reviews, its evaluation of the company’s internal controls including internal control over financial reporting and the overall quality of the company’s financial reporting. Ernst & Young LLP, as the company’s independent registered public accounting firm, also periodically updates the audit committee about new accounting developments and their potential impact on the company’s reporting. The audit committee’s meetings with Ernst & Young LLP were held with and without management present. The audit committee is not employed by the company, nor does it provide any expert assurance or professional certification regarding the company’s financial statements. The audit committee relies, without independent verification, on the accuracy and integrity of the information provided, and representations made, by management and the company’s independent registered public accounting firm. In reliance on the reviews and discussions referred to above, the audit committee has recommended to the company’s board of directors that the audited financial statements and management’s assessment of the effectiveness of the company’s internal control over financial reporting be included in our annual report on Form 10-K for the year ended December 31, This report of the audit committee is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts. The foregoing report has been furnished by the audit committee. Respectfully submitted, The Audit Erle T. Mast (Chairman) Louis C. Bock Mark Wiggins COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mr. Wiggins (chairman) and DIRECTOR NOMINATION PROCESS Director Qualifications In evaluating director nominees the nominating/corporate governance committee will consider among other things the following factors: The nominating/corporate governance committee’s goal is to assemble a board of directors that brings to the company a variety of perspectives and skills derived from high quality business and professional experience. Moreover, the nominating/corporate governance committee believes that the background and qualifications of the board of directors, considered as a group, should provide a significant mix of experience, knowledge and abilities that will allow the board of directors to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law. Other than the foregoing criteria for director nominees, the nominating/corporate governance committee has not adopted a formal policy with respect to a fixed set of specific minimum qualifications for its candidates for membership on the board of directors. The nominating/corporate governance committee may consider such other facts, including, without limitation, diversity, as it may deem are in the best interests of the company and its stockholders. The nominating/corporate governance committee does, however, believe it is appropriate for at least one, and, preferably, several, members of our board of directors to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that a majority of the members of our board of directors be independent as required under the Nasdaq qualification standards. The nominating/corporate governance committee also believes it is appropriate for our President and Chief Executive Officer to serve as a member of our board of directors. Our directors’ performance and qualification criteria are reviewed annually by the nominating/corporate governance committee. Identification and Evaluation of Nominees for Directors The nominating/corporate governance committee identifies nominees for director by first evaluating the current members of our board of directors willing to continue in service. Current members with qualifications and skills that are consistent with the nominating/corporate governance committee’s criteria for board of director service and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of our board of directors with that of obtaining a new perspective or expertise. If any member of our board of directors does not wish to continue in service or if our board of directors decides not to re-nominate a member for re-election, the nominating/corporate governance committee may identify the desired skills and experience of a new nominee in light of the criteria above, in which case, the nominating/corporate governance committee would generally poll our board of directors and members of management for their recommendations. The nominating/corporate governance committee may also review the composition and qualification of the boards of directors of our competitors, and may seek input from industry experts or analysts. The nominating/corporate governance committee reviews the qualifications, experience and background of the candidates. Final candidates are interviewed by the members of the nominating/corporate governance committee and by certain of our other independent directors and executive management. In making its determinations, the nominating/corporate governance committee evaluates each individual in the context of our board of directors as a whole, with the objective of assembling a group that can best contribute to the success of our company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the nominating/corporate governance committee makes its recommendation to our board of directors. The nominating/corporate governance committee has utilized the third-party search firm of Spencer Stuart to assist with the identification of qualified board of director candidates. The nominating/corporate governance committee evaluates nominees recommended by stockholders in the same manner as it evaluates other nominees. We have not received director candidate recommendations from our stockholders and do not have a formal policy regarding consideration of such recommendations. However, any recommendations received from stockholders will be evaluated in the same manner that potential nominees suggested by board members, management or other parties are evaluated. We do not intend to treat stockholder recommendations in any manner different from other recommendations. Under our amended and restated bylaws, stockholders wishing to suggest a candidate for director should write to our corporate secretary and provide such information about the stockholder and the proposed candidate as is set forth in our amended and restated bylaws and as would be required by SEC rules to be included in a proxy statement. In addition, the stockholder must include the consent of the candidate and describe any arrangements or undertakings between the stockholder and the candidate regarding the nomination. In order to give the nominating/corporate governance committee sufficient time to evaluate a recommended candidate and/or include the candidate in our proxy statement for the BOARD DIVERSITY While we do not have a formal policy regarding the diversity of the board of directors, we believe the board is diverse based on gender and ethnicity, as reflected in the charts below. The nominating/corporate governance committee considers the board of director’s overall composition when considering director candidates, including whether the board of directors has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of our current and expected future needs. In addition, the nominating/corporate governance committee also believes that it is desirable for new candidates to contribute to the variety of viewpoints on the board of directors, which may be enhanced by a mix of different professional and personal backgrounds and experiences. DIRECTOR ATTENDANCE AT ANNUAL MEETINGS Although our company does not have a formal policy regarding attendance by members of our board of directors at our annual meeting, we encourage all of our directors to attend. All COMMUNICATIONS WITH OUR BOARD OF DIRECTORS Stockholders seeking to communicate with our board of directors should submit their written comments to our corporate secretary at Zogenix, Inc., Attn: Corporate Secretary, CORPORATE GOVERNANCE Our company’s Code of Business Conduct and Ethics, Corporate Governance Guidelines, Audit Committee Charter, Compensation Committee Charter and Nominating/Corporate Governance Committee Charter are available, free of charge, on our website at www.zogenix.com. Please note, however, that the information contained on the website is not incorporated by reference in, or considered part of, this proxy statement. We will also provide copies of these documents, as well as our company’s other corporate governance documents, free of charge, to any stockholder upon written request to Zogenix, Inc., Attention: Corporate Secretary, Director Compensation We compensate non-employee members of the board of directors. Directors who are also employees do not receive cash or equity compensation for service on the board of directors in addition to compensation payable for their service as our employees. Our non-employee Pursuant to The initial options granted to non-employee directors will vest over three years in 36 equal monthly installments, subject to the director’s continuing service on our board of directors on those dates. The annual options granted to non-employee directors described above will vest over one year in 12 equal monthly installments, subject to the director’s continuing service on our board of directors on those dates. The term of each option granted to a non-employee director will be ten years and will remain exercisable for a period of 12 months following a director’s termination of service. These options The following table summarizes The aggregate number of shares subject to stock options outstanding at December 31, VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS If a quorum is present and voting at the annual meeting, the three nominees receiving the highest number of votes will be elected to our board of directors. Votes withheld from any nominee, abstentions and broker non-votes will be counted only for purposes of determining a quorum. Broker non-votes will have no effect on this proposal as brokers or other nominees are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF JAMES B. BREITMEYER, M.D., PH.D., STEPHEN J. FARR, PH.D. AND MARY E. STUTTS FOR ELECTION TO THE RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC The audit committee has selected Ernst & Young LLP as the company’s independent registered public Stockholder ratification of the selection of Ernst & Young LLP as the company’s independent registered public INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES The following table represents aggregate fees billed to us for services related to the fiscal years ended December 31, The audit committee has considered whether the provision of non-audit services is compatible with maintaining the independence of Ernst & Young LLP, and has concluded that the provision of such services is compatible with maintaining the independence of our auditors. PRE-APPROVAL POLICIES AND PROCEDURES Our audit committee has established a policy that all audit and permissible non-audit services provided by our independent registered public accounting firm will be pre-approved by the audit committee, and all such services were pre-approved in accordance with this policy during the fiscal years ended December 31, independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote at the meeting will be required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. The approval of OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, APPROVAL, ON AN ADVISORY BASIS, OF Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, and Section 14A of the Exchange Act, our stockholders are entitled to vote at the annual meeting to provide advisory approval of the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC. At our 2017 annual meeting, the stockholders recommended that stockholders vote on the compensation of our named executive officers each year, and the board has determined that we will conduct an annual “say-on-pay” vote. We are asking our stockholders to Accordingly, we ask that our “RESOLVED, that Zogenix, Inc.’s stockholders approve, on an advisory basis, the compensation of Vote Required; Recommendation of the Board of Directors The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote at the meeting will be required to approve the OUR BOARD OF DIRECTORS RECOMMENDS THAT APPROVAL OF AMENDMENT AND RESTATEMENT OF 2010 EQUITY INCENTIVE AWARD PLAN Our stockholders are being asked to approve the amendment and restatement of our 2010 Equity Incentive Award Plan, or the 2010 Plan. The proposed amended and restated 2010 Plan is referred to herein as the “Restated Plan.” Our board of directors approved the Restated Plan on March 30, 2021, subject to stockholder approval. The Restated Plan will become effective as of the date our stockholders approve the Restated Plan. In the event that our stockholders do not approve the Restated Plan, then it will not become effective, and the 2010 Plan will continue in full force and effect in accordance with its terms as previously approved by our stockholders, and we may continue to grant awards under the 2010 Plan, subject to its terms, conditions and limitations, using the shares available for issuance thereunder. Overview of Proposed Amendments In this Proposal 4, we are requesting shareholder approval of the Restated Plan in order to: The Restated Plan would reserve an additional 4,500,000 shares for issuance over the existing share reserve under the 2010 Plan, subject to potential adjustments, as described below under the heading “Adjustments.” The Restated Plan is not being amended in any material respect other than to reflect the changes described above. WHY WE RECOMMEND THAT YOU VOTE FOR We believe that the adoption of the Restated Plan is essential to our success. A talented, motivated and effective management team and workforce are Our equity incentive program is broad-based. As of March 29, 2021, all 241 of our employees had received grants of equity awards, one consultant out of our approximately 168 current consultants had received a grant of equity awards and all 9 of our non-employee directors had received grants of equity awards. The company’s practice, however is to not grant equity awards to consultants. We believe we must continue to offer a competitive equity compensation plan in order to attract, retain and motivate the industry-leading talent imperative to our continued growth and success. Outstanding Awards Under Existing Plans — Ability to Grant Future Equity Awards is Limited The table below presents information about the number of shares that were subject to various outstanding equity awards under our equity plans, and the shares remaining available for issuance under each such plan, each at March 29, 2021. The existing 2010 Plan is the only equity incentive plan we currently have in place under which we can grant awards (other than the shares reserved for issuance under our Employee Stock Purchase Plan, or ESPP. We no longer grant awards under our Employment Inducement Equity Incentive Award Plan or Inducement Plan. As a result, assuming approval of this Proposal 4, the only shares we will have available for future issuance of equity awards will be the shares reserved for issuance under the Restated Plan (other than the shares reserved for issuance under our ESPP). * Less than 1% of outstanding shares of our Common Stock outstanding as of March 29, 2021. (1) Based on 55,812,590 shares of our Common Stock outstanding as of March 29, 2021. (2) Based on the closing price of our Common Stock on March 29, 2021, of $18.52 per share. Background for the Determination of the Share Reserve under the Restated Plan In determining whether to approve the Restated Plan, our board of directors considered that: THE RESTATED PLAN COMBINES COMPENSATION AND GOVERNANCE BEST PRACTICES The Restated Plan reflects a broad range of compensation and governance best practices, with some of the key features of the Restated Plan as follows: SUMMARY of the Restated Plan The principal features of the Restated Plan are summarized below, but the summary is qualified in its entirety by reference to the Restated Plan itself, which is attached as Appendix A to this proxy statement. Securities Subject to the Restated Plan A total of 11,500,000 shares of our common stock are currently authorized for issuance under the 2010 Plan and will be reserved for issuance under the Restated Plan. Pursuant to the Restated Plan, the number of shares that will be reserved for issuance as of the effective date of the Restated Plan will be increased to 16,000,000. In no event may more than 16,000,000 shares be issued upon the exercise of ISOs under the Restated Plan. To the extent that an award expires or is forfeited or an award is settled for cash, any shares subject to the award will, to the extent of such expiration, forfeiture or cash settlement, be available for future grant or sale under the Restated Plan. In addition, shares of common stock which are delivered by the holder or withheld by us in payment of the grant or exercise price or tax withholding obligation of any award under the Restated Plan will again be available for future grant or sale under the Restated Plan. If any shares of restricted stock are forfeited by a participant or repurchased by us pursuant to the Restated Plan, such shares shall again be available for future grant or sale under the Restated Plan. The payment of dividend equivalents in cash in conjunction with any outstanding awards shall not be counted against the shares of stock available for issuance under the Restated Plan. To the extent permitted by applicable law or any exchange rule, and subject to certain other restrictions, shares issued in assumption of, or in substitution for, any outstanding awards or shares available under a pre-existing plan of an entity acquired by the Company or any of its subsidiaries that was approved by shareholders and not adopted in contemplation of such acquisition will not be counted against the shares available for grant under the Restated Plan. Administration The compensation committee of our board of directors will generally administer the Restated Plan (except with respect to any award granted to non-employee directors, which must be administered by our full board of directors). To the extent necessary to comply with Rule 16b-3 of the Exchange Act, the members of the compensation committee must each be a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act. In addition, to the extent required by applicable law, each member of the compensation committee shall be an “independent director” under the rules of any securities exchange on which the shares of our common stock are listed. The compensation committee may delegate certain of its duties and authorities to a committee of one or more directors or officers of the Company for awards to certain individuals, within specific guidelines and limitations. However, no delegation of authority is permitted with respect to awards made to individuals who (1) are subject to Section 16 of the Exchange Act, or (2) are officers of the Company and have been delegated authority to grant or amend awards under the Restated Plan. The compensation committee, the board of directors or any such subcommittee to which authority to grant awards has been delegated are referred to herein as the “plan administrator.” Subject to the terms and conditions of the Restated Plan, the plan administrator has the authority to select the persons to whom awards are to be made, to determine the type or types of awards to be granted to each person, the number of awards to grant, the number of shares to be subject to such awards, and the terms and conditions of such awards, and to make all other determinations and decisions and to take all other actions necessary or advisable for the administration of the Restated Plan. The plan administrator is also authorized to establish, adopt, amend or revise rules relating to administration of the Restated Plan. Our board of directors may at any time revest in itself the authority to administer the Restated Plan. Eligibility Options, SARs, restricted stock and other awards under the Restated Plan may be granted to individuals who are then our officers or employees or are the officers or employees of any of our subsidiaries. Such awards may also be granted to our non-employee directors and consultants but only employees may be granted ISOs. As of March 29, 2021, we had 9 non-employee directors, 241 employees and approximately 168 consultants, each of whom would have been eligible for awards under the Restated Plan had it been in effect on such date. We generally do not grant equity awards to consultants. The closing share price per share for our common stock on the Nasdaq Global Market on March 29, 2021 was $18.52. Awards The Restated Plan provides that the plan administrator may grant or issue stock options, SARs, restricted stock, restricted stock units, dividend equivalents, stock payments, and other incentive awards, or any combination thereof. The plan administrator will consider each award grant subjectively, considering factors such as the individual performance of the recipient and the anticipated contribution of the recipient to the attainment of our long-term goals. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award. Nonqualified stock options, or NQSOs, provide for the right to purchase shares of our common stock at a specified price which may not be less than the fair market value of a share of common stock on the date of grant, and usually will become exercisable (at the discretion of the plan administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of performance targets established by the plan administrator. NQSOs may be granted for any term of up to ten years after the date of grant. Incentive stock options, or ISOs, are designed to comply with the provisions of the Internal Revenue Code and are subject to specified restrictions contained in the Internal Revenue Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, must expire within a specified period of time following the optionee’s termination of employment, and must be exercised within the ten years after the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) more than 10% of the total combined voting power of all classes of our capital stock, the Restated Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must expire upon the fifth anniversary of the date of its grant. Restricted stock may be granted to participants and made subject to such restrictions as may be determined by the plan administrator. Typically, restricted stock may be forfeited for no consideration if the conditions or restrictions are not met, and it may not be sold or otherwise transferred to third parties until restrictions are removed or expire. Recipients of restricted stock, unlike recipients of options, may have voting rights and may receive dividends, if any, prior to the time when the restrictions lapse, provided that any dividends paid on unvested shares will be subject to the same vesting conditions as the underlying unvested shares. Restricted stock units, or RSUs, may be awarded to participants, typically without payment of consideration or for a nominal purchase price, but subject to vesting conditions including continued employment or on performance criteria established by the plan administrator. Like restricted stock, RSUs may not be sold or otherwise transferred or hypothecated until vesting conditions are removed or expire. Unlike restricted stock, stock underlying RSUs will not be issued until the RSUs have vested, and recipients of RSUs generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied. SARs granted under the Restated Plan typically provide for payments to the holder based upon increases in the price of our common stock over the exercise price of the SAR. The exercise price of a SAR may not be less than the fair market value of a share of common stock on the date of grant. There are no restrictions specified in the Restated Plan on the exercise of SARs or the amount of gain realizable therefrom, other than a SAR may not have a term in excess of ten years from the date of grant. The plan administrator may elect to pay SARs in cash or in common stock or in a combination of both. Dividend equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares covered by the awards held by the participant. Dividends and dividend equivalents may not be paid on awards subject to vesting conditions unless and until such conditions are met. Dividend equivalents may not be paid on stock options or SARs. Stock payments may be authorized by the plan administrator in the form of common stock or an option Other incentive awards may be authorized by the plan administrator and may provide participants with shares of common stock or the right to purchase shares of common stock or may have a value derived from the value of, or an exercise or conversion privilege at a price related to shares of common stock or a cash value, or otherwise be payable in shares of common stock or cash. Other incentive awards may be linked to the attainment of specific performance goals determined appropriate by the plan administrator. Other incentive awards may be paid in cash, common stock or other property, or a combination thereof, as determined by the plan administrator. Performance Criteria The plan administrator may grant awards that are paid, vest or become exercisable upon the attainment of company performance criteria which may be related to one or more performance criteria as applicable to our performance or the performance of a division, business unit or an individual, measured either in absolute terms, on a same-property basis, as compared to any incremental increase or as compared to results of a peer group, which performance criteria may include, but are not limited to: operating or other costs and expenses, improvements in expense levels, cash flow (including, but not limited to, operating cash flow and free cash flow), return on net assets, stockholders’ equity, return on stockholders’ equity, return on sales, gross or net profit or operating margin, working capital, net earnings (either before or after interest, taxes, depreciation and amortization), gross or net sales or revenue, net income (either before or after taxes), adjusted net income, operating earnings, earnings per share of stock, adjusted earnings per share of stock, price per share of stock, capital raised in financing transactions or other financing milestones, market recognition (including but not limited to awards and analyst ratings), financial ratios, implementation or completion of critical projects, comparisons with various stock market indices, and implementation, completion or attainment of objectively determinable objectives relating to research, development, regulatory, commercial or strategic milestones or development. These performance criteria may be measured in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices. The plan administrator may provide for adjustments for such items as it determines are appropriate, in its discretion, which may include, but are not limited to, one or more of the following: items related to a change in accounting principle, items relating to financing activities, expenses for restructuring or productivity initiatives, other non-operating items, items related to acquisitions, items attributable to the business operations of any entity acquired by us during the performance period, items related to the disposal of a business of segment of a business, items related to discontinued operations that do not qualify as a segment of a business under Tax Withholding The Restated Plan permits the plan administrator to allow for the withholding or surrender of shares in satisfaction of tax withholding with respect to awards with a value up to the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America). Transferability of Awards Unless the plan administrator provides otherwise, the Restated Plan generally does not allow for the transfer of awards, and only the recipient of an option or SAR may exercise such an award during his or her lifetime. Forfeiture, Recoupment and Clawback Provisions Pursuant to its general authority to determine the terms and conditions applicable to awards under the Restated Plan, the plan administrator has the right to provide, in an award agreement or otherwise, that an award shall be subject to the provisions of any recoupment or clawback policies implemented by us, including, without limitation, any recoupment or clawback policies adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder. Adjustments If there is any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares of our common stock or the share price of our common stock other than an equity restructuring (as defined in the Restated Plan), the plan administrator will make such equitable adjustments, if any, as the plan administrator in its discretion may deem appropriate to reflect such change with respect to (1) the aggregate number and type of shares that may be issued under the Restated Plan and the limit on ISOs under the Restated Plan, (2) the terms and conditions of any outstanding awards (including, without limitation, any applicable performance targets or criteria with respect thereto), and (3) the grant or exercise price per share for any outstanding awards under the plan. If there is any equity restructuring, (1) the number and type of securities subject to each outstanding award and the grant or exercise price per share for each outstanding award, if applicable, will be proportionately adjusted, and (2) the plan administrator will make proportionate adjustments to reflect such equity restructuring with respect to the aggregate number and type of shares that may be issued under the Restated Plan and the limit on ISOs under the Restated Plan. Adjustments in the event of an equity restructuring will not be discretionary. The plan administrator also has the authority under the Restated Plan to take certain other actions with respect to outstanding awards in the event of a corporate transaction, including provision for the cash-out, termination, assumption or substitution of such awards. Corporate Transactions In the event of a change in control where the acquirer does not assume awards granted under the Restated Plan, awards issued under the Restated Plan will be subject to accelerated vesting such that 100% of the awards will become vested and exercisable or payable, as applicable. Under the Restated Plan, a change in control is generally defined as: Amendment and Termination of the Restated Plan Our compensation committee or board of directors may terminate, amend or modify the Restated Plan. However, stockholder approval of any amendment to the Restated Plan will be obtained to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, or for any amendment to the Restated Plan that increases the number of shares available under the Restated Plan. Unless earlier terminated by our board of directors, the Restated Plan will terminate on the tenth anniversary of the date our board of directors adopted the Restated Plan. Repricing Prohibited Other than pursuant to the provisions of the Restated Plan described above under the headings “Adjustments” and “Corporate Transactions,” the plan administrator may not without the approval of the Company’s stockholders (1) lower the exercise price of an option or SAR after it is granted or (2) cancel an option or SAR when the exercise price exceeds the fair market value of the underlying shares in exchange for cash or another award. Securities Laws The Restated Plan is intended to conform with all provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. The Restated Plan will be administered, and options will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. Federal Income Tax Consequences Associated with the Restated Plan The federal income tax consequences of the Restated Plan under current federal income tax law are summarized in the following discussion which deals with the general tax principles applicable to the Restated Plan and is intended for general information only. The following discussion of federal income tax consequences does not purport to be a complete analysis of all of the potential tax effects of the Restated Plan. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. This summary is not intended to be complete and does not describe foreign, state and local tax laws, employment, estate or gift tax considerations. The tax information summarized is not tax advice. Stock Options and Stock Appreciation Rights. A Restated Plan participant generally will not recognize taxable income and we generally will not be entitled to a tax deduction upon the grant of a stock option or stock appreciation right. The tax consequences of exercising a stock option and the subsequent disposition of the shares received upon exercise will depend upon whether the option qualifies as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code. The Restated Plan permits the grant of options that are intended to qualify as incentive stock options as well as options that are not intended to so qualify; however, incentive stock options generally may be granted only to our employees and employees of our parent or subsidiary corporations, if any. Upon exercising an option that does not qualify as an incentive stock option when the fair market value of our stock is higher than the exercise price of the option, a Restated Plan participant generally will recognize taxable income at ordinary income tax rates equal to the excess of the fair market value of the stock on the date of exercise over the purchase price, and we (or our subsidiaries, if any) generally will be entitled to a corresponding tax deduction for compensation expense, in the amount equal to the amount by which the fair market value of the shares purchased exceeds the purchase price for the shares. Upon a subsequent sale or other disposition of the option shares, the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares. Upon exercising an incentive stock option, a Restated Plan participant generally will not recognize taxable income, and we will not be entitled to a tax deduction for compensation expense. However, upon exercise, the amount by which the fair market value of the shares purchased exceeds the purchase price will be an item of adjustment for alternative minimum tax purposes. The participant will recognize taxable income upon a sale or other taxable disposition of the option shares. For federal income tax purposes, dispositions are divided into two categories: qualifying and disqualifying. A qualifying disposition generally occurs if the sale or other disposition is made more than two years after the date the option was granted and more than one year after the date the shares are transferred upon exercise. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition generally will result. Upon a qualifying disposition of incentive stock option shares, the participant will recognize long term capital gain in an amount equal to the excess of the amount realized upon the sale or other disposition of the shares over their purchase price. If there is a disqualifying disposition of the shares, then the excess of the fair market value of the shares on the exercise date (or, if less, the price at which the shares are sold) over their purchase price will be taxable as ordinary income to the participant. If there is a disqualifying disposition in the same year of exercise, it eliminates the item of adjustment for alternative minimum tax purposes. Any additional gain or loss recognized upon the disposition will be recognized as a capital gain or loss by the participant. We will not be entitled to any tax deduction if the participant makes a qualifying disposition of incentive stock option shares. If the participant makes a disqualifying disposition of the shares, we should be entitled to a tax deduction for compensation expense in the amount of the ordinary income recognized by the participant. Upon exercising or settling a stock appreciation right, a Restated Plan participant will recognize taxable income at ordinary income tax rates, and we should be entitled to a corresponding tax deduction for compensation expense, in the amount paid or value of the shares issued upon exercise or settlement. Payments in shares will be valued at the fair market value of the shares at the time of the payment, and upon the subsequent disposition of the shares the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares. Restricted Stock and RSUs. A Restated Plan participant generally will not recognize taxable income at ordinary income tax rates and we generally will not be entitled to a tax deduction upon the grant of restricted stock or RSUs. Upon the termination of restrictions on restricted stock or the payment of RSUs, the participant will recognize taxable income at ordinary income tax rates, and we should be entitled to a corresponding tax deduction for compensation expense, in the amount paid to the participant or the amount by which the then fair market value of the shares received by the participant exceeds the amount, if any, paid for them. Upon the subsequent disposition of any shares, the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares. However, a Restated Plan participant granted restricted stock that is subject to forfeiture or repurchase through a vesting schedule such that it is subject to a “risk of forfeiture” (as defined in Section 83 of the Internal Revenue Code) may make an election under Section 83(b) of the Internal Revenue Code to recognize taxable income at ordinary income tax rates, at the time of the grant, in an amount equal to the fair market value of the shares of common stock on the date of grant, less the amount paid, if any, for such shares. We will be entitled to a corresponding tax deduction for compensation, in the amount recognized as taxable income by the participant. If a timely Section 83(b) election is made, the participant will not recognize any additional ordinary income on the termination of restrictions on restricted stock, and we will not be entitled to any additional tax deduction. Dividend Equivalents, Stock Payment Awards and Other Incentive Awards. A Restated Plan participant will not recognize taxable income and we will not be entitled to a tax deduction upon the grant of dividend equivalents, stock payment awards or other incentive awards until cash or shares are paid or distributed to the participant. At that time, any cash payments or the fair market value of shares that the participant receives will be taxable to the participant at ordinary income tax rates and we should be entitled to a corresponding tax deduction for compensation expense. Payments in shares will be valued at the fair market value of the shares at the time of the payment, and upon the subsequent disposition of the shares, the participant will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares. Section 409A of the Internal Revenue Code. Certain types of awards under the Restated Plan may constitute, or provide for, a deferral of compensation under Section 409A. Unless certain requirements set forth in Section 409A are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% federal income tax (and, potentially, certain interest penalties). To the extent applicable, the Restated Plan and awards granted under the Restated Plan will be structured and interpreted to comply with Section 409A and the Department of Treasury regulations and other interpretive guidance that may be issued pursuant to Section 409A. Tax Consequences to the Company. To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services should be entitled to a corresponding deduction provided that, among other things, the amount (1) meets the test of reasonableness, (2) is an ordinary and necessary business expense, (3) is not an “excess parachute payment” within the meaning of Section 280G of the Code, and (4) is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code. Section 162(m) Limitation. In general, under Section 162(m), income tax deductions of publicly-held corporations may be limited to the extent total compensation (including base salary, annual bonus, stock option exercises and non- qualified benefits paid) for covered employees, generally all named executive officers and any covered employee from a previous year, exceeds $1 million in any one year. New Plan Benefits Our non-employee directors will be eligible to receive automatic option grants under the Restated Plan, as described above under “Director Compensation.” All other future grants under the Restated Plan are within the discretion of the plan administrator and the benefits of such grants are, therefore, not determinable. Plan Benefits As of March 29, 2021, each of our named executive officers and the other groups identified below have received the following option and RSU grants under the 2010 Plan since its inception (even if not currently outstanding): Vote Required; Recommendation of the Board of Directors The affirmative vote of the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the annual OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 2010 EQUITY INCENTIVE AWARD PLAN. APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK Our board of directors is requesting stockholder approval of an The proposed amendment would amend the first sentence of ARTICLE FOURTH of the Amended and Restated Certificate of Incorporation to read in its entirety as follows: “The Corporation is authorized to issue two classes of stock to be designated, respectively, Common Stock, par value $0.001 per share (“Common Stock”) and Preferred Stock, par value $0.001 per share (“Preferred Stock”). The total number of shares the Corporation shall have the authority to issue is Two Hundred Ten Million (210,000,000) shares, Two Hundred Million (200,000,000) shares of which shall be Common Stock and Ten Million (10,000,000) shares of which shall be Preferred Stock.” The additional common stock to be authorized by adoption of the amendment would have rights identical to our currently outstanding common stock. Adoption of the proposed amendment and issuance of the common stock would not affect the rights of the holders of our currently outstanding common stock, except for effects incidental to increasing the number of shares of our common stock outstanding, such as dilution of the voting rights of current holders of common stock. If the amendment is adopted, it will become effective upon filing of a Certificate of Amendment of our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. In addition to the 55,812,590 shares of common stock outstanding on March 29, 2021, our board of directors has reserved an aggregate of 7,364,360 shares of common stock for issuance upon exercise of options and other awards granted under our stock option plans and 12,312,613 shares of common stock for issuance upon conversion of our 2.75% Convertible Senior Notes due 2027. Although, at present, our board of directors has no plans to issue the additional shares of common stock, it desires to have the shares available to provide additional flexibility to use our capital stock for business and financial purposes in the Any future issuance of additional authorized shares of our common stock may, among other things, dilute the equity and voting rights of those holding common stock at the time the additional shares are issued. Additionally, this potential dilutive effect may cause a reduction in the market price of our common stock. Further, the amendment could adversely affect the ability of third parties to take us over or change our control by, for example, permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of our board of directors or contemplating a tender offer or VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS The affirmative vote of OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK. The following table sets forth information about the beneficial ownership of our common stock at Unless otherwise noted below, the address of each beneficial owner listed on the table is c/o Zogenix, Inc., For each person and group included in the table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group as described above by the sum of the The following table sets forth certain information about our executive officers as of Executive Officers The biography of Stephen J. Farr, Ph.D. can be found above under the Michael P. Smith has served as our Executive Vice President, Chief Financial Officer and Treasurer Bradley S. Galer, M.D. Gail M. Farfel, Ph.D. Shawnte M. Mitchell has served as Executive Vice President, General Counsel, and Secretary since April 2020. From August 2016 to April 2020, Ms. Mitchell was Senior Vice President, General Counsel and Corporate Affairs of Aptevo Therapeutics, Inc. where she spent time overseeing compliance, governance, SEC, intellectual property, data privacy, human resources, insurance and contractual matters. From May 2009 to August 2016, Ms. Mitchell served as Vice President, Associate General Counsel and Assistant Secretary at the specialty biopharmaceutical company Emergent BioSolutions. Ms. Mitchell began her career as an Associate at Ropes & Gray, where she advised health care, life sciences, and technology clients in mergers and acquisitions, venture capital investment, debt finance, health care and FDA related matters. Ms. Mitchell received a B.S. in Biological Sciences from Stanford University and a J.D. from The George Washington University Law School. Ashish M. Sagrolikar has served as our Executive Vice President and Compensation Discussion and Analysis This compensation discussion and analysis provides information about the material components of our executive compensation program for our “named executive Specifically, this compensation discussion and analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each compensation component that we provide. In addition, we explain how and why the compensation committee and our board of directors arrived at specific compensation policies and decisions involving our executive officers during the fiscal year ended December 31, COMPANY OVERVIEW We are a global biopharmaceutical company committed to developing and commercializing therapies with the potential to transform the lives of patients and their families living with rare diseases. The company’s first rare disease therapy, FINTEPLA® (fenfluramine) oral solution has been approved by the U.S. Food and Drug Administration (“FDA) and the European Medicines Agency and is in development in Japan for the treatment of seizures associated with Dravet syndrome, a rare, severe lifelong epilepsy. The company has two additional late-stage development programs underway: one for FINTEPLA for the treatment of seizures associated with Lennox-Gastaut syndrome, another rare epilepsy, and one for MT1621, an investigational therapy for the treatment of a rare genetic disorder called TK2 deficiency (being developed through its subsidiary Modis Therapeutics). We are also collaborating with Tevard Biosciences to identify and develop potential next-generation gene therapies for genetic rare epilepsies. BUSINESS HIGHLIGHTS The arrival of the Response to 2020 Say-on-Pay Vote In May 2020, we held a stockholder advisory vote on the compensation As we evaluated our compensation practices and talent needs throughout 2020, we were mindful of the strong support our stockholders have historically expressed for our compensation philosophy. As a result, the compensation committee decided to generally retain our existing approach to executive compensation for our continuing executives, with an emphasis on short- and long-term incentive compensation that rewards our senior executives for corporate and individual performance. As discussed below, COMPENSATION PHILOSOPHY AND OBJECTIVES We recognize that the ability to excel depends on the integrity, knowledge, imagination, skill, diversity and teamwork of our employees. To this end, the key objectives of our executive compensation program are: OVERVIEW OF 2020 EXECUTIVE COMPENSATION DECISIONS In general, the majority of each of our named executive officers’ total compensation is tied directly to corporate and individual performance, increases in our stock price, or both. Specific elements of our executive compensation program that demonstrate our pay-for-performance philosophy include: The primary elements of our total direct compensation program for the named executive officers and a summary of the actions taken by the compensation committee during 2020 are set forth below. ·Our named executive officers received base salary increases for 2020 consistent with our pay positioning philosophy of tying target total cash compensation to the 50th percentile of similarly-situated executives at comparable companies based on our peer group. ·As a result, our named executive’s 2020 base salaries remained at or below the 50th percentile of similarly-situated executives. ·Our corporate objectives for purposes of our annual cash incentives were established before the onset of the COVID-19 pandemic and were not adjusted by our compensation committee to take into account the impact of the pandemic on certain of the performance goals. ·While the company achieved substantially all of its corporate performance goals during 2020 despite the difficult environment, our named executive officers’ annual incentives tied to corporate performance were paid out at 96% of target. ·Our named executive officers received stock options and RSUs during 2020, both of which vest over four years. ·Stock options are an important vehicle for tying executive pay to performance, because they deliver future value only if the value of our common stock increases above the exercise price. As a result, they provide strong incentives for our executive officers to increase the value of our common stock over the long term, and they tightly align the interests of our executives with those of our stockholders. ·RSU awards are granted because they are less dilutive to our KEY EXECUTIVE COMPENSATION CHANGES FOR 2021 Our compensation committee implemented two changes to our executive compensation program for 2021 to further align the interests of ·In 2021, we implemented a new performance-based RSU, or PSU, program for our executive equity awards. ·In 2021, we granted approximately 33-1/3% of our executive’s annual equity awards in the form of PSU awards to further align our equity program with market practices and stockholder expectations. ·The performance goals for the PSU awards are based on objectives related to regulatory and commercial objectives. ·In March 2021, we implemented a clawback policy for executives, including our Chief Executive Officer and other named executive officers. ·This new policy provides for the recoupment of certain cash and equity incentive compensation paid to any of our executives if we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under securities laws and it is determined that the executive’s misconduct contributed to that noncompliance. 2020 COMPENSATION MIX – EMPHASIS ON AT RISK COMPENSATION The compensation committee believes it is important to align the mix and levels of compensation we offer to those offered by our peers in order to retain and incentivize the talented executive officers whose efforts are key to our long-term success. As an executive’s ability to impact operational performance The charts below show the mix of the target compensation of our Chief Executive Officer and the average target compensation of our other named executive officers. REALIZED PAY FOR OUR CHIEF EXECUTIVE OFFICER The table below shows the compensation of our Chief Executive Officer and compares the reported values in the Summary Compensation Table to the realizable value as of the end of fiscal year 2020 based on our closing share price of $19.99 per share on December 31, 2020 (the last trading day of the year). As shown below, the grant date fair value of our Chief Executive Officer’s compensation – as required to be reported in the Summary Compensation Table – is not reflective of the actual realizable value that could be received. Looking over the past three years, there is a clear and stark difference between the average reported value of our Chief Executive Officer’s pay (approximately $18.9 million) and his realizable pay value (approximately $4.0 million). This table demonstrates how our pay-for-performance philosophy works in practice. OUR EXECUTIVE COMPENSATION PRACTICES We endeavor to maintain sound executive compensation policies and practices consistent with our executive compensation philosophy. The following table highlights some of our executive compensation policies and practices, which are structured to drive performance and align our executives’ interests with our stockholders’ long-term interests: PRINCIPAL ELEMENTS OF PAY Our 2020 executive compensation program generally consisted of three principal components, as further described below. In addition, we provide retirement and benefits plans to executives on the same basis as our other employees and we provide certain other limited remuneration to them. For additional information, please see “Compensation Determination Process” and “Summary Compensation Table” below. In determining each element of compensation for any given year, We believe that the total compensation received by our named executive officers relating to Compensation Determination Process Role of the compensation committee The compensation committee of our board of directors develops, reviews and approves each of the elements of our executive compensation program. The compensation committee also regularly assesses the effectiveness and competitiveness of our compensation programs. In the first quarter of each year, the compensation committee reviews the performance of each of our named executive officers during the previous year. At this time the compensation committee also reviews our performance relative to the corporate performance objectives set by the board of directors for the year under review and makes the final bonus payment determinations based on our overall corporate performance and, with respect to the named executive officers other than our Chief Executive Officer, the compensation committee’s evaluation of each named executive officer’s performance for the year under review. In connection with this review, the compensation committee also reviews and adjusts, as appropriate, annual base salaries for our named executive officers and grants, as appropriate, additional During the fourth quarter of each year our compensation committee also reviews the corporate performance objectives for purposes of our performance bonus programs for the following year, but such objectives historically have been recommended to the full board of directors for approval. Role of our executive Officers Our Chief Executive Officer, with the assistance and support of our Our Chief Executive Officer generally attends all of the compensation committee meetings, but the compensation committee also holds executive sessions that are not attended by any members of management or non-independent directors, as needed from time to time. Any deliberations or decisions regarding our Chief Executive Officer’s compensation are made without him present. Role of Compensation Consultant and Comparable Company Information The compensation committee is authorized to retain the services of third-party compensation consultants and other outside advisors, from time to time, In 2020, the compensation committee Radford did not provide any other services to us in COMPETITIVE POSITIONING The compensation committee The identified peer group consisted of For 2020, this peer group consisted of the following companies: Our compensation committee reviewed the foregoing comparable company data in connection with its determinations of the We expect that the compensation committee will continue to review comparable company data in connection with setting the compensation we offer our named executive officers to help ensure that our compensation programs are competitive and fair. The compensation levels of the named executive officers reflect to a significant degree the varying roles and responsibilities of such executives. As a result of the compensation committee’s and the board of director’s assessment of our Chief Executive Officer’s and President’s roles and responsibilities within our company, there are significant compensation differentials between these named executive officers and our other named executive officers. Executive Compensation Components The following describes each component of our executive compensation program, the rationale for each, and how compensation amounts are determined. Base Salaries In general, base salaries for our named executive officers are initially established through arm’s length negotiation at the time the executive is hired, taking into account such executive’s qualifications, experience and prior salary. Base salaries of our named executive officers are approved and reviewed annually by our compensation committee and adjustments to base salaries are based on the scope of an executive’s responsibilities, individual contribution, prior experience and sustained performance. Decisions regarding salary increases may take into account an executive officer’s current salary, equity ownership, and the amounts paid to an executive officer’s peers inside our company by conducting an internal analysis, which compares the pay of an executive officer to other members of the management team. Base salaries are also reviewed in the case of promotions or other significant changes in responsibility. Base salaries are not automatically increased if the compensation committee believes that other elements of the named executive officer’s compensation are more appropriate in light of our stated objectives. This strategy is consistent with our intent of offering compensation that is cost-effective, competitive and contingent on the achievement of performance objectives. In The foregoing increases were designed to bring each executive’s annual base salary and The actual base salaries paid to all of our named executive officers for Performance Bonuses Each named executive officer is also eligible for a performance bonus based upon the achievement of certain corporate performance goals and objectives approved by our board of directors and, with respect to our named executive officers other than Dr. Farr, individual performance. Bonuses are set based on the executive’s base salary as of the end of the bonus year, and are expected to be paid out in the first quarter of the following year. The target levels for executive bonuses for At the beginning of each year, the board of directors (considering the recommendations of the compensation committee and management) sets corporate goals and milestones for the year. These goals and milestones and the proportional emphasis placed on each are set by the board of directors after considering management input and our overall strategic objectives. These goals generally relate to factors such as financial targets, achievement of product development objectives and establishment of new collaborative arrangements. The board of directors, upon recommendation of the compensation committee, determines the level of achievement of the corporate goals for each year. The individual component of each named executive’s bonus award is not necessarily based on the All final bonus payments to our named executive officers are determined by our compensation committee. The actual bonuses awarded in any year, if any, may be more or less than the target, depending on individual performance and the achievement of corporate objectives and may also vary based on other factors at the discretion of the compensation committee (or the full board of directors, with respect to our Chief Executive Officer). Under our annual incentive plan, the maximum bonus payable to an executive is 125% of his or her target bonus. Corporate Performance The corporate To determine our · NDA approved and FINTEPLA® launched in US · Positive Phase 3 trial completed to support future J-NDA submission · Marketing Authorization Application approved and launch readiness completed in Germany · Positive study results achieved forPhase 3 trial · Completed studies to enable LGS supplemental NDA submission in 2021 · Completed development of drug substance and product manufacturing to support future regulatory submissions · Held successful health authority meetings to clarify requirements for future regulatory submissions · Executed collaboration and license agreement with Tevard Biosciences This overall INDIVIDUAL PERFORMANCE LEVELS The compensation committee’s determination of the individual components of the ANNUAL CASH INCENTIVE PAYOUT FORMULA With the exception of Dr. Farr, the target cash incentive awards of our executive officers as a The annual performance bonuses paid to our named executive officers for Long-Term Equity Incentives The goals of our long-term, equity-based incentive awards are to align the interests of our named executive officers and other employees, non-employee directors and consultants with the interests of our stockholders. Because vesting is based on continued employment over multiple years, our equity-based incentives also encourage the retention of our named executive officers through the vesting period of the awards. In determining the size of the long-term equity incentives to be awarded to our named executive officers, we take into account a number of internal factors, such as the relative job scope, the value of existing long-term incentive awards, individual performance history, prior contributions to us and the size of prior grants. We use employee, to reward an employee, for retention purposes or for other circumstances recommended by management or the compensation committee. EQUITY VEHICLES Annual equity awards are granted under our 2007 Equity Plan, using mix of different equity instruments to further its goal of attracting and retaining top performers and to balance the relative advantages of different instruments. The exercise price of each stock option grant is the fair market value of our common stock on the grant date, as determined by our board of directors from time to time. Stock option awards granted in connection with an employee’s commencement of employment generally vest over a four-year period as follows: 25% of the shares underlying the option vest on the first anniversary of the date of the vesting commencement date and the remainder of the shares underlying the option vest in equal monthly installments over the remaining 36 months thereafter. Annual stock option awards to our named executive officers vest monthly over a four-year period. RSU awards generally vest in four equal annual installments. From time to time, our compensation committee may, however, determine that a different vesting schedule is appropriate. 2020 ANNUAL EQUITY AWARDS Generally, the compensation committee In March 2020, the compensation committee approved the annual equity awards for Messrs. Smith and Sagrolikar and Drs. Galer and Farfel in a combination of options and RSU awards with approximately 75% of the value allocated in the form of options and approximately 25% of the value allocated in the form of RSU awards. The compensation committee approved an option award to purchase 110,000 shares of our common stock The equity awards granted to our named executive The compensation committee’s recommendation regarding each named executive officer’s award amount was not based on any quantifiable factors, but instead was based on the compensation committee’s subjective analysis of the award levels the committee deemed appropriate for each executive in light of various factors, including the dilution created as a result of our public offerings and the need to continue to incentivize our executives. Each of these factors was taken into consideration by the compensation committee for each executive, as was management’s recommendations regarding the appropriate award levels. The final award levels, however, were entirely based on the compensation committee’s subjective analysis of these general factors and internal pay equity considerations. For a description of Health, Welfare and The establishment of competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel. Health and Welfare Retirement Savings. All our full-time employees in the United Other BENEFITS We do not provide significant perquisites or personal benefits to our named executive officers. Post Termination and Change in Control Benefits We have entered into employment agreements which provide for certain severance benefits in the event a named executive officer’s employment is involuntarily or constructively terminated. Such severance benefits are intended and designed to alleviate the financial impact of an involuntary termination and maintain a stable work environment through salary continuation and equity award vesting acceleration. We provide severance benefits because they are essential to help us fulfill our objective of attracting and retaining key managerial talent. While these arrangements form an integral part of the total compensation provided to these individuals and are considered by the compensation committee when determining executive officer compensation, the decision to offer these benefits did not influence the compensation committee’s determinations concerning other direct compensation or benefit levels. The compensation committee has determined that such arrangements offer protection that is competitive within our industry and for our company size and are designed to attract highly qualified individuals and maintain their employment with us. In determining the severance benefits payable pursuant to the executive employment agreements, the compensation committee considered what level of severance benefits would be sufficient to retain our current executive team and to recruit talented executives in the future, which determination was based in part on input from management and our board of directors. For a description of these employment agreements, see “— Employment Agreements” below. Prohibition on Certain Transactions in Zogenix Securities Our insider trading policy prohibits officers, directors and employees, and entities controlled by such individuals and members of their households, from making short sales in our equity securities, transacting in puts, calls or other derivative securities involving our equity securities, on an exchange or in any other organized market, engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, purchasing our securities on margin or pledging our securities as collateral for a loan. CLAWBACK POLICY In March 2021, our board adopted an incentive compensation “clawback” policy. We believe that by providing the company with the appropriate power to Under our compensation Tax and deductibility of executive compensation The compensation committee and our board of directors have considered the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year for Accounting for Stock-Based Compensation Under FASB ASC 718, Risk Assessment of Compensation Program In March 2021, management assessed our compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that are reasonably likely to have a material adverse effect on us. As part of that assessment, management reviewed the primary elements of our compensation program, including base salary, short-term incentive compensation and long-term incentive compensation. Management’s risk assessment included a review of the overall design of each primary element of our compensation program, and an analysis of the various design features, controls and approval rights in place with respect to compensation paid to management and other employees that mitigate potential risks to us that could arise from our compensation program. Following the assessment, management determined that our compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on us and reported the results of the assessment to our compensation committee. Report of the Compensation Committee of the Board of Directors The compensation committee of The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on such review and discussions, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and in the Annual Report on Form 10-K for the year ended December 31, This report of the compensation committee is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts. The foregoing report has been furnished by the compensation committee. Respectfully submitted, The Compensation Committee of the Board of Directors Mark Wiggins (Chairman) James B. Breitmeyer, M.D., Ph.D. Renee P. Tannenbaum, Pharm.D. Summary Compensation Table The following table shows information regarding the compensation earned by our named executive officers during the Salary ($) Non-Equity Incentive Plan Compensation ($)(2) Each of Drs. Galer and Farfel were granted performance-based stock options in October 2015 that were scheduled to vest upon the acceptance by the FDA of the NDA for Fintepla®, provided such event occurred on or before the third anniversary of the date of grant. On September 28, 2018, prior to the date the options would have otherwise expired, our compensation committee accelerated the vesting of 90% of such stock options held by Drs. Galer and Farfel (covering 13,500 shares and 6,750 shares, respectively), in recognition of our significant progress towards the performance goal and his or her dedicated service for the three years since the grant date. Pursuant to SEC rules, for 2018, amounts reflected in the option column above for Drs. Galer and Farfel also include the fair value of modification to the vesting schedules for such awards equal to $545,462 for Dr. Galer and $272,731 for Dr. Farfel, the incremental expenses arising from the modification (computed in accordance with ASC 718). 2020 Grants of Plan-Based Awards The following table sets forth summary information regarding grants of plan-based awards made to our named executive officers during the year ended December 31, Discussion of Summary Compensation and Grants Plan-Based Awards Tables Our executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the Employment Agreements Pursuant to the employment termination; (3) continuation of health benefits for a period of 12 months following the date of termination; and (4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards as to the number of stock awards that would have vested over the 12-month period following termination had such officer remained continuously employed by us during such If a named executive officer is terminated without cause or resigns for good reason during the period commencing 60 days prior to a change in control (as defined below) or 12 months following a change in control, such officer shall be entitled to receive, in addition to the severance benefits described above, a lump sum cash payment in an amount equal to his or her bonus (as defined below) for the year in which the termination of employment occurs. In addition, in the event of a change in control, the vesting and exercisability of 50% of the executive officer’s outstanding unvested stock awards shall be automatically accelerated and, in the event an executive officer is terminated without cause or resigns for good reason within three months prior to or 12 months following a change in control, the vesting and exercisability of 100% of the executive officer’s outstanding unvested Ms. Mitchell’s employment agreement Mr. Sagrolikar’s employment agreement provides that he For purposes of the employment agreements, “cause” generally means an executive officer’s (1) commission of an act of fraud, embezzlement or dishonesty or some other illegal act that has a material adverse impact on us or any successor or affiliate of ours, (2) conviction of, or entry into a plea of “guilty” or “no contest” to, a felony, (3) unauthorized use or disclosure of our confidential information or trade secrets or any successor or affiliate of ours that has, or may reasonably be expected to have, a material adverse impact on any such entity, (4) gross negligence, insubordination or material violation of any duty of loyalty to us or any successor or affiliate of ours, or any other material misconduct on the part of the executive officer, (5) ongoing and repeated failure or refusal to perform or neglect of his or her duties as required by his or her employment agreement, which failure, refusal or neglect continues for 15 days following his or receipt of written notice from our board of directors, Chief Executive Officer or supervising officer, as applicable, stating with specificity the nature of such failure, refusal or neglect, or (6) breach of any policy of ours or any material provision of his or her employment agreement. For purposes of the employment agreements, “good reason” generally means (1) a material diminution in the executive officer’s authority, duties or responsibilities, (2) a material diminution in the executive officer’s base compensation, unless such a reduction is imposed across-the-board to senior management of the company, (3) a material change in the geographic location at which the executive officer must perform his or her duties, or (4) any other action or inaction that constitutes a material breach by us or any successor or affiliate of ours of its obligations to the executive officer under his or her employment agreement. For purposes of the employment agreements, “bonus” generally means an amount equal to the average of the bonuses awarded to the named executive officer for each of the three fiscal years prior to the date of his or her termination of employment, or such lesser number of years as may be applicable if the executive officer has not been employed for three full years on the date of termination of employment. For any partial fiscal year occurring because the executive commenced employment during that year, the executive’s “bonus” for that year shall be annualized as part of the bonus calculation. For purposes of the employment agreements, “change in control” has the same meaning as such term is given under the terms of our 2010 Equity Incentive Award Plan. Under the plan, a change in control is generally defined as: Outstanding Equity Awards at Fiscal Year-End The following table sets forth specified information Option Exercise Price ($) Option Expiration Date Option Exercises and Stock Vested The following table sets forth information regarding option exercises and stock awards that vested during 2020 with respect to our named executive Potential Payments Upon Termination or Change in Control The following table summarizes the potential payments to our named executive officers in four scenarios: (1) upon termination by us without cause or the executive’s resignation for good reason apart from a change in CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are required to disclose the ratio of the annual total compensation of our Chief Executive Officer to the annual total compensation of our median compensated employee, using the required calculations. The pay ratio included in this information is a reasonable estimate calculated in a manner that is intended to be consistent with Item 402(u) of Regulation S-K. As of December 31, 2020, our employee population consisted of 212 individuals. To identify the median employee for fiscal 2020, we looked at our employee population as of December 31, 2020 and determined each such employee’s fiscal 2020 compensation consisting of base salary and performance bonus, our consistently applied compensation measure. Additional information regarding our methodology includes the following: To calculate the 2020 pay ratio, we calculated the components of the median employee’s compensation for 2020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. For 2020, our last completed fiscal year: Based on this information, our 2020 Chief Executive Officer to median employee pay ratio was approximately 18 to 1. This pay ratio disclosure is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio permit companies to use various methodologies and assumptions, to apply certain exclusions and to make reasonable estimates that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable with the pay ratio that we have reported. Equity Compensation Plan Information The following table summarizes securities available under our equity compensation plans as of December 31, The following is a summary of transactions and series of similar transactions, since the beginning of fiscal year We also describe below certain other transactions with our directors, executive officers and stockholders. We have a written policy which requires that any transaction with a related party required to be reported under applicable SEC rules, other than compensation-related matters, be reviewed and approved by our audit committee. We have not and will not adopt written procedures for review of, or standards for approval of, these transactions, but instead we intend to review such transactions on a case by case basis. In addition, our compensation committee will approve all compensation-related policies. Employment and Release Agreements We have entered into employment agreements all of our named executive officers. For further information, see “Compensation Discussion and Analysis Indemnification of Officers and Directors Our amended and restated certificate of incorporation and our amended and restated bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Further, we have entered into indemnification agreements with each of our directors and officers, and we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances. Under Section 16(a) of the Exchange Act, directors, executive officers and beneficial owners of 10% or more of our common stock, or reporting persons, are required to report to the SEC on a timely basis the initiation of their status as a reporting person and any changes with respect to their beneficial ownership of our common stock. Based solely on our review of copies of such forms that we have received, or written representations from reporting persons, we believe Proposals of stockholders intended to be presented at our annual meeting of stockholders to be held in must be received at our principal executive offices not less than 90 calendar days before nor more than 120 calendar days before the one year anniversary of the date of the previous year’s annual meeting of stockholders. Therefore, to be presented at our give notice by these dates, then Any person who was a beneficial owner of our common stock on the record date may request a copy of our annual report, and it will be furnished without charge upon receipt of a written request identifying the person so requesting a report as a stockholder of our company at such date. Requests should be directed to Zogenix, Inc., We do not know of any business other than that described in this proxy statement that will be presented for consideration or action by the stockholders at the annual meeting. If, however, any other business is properly brought before the meeting, shares represented by proxies will be voted in accordance with the best judgment of the persons named in the proxies or their substitutes. All stockholders are urged to complete, sign and return the accompanying proxy card in the enclosed envelope. Stephen J. Farr, Ph.D. Chief Executive Officer and Emeryville, California April , 2021 ZOGENIX, INC. 2010 EQUITY INCENTIVE PLANPlace Record Date Voting 9:00 a.m., Pacific Time,
May 27, 2021March 29, 2021 Shareholders as of the record date
are entitled to voteProposal No. Description Board Recommendation Page 1 Election of Class II Directors ✔ FOR each nominee 8 2 Ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021 ✔ FOR 20 3 Approval, on an advisory basis, of the compensation of our named executive officers ✔ FOR 22 4 Approval of an amendment and restatement of our 2010 Equity Incentive Award Plan ✔ FOR 22 5 Approval of an amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 100,000,000 to 200,000,000 ✔ FOR 33 Nominee Age Director
SinceTerm
ExpiresPrincipal Occupation Committees James B. Breitmeyer, M.D., Ph.D. 67 2014 2021 President and CEO of Oncternal Therapeutics, Inc. Compensation Committee Stephen J. Farr, Ph.D. 62 2015 2021 Chief Executive Officer and President of Zogenix, Inc. Mary E. Stutts 65 2020 2021 Senior Vice President, Corporate Relations of Sumitovant Biopharma Ltd. Director Louis C. Bock. 56 2006 2023 Venture Partner at Santé Ventures Audit Committee; Nominating/Corporate Governance Committee Cam L. Garner 72 2006 2023 Co-Founder and Chairman of Zogenix, Inc. Nominating/Corporate Governance Committee Caroline M. Loewy 54 2020 2023 Strategic Business and Financial Advisor Erle T. Mast 58 2008 2022 Former Healthcare Executive Audit Committee; Nominating/Corporate Governance Committee Renee Tannenbaum, Pharm.D. 69 2015 2022 Vice President of Global Partnering of Halozyme, Inc. Compensation Committee Denelle J. Waynick 53 2020 2022 General Counsel and Corporate Secretary of MyoKardia, Inc. Mark Wiggins 65 2011 2023 Chief Business Officer of Tracon Pharmaceuticals, Inc. Audit Committee; Compensation Committee 1 Number of directors 10 Directors who attended at least 75% of board and committee meetings 10 100% independent audit, compensation and nominating/corporate governance committees ✓ Annual Board self-evaluations ✓ Corporate governance guidelines ✓ Corporate governance guidelines formalize the consideration of diversity factors for director nominees ✓ Majority voting in uncontested elections ✓ All employees, officers and directors must adhere to a Code of Conduct and Business Ethics ✓ Percentage of directors who are independent 90% Strong and active lead independent director ✓ Board and committees may engage outside advisors independent of management ✓ Active shareholder engagement program ✓ Corporate Social Responsibility Program ✓ 2 5858455CaliforniaCA 94608
FOR THE 20162020 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JULY 13, 2016the enclosedyour proxy for use at the annual meeting of stockholders to be held on July 13, 2016Thursday, May 27, 2021 at 8:309:00 a.m., local time,Pacific Time, via a completely virtual format through a live audio-only webcast hosted online at the Claremont Hotel, locatedwww.virtualshareholdermeeting.com/ZGNX2021.41 Tunnel Road, Berkeley, California 94705. If you need directionswww.proxyvote.com with an option to the locationrequest a printed set be mailed to you. We expect to begin mailing a Notice of the annual meeting, please contact us at (510) 550-8300.OnInternet Availability of Proxy Materials on or about , 2016, we will mailApril 16, 2021 to all stockholders of record entitled to vote at the annual meeting a Notice of Internet Availability of Proxy Materials containingmeeting. The notice contains instructions on how to access ourfor viewing the proxy statementmaterials and annual reportvoting online and how to vote online. If you receive such a Notice by mail, you will not receiverequesting a printed copyset of the materials unless you specifically request one. However, the Notice contains instructions on how to request to receive printed copies of these materials and a proxy card by mail.July 13, 2016May 27, 2021: This proxy statement and our annual report are available electronically at http://www.proxyvote.com.What amvoting on?threefive proposals scheduled for a vote:• James B. Breitmeyer, M.D., Ph.D., • Stephen J. Farr, Ph.D., and • Mary E. Stutts. •Roger L. Hawley,•Erle T. Mast, and•Renee P. Tannenbaum, Pharm.D.accountantsaccounting firm for the year ending December 31, 2016.2021.approve a one-timeconsider and vote upon, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (“SEC”).option exchange program.from 100,000,000 to 200,000,000.Who can vote at the meeting?May 16, 2016March 29, 2021 are entitled to vote at the annual meeting. On this record date, there were 24,771,56855,812,590 shares of our common stock outstanding. Common stock is our only class of stock entitled to vote.How many votes dohave?May 16, 2016March 29, 2021 entitles you to one vote.Why didreceive a one-page noticeRECEIVE A ONE-PAGE NOTICE IN THE MAIL REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS INSTEAD OF A FULL SET OF PROXY MATERIALS?the mail regarding the Internet availabilityorder to expedite our stockholders’ receipt of proxy materials, insteadlower our costs and reduce the environmental impact of a full set of proxy materials?Pursuant to rules adopted by the SEC,annual meeting, we have elected to provide access toare making our proxy materials available to stockholders primarily over the Internet. Accordingly,internet. As a result, we are sendingmailing a Notice of Internet Availability of Proxy Materials (“Notice”) to our stockholders who have not previously requested the receiptinstead of paper proxy materials advising them that they can access this proxy statement, our annual report and1voting instructions over the Internet at www.proxyvote.com , by calling 1-800-579-1639 , or by sending a blank e-mail to sendmaterial@proxyvote.com with your twelve digit control number in the subject line. You can also state your preference to receive a paper copy for future meetings. There is no charge forof the full set of proxy materials. As explained in the Notice, you requestingcan view our proxy materials and vote online by visiting www.proxyvote.com and having available the 16-digit control number contained in your Notice. If you received a copy. Please make yourNotice, you will not receive a printed copy of the proxy materials3 copy on orprinted set of proxy materials should be made before July 1, 2016May 13, 2020 to facilitate timely delivery.addition,light of public health concerns, this year’s annual meeting will be held in a virtual meeting format only, via a live audio-only webcast. There is no physical location for the annual meeting. The virtual annual meeting has been designed to provide the same rights to participate as you would have at an in-person meeting. may request to receive proxy materials electronically by email or in printed form by mail on an ongoing basis. All stockholders will have the ability to access the proxy materialsmeeting website prior to the start time. Online access to the audio webcast will open approximately 30 minutes prior to the start of the annual meeting to allow time for you to log in and test the computer audio system.the website referred to above andyour Notice (printed in the Notice of Internet Availability of Proxy Materials or request to receive a printed set ofbox and marked by the arrow) and the instructions that accompanied the proxy materials. We encourageIn the event that you do not have a control number, please contact your broker, bank, or other agent as soon as possible and no later than May 1, 2021, so that you can be provided with a control number and gain access to the meeting.take advantageask questions, we may respond to up to two questions from a single stockholder.availability ofvirtual annual meeting, we will have technicians ready to assist stockholders with any technical difficulties they may have accessing or hearing the proxy materialsvirtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Internet to help reduce the environmental impact of our annual meeting.Virtual Shareholder Meeting log in page.How dovote by proxy?youshareholders may either(a) vote “For” alleach of the nominees tonominees; (b) vote “Against” each of the boardnominees; or (c) abstain from voting on the election of directorsone or you may “Withhold” your vote for any nominee you specify.more of the nominees. With respect to the ratification of the appointment of Ernst & Young LLP as our independent registered public accountants,accounting firm, you may vote “For” or “Against” or abstain from voting. With respect to the advisory vote on the compensation of our named executive officers, you may vote “For” or “Against” or abstain from voting. With respect to the approval of a one-time stock option exchange program,the amendment and restatement to our 2010 Equity Incentive Plan, you may vote “For” or “Against” or abstain from voting.4 planexpect to attend the virtual annual meeting, we urge you to vote by proxy in advance of the meeting to ensure that your vote is counted.– By Mail: If you are a stockholder of record, and you elect to receive your proxy materials by mail, you may vote using your proxy card by completing, signing, dating and returningBefore the proxy card in the self-addressed, postage-paid envelope provided. If you hold your shares in street name and you elect to receive your proxy materials by mail, you can vote by completing and mailing the voting instruction form that will be provided by your bank, broker or other holder of record. You should mail the proxy card or voting instruction form in plenty of time to allow delivery prior to the meeting. Do not mail the proxy card or voting instruction form if you are voting over the Internet or by telephone. If you properly complete your proxy card and send it in time to vote, your proxy (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your shares, as permitted, will be voted as recommended by our board of directors. If any other matter is presented at the annual meeting, your proxy (one of the individuals named on your proxy card) will vote in accordance with his or her best judgment. As of the date of this proxy statement, we knew of no matters that needed to be acted on at the meeting, other than those discussed in this proxy statement.Via the Internet:Annual Meeting. You may vote at www.voteproxy.com,www.proxyvote.com, 24 hours a day, seven days a week. Use the Company Number and Account Number shown on your Notice, of Internet Availability of Proxy Materials, proxy card or voting instructions form that is sent to you. Votes submitted through the Internetinternet must be received by 11:59 p.m., Eastern Time, on July 12, 2016.May 26, 2021.– By Telephone: You may vote using a touch-tone telephone by calling 1-800-690-6903, 24 hours a day, seven days a week. UseDuring the Company Number and Account Number shown on your Notice of Internet Availability of Proxy Materials, proxy card or voting instructions form that is sent to you. Votes submitted by telephone must be received by 11:59 p.m., Eastern Time, on July 12, 2016.In Person:Virtual Annual Meeting. You may still attend the virtual annual meeting and vote in personduring the meeting even if you have already voted by proxy. To vote in person, come toduring the annual meeting, and wevisit www.virtualshareholdermeeting.com/ZGNX2021 on the day of the meeting; you will give you a ballot atneed the annual meeting. If you hold16-digit control number provided on your shares in street name, and wish to vote in person at the annual meeting, you must obtain a validNotice, proxy from your broker, bankcard or other agent. Follow the instructions fromthat accompanied your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.materials.revoke my proxy?•you may send in another signed proxy with a later date,2•you may notify our corporate secretary, Ann D. Rhoads, in writing before the annual meeting that you have revoked your proxy, or•you may notify our corporate secretary in writing before the annual meeting and vote in person at the meeting.What constitutes a quorum?later date,May 16, 2016,March 29, 2021, or approximately 12,410,55527,906,296 shares, constitutes a quorum at the meeting, permitting us to conduct our business.What vote is required to approve each proposal?twothree nominees who receive the most “For” votes (among votes properly5 a one-time stock option exchange program. Stockholderthe Compensation of the Named Executive Officers. The approval of this proposal requires the affirmative votecompensation of the named executive officers must receive “For” votes from the holders of a majority of the votes cast with respect to this proposal by the shares of common stock present in person or represented by proxy and entitled to vote thereon at the Annual Meeting. A “majorityannual meeting.votes cast” means thatan Amendment and Restatement to the number of votes “For” theCompany’s 2010 Equity Incentive Award Plan. The approval of the option exchange programamendment and restatement of our 2010 Equity Incentive Award Plan must exceedreceive “For” votes,numbershares of votes “Against”common stock present in person or represented by proxy and entitled to vote at the annual meeting.option exchange program.holders of a majority of the outstanding shares of common stock.Solutions.What is the effectSolutions, Inc. (“Broadridge”), an independent agent retained by our board of abstentions and broker non-votes?and whether our stockholders have approved a one-time stock option exchange program.the compensation of the named executive officers, the amendment and restatement of our 2010 Equity Incentive Award Plan, and the amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of our common stock. However, because the election of directors is determined by a plurality of votes cast, abstentions will not be counted in determining the outcome of such proposal.approvalamendment and restatement of a one-time stock option exchange program,our 2010 Equity Incentive Award Plan, broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote. However, ratification of the appointment of Ernst & Young LLP isand the approval of an amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of our common stock are expected to be considered a routine mattermatters on which a broker or other nominee has discretionary authority to vote. As a result, these proposals are not expected to have any broker non-votes will be counted for purposes of this proposal.Who is paying the costs of soliciting these proxies?3How doobtain an Annual Report on FormOBTAIN AN ANNUAL REPORT ON FORM 10-K?20152020 that we filed with the SEC on March 1, 2021, we will send you one without charge. Please write to:5858#4556 How canfind out the results of the voting at the annual meeting?7 41:the company’sour Class IIIII directors, Roger L. Hawley, Erle T. MastJames B. Breitmeyer, M.D., Ph.D. , Stephen J. Farr, Ph.D. and Renee P. Tannenbaum, Pharm.D.,Mary E. Stutts will expire at the 20162021 annual meeting.IIIII director for election at the 20162021 annual meeting are Roger L. Hawley, Erle T. MastJames B. Breitmeyer, M.D., Ph.D. , Stephen J. Farr, Ph.D. and Renee P. Tannenbaum, Pharm.D.Mary E. Stutts. If Mr. Hawley, Mr. Mast or Dr. Tannenbaum isDrs. Breitmeyer and Farr and Ms. Stutts are elected at the 20162021 annual meeting, each such individual will be elected to serve for a term of three years that will expire at our 20192024 annual meeting of stockholders and until such individual’s successor is elected and qualified.Mr. Hawley, Mr. MastDrs. Breitmeyer and Dr. TannenbaumFarr and Ms. Stutts are currently members of our board of directors.2019
2024 Annual Meeting of Stockholders (Class III)Name Age Position(s) NameJames B. Breitmeyer, M.D., Ph.D. AgePresent Position with Zogenix, Inc.Roger L. Hawley6367 Director Erle T. MastStephen J. Farr, Ph.D. 5362 Chief Executive Officer, President and Director Chairman of Audit CommitteeRenee P. Tannenbaum, Pharm.D.Mary E. Stutts 6465 Director Roger L. Hawley is one of our co-founders and James B. Breitmeyer, M.D., Ph.D. has served as a member of our board of directors since March 2014. Since August 20062015, Dr. Breitmeyer has served as President, CEO and Director of Oncternal Therapeutics, Inc. a clinical-stage oncology biotechnology company. Previously, he served as President of Bavarian Nordic, Inc. and Executive Vice President of Bavarian A/S, a multinational corporation headquartered in Denmark, from February 2013 to July 2015. He previously served as the acting Chief Medical Officer of our company from August 2012 to February 2013 in an advisory capacity, the Executive Vice President of Development and Chief ExecutiveMedical Officer of Cadence Pharmaceuticals Inc., from August 2006 to April 2015. From January 2006August 2012, and the Chief Medical Officer of Applied Molecular Evolution Inc., a wholly-owned subsidiary of Eli Lilly and Co. from December 2001 to August 2006, Mr. Hawley2006. Dr. Breitmeyer has also served as President and Chief Executive Officer of the Harvard Clinical Research Institute and held a consultant to CG Pharma, Inc. From August 2003 to January 2006 he served as Executive Vice President, Commercial and Technical Operations for InterMune, Inc., a biopharmaceutical company focused on therapies in hepatology and pulmonology. From October 2002 to July 2003, Mr. Hawley was the Chief Commercial Officervariety of positions at PrometheusSerono Laboratories Inc., a specialty pharmaceutical and diagnostics company. From 2001 to 2002, Mr. Hawley served as General Manager & Vice President of Sales and Marketing at Elan Pharmaceuticals, Inc. (acquired by Alkermes Plc). From 1987 to 2001, Mr. Hawley held a broad range of management positions in commercial operations, alliance/partnership management, and regional sales and corporate finance at GlaxoSmithKline, or GSK. His last position at GSK was Vice President of Sales-CNS/GI Division. From 1976 to 1987, he held various financial management positions with Marathon Oil Company, including serving four years in London, England. While at Marathon, he was a certified treasury manager and a certified public accountant. Mr. Hawley served as a member of Dr. Breitmeyer currently serves on the board of directors of Cypress Bioscience,Otonomy, Inc., a publicly traded pharmaceuticalbiotechnology company, until December 2010. Mr. Hawley holds a B.Sc. in Accounting from Eastern Illinois University. As one of our co-founderswhere he serves on the audit and havingcompensation committees. Dr. Breitmeyer served as our Chief Executive Officer for nearly nine years, Mr. Hawley’sa founding collaborator and scientific advisor to Immunogen, Inc., and held clinical and teaching positions at the Dana Farber Cancer Institute and Harvard Medical School. Dr. Breitmeyer earned his B.A. in Chemistry from the University of California, Santa Cruz and his M.D. and Ph.D. from Washington University School of Medicine and is Board Certified in Internal Medicine and Oncology. Dr. Breitmeyer’s extensive knowledge of our business, history and culture, as well as over 20 years of experience in the pharmaceuticalbiopharmaceutical industry, including providing strong58 Name Age Position(s) Erle T. Mast 58 Director, Chairman of Audit Committee Renee P. Tannenbaum, Pharm.D. 69 Director Denelle J. Waynick 53 Director iswas a co-founder of and has served as Executive Vice President, Chief Financial Officer with Clovis Oncology, Inc. since, a biotechnology company, from May 2009.2009 through March 2016. From July 2002 to May 2008, Mr. Mast served as Executive Vice President and Chief Financial Officer of Pharmion Corporation, until its acquisition by Celgene Corporation. From 2000 to 2002, after Elan Pharma International Ltd. acquired Dura Pharmaceuticals, Inc., Mr. Mast served as Chief Financial Officer for the Global Biopharmaceuticals business unit of Elan. From 1997 to 2000, Mr. Mast served as Vice President of Finance for Dura Pharmaceuticals. From 1984 to 1997, Mr. Mast held positions of increasing responsibility at Deloitte & Touche, LLP, serving most recently as Partner,partner, where he provided accounting, auditing and business consulting services to companies in various industries, including the healthcare, pharmaceutical, biotech and manufacturing industries. Mr. Mast also served on the board of directors ofas a director for Sienna Biopharmaceuticals, Inc. from 2017 to 2018, for Somaxon Pharmaceuticals, Inc. from 2008 to 2013 and for Receptos Inc. from 2013 to 2015, and of Somaxon Pharmaceuticals, Inc. from 2008 to 2013.each publicly traded biotechnology companies. Mr. Mast received ahis degree in Business Administration from California State University, Bakersfield. Mr. Mast’s experience as a chief financial officer of various companies in the healthcare industry and in providing accounting, auditing and consulting services while at Deloitte & Touche, LLP, as well as his9 an independent consultant toVice President of Global Partnering at Halozyme, Inc., where she is responsible for leading the life sciences industry. From 2012 to 2016,team that executes business development activities and the company’s alliances through partnerships and collaborations. Dr. Tannenbaum served as thewas previously Head of Global Customer Excellence ofat AbbVie Inc., a global, research-based biopharmaceutical company,from October 2012 to January 2016, where she was responsible for building commercial capabilities for headquarters and affiliate commercial organizations.the organization. Previously, Dr. Tannenbaum was previouslyserved as President of Myrtle Potter & Company, LLC, a global life sciences consulting and advisory firm from JanuaryApril 2011 to October 2012. From May 2009 to January 2011, she served as2012 and Executive Vice President and Chief Commercial Officer at Elan Pharmaceuticals, Inc., or Elan,from May 2009 to January 2011, where she was responsible for revenue generation for Elan’s marketed products, preparing for the commercialization of the company’s pipeline, including its Alzheimer’s portfolio, and strengthening the company’s overall commercial capabilities. Prior to her role at Elan, Dr. Tannenbaum was at Novartis Pharma AG for three years, where she led the Global Commercial Operations organization. Prior to that, sheDr. Tannenbaum spent nine years at Bristol Myers Squibb and 16 years at Merck and Company, Inc. where she held a variety of leadership positions in operations and general management. SheDr. Tannenbaum served as a director to Nordic Nanovector ASA, a publicly-traded company in Norway, and Cipher Pharmaceuticals, Inc. a Canadian publicly-traded company, from April to August 2016, Sharps Compliance Inc. from November 2012 to November 2014 and Immune Pharmaceuticals, Inc., a publicly-traded company, from August 2011 to October 2012. Dr. Tannenbaum retains a faculty position at the University of the Sciences at Philadelphia’sSciences’ Mayes College of Healthcare Business and Policy and serves as the Dean’s Professor. Dr. Tannenbaum received her Pharm.D.Doctor of Pharmacy degree from the Philadelphia College of Pharmacy and Sciences, her M.B.A.MBA from Temple University, and her B.Sc.Bachelor of Science degree in Pharmacy from the University of Connecticut. She currently serves on the board for the Healthcare Businesswomen’s Association, Chicago Chapter. Dr. Tannenbaum’s extensive experience in the biopharmaceutical industry, including providing strong executive leadership to numerous biopharmaceutical companies, contributed to our board of directors’ conclusion that she should serve as a director of our company.MembersBoardNew Jersey Attorney General from January to October 2008 and served as Legal Director at Schering-Plough (now Merck) from 2003 to 2008. She began her legal career in the corporate law department of Directors ContinuingPaul Hastings in Office2017
2023 Annual Meeting of Stockholders (Class I)Name Age NameAgePresent Position with Zogenix, Inc.Position(s)Louis C. Bock 5156 Director, Chairman of Nominating/Corporate Governance Committee Cam L. Garner 6872 Chairman of the Board of Directors Chairman of Compensation CommitteeCaroline M. Loewy 54 Director Mark Wiggins 6065 Director, Chairman of Compensation Committee beenserved as a Venture Partner at Santé Ventures, a venture capital firm, since Augustfirm. From September 1997 to July 2014, and a Partner at Archer Venture Management since December 2013. Previously, Mr. Bockhe was a Managing Director of Scale Venture Partners, a venture capital firm, from 1997 to July 2014.firm. Previously, Mr. Bock joined Scale Venture Partners in September 1997 from Gilead Sciences, Inc., a biopharmaceutical company, where he held various positions in research, project management, business development and sales at Gilead Sciences, Inc., from September 1989 to September 1997. Prior to Gilead, he was a research associate at Genentech, Inc. from November 1987 to September 1989. He currently servesFrom May 2005 to July 2018, Mr. Bock served as a director of Arizona Therapeutics, Inc. (AzTE), AscentaOrexigen Therapeutics, Inc., Cardiokinetix, Inc.,and from September 2013 to April 2016, he served as a director of Heat Biologics, Inc., Molecular Templates, PowerVision, Inc., Orexigen Therapeutics, Inc. and Sonexa Therapeutics, Inc. andboth biotechnology companies. In addition, Mr. Bock is responsible for Scale Venture Partners’ prior investments in Seattle Genetics,6 Inc. Mr. Bock has also previously served as a director of Horizon Pharma, Inc., New Century Hospice, Inc. and diaDexus, Inc. Mr. Bock received his B.S. in Biology from California State University, Chico and anhis M.B.A. from California State University, San Francisco. Mr. Bock’s extensive clinical and leadership experience in the biotechnology and biopharmaceutical industries, including experience in research, project management, business development and sales, from his time at Gilead, and his membership on other companies’ boards of directors, including positions on other audit10 alsocurrently serves as Chairman of Evoke Pharma, a publicly-traded company, OrPro and Alastin Skincare. Mr. Garner serves on the boardExecutive Committee and Board of directorsAdvisors of Aegis Therapeutics, Inc., Neurelis, Inc., Kalyra Pharmaceuticals and OrPro Therapeutics.UCSD Moores Cancer Center, San Diego. Mr. Garner earned his B.A. in Biology from Virginia Wesleyan College and an M.B.A. from Baldwin-Wallace College. As one of our co-founders and having served as our chairman since August 2006, Mr. Garner’s extensive knowledge of our business, its history and its culture, his extensive experience as a board member of multiple publicly-traded and privately-held companies, and expertise in developing, financing and providing strong executive leadership to numerous biopharmaceutical companies, contributed to our board of directors’ conclusion that he should serve as a director of our company.Corporate and Business Development atwith Elcelyx Therapeutics, Inc., a biotechnology company from August 20122011 to March 2015. Mr. Wiggins previouslyPreviously, he served as the Chief Business Officer ofwith Mpex Pharmaceuticals, a biopharmaceutical company, overseeing strategic business operations and the sale of the companyuntil its acquisition by Axcan Pharma, Inc. in 2011. From May 1998 to February 2009, Mr. Wiggins was employed at Biogen Idec, Inc., and its predecessor Idec Pharmaceuticals Corp., biotechnology companies, where he served as head of Business Development, later as Vice President of Marketing and Business Development and most recently served as Executive Vice President of Corporate and Business Development. At Idec Pharmaceuticals, Mr. Wiggins was a member of the management committee for the collaboration with Genentech Inc. on Rituxan ® , and he was responsible for worldwide partnering, licensing and corporate acquisitions. Mr. Wiggins has substantial experience in pharmaceutical marketing and business development activities.Rituxan®. Prior to Biogen Idec, Mr. Wiggins spent fifteen years in a number of positions of increasing responsibility in marketing, marketing research and business development at Hybridon, Inc., Schering-Plough Corporation (now Merck), Johnson & Johnson and Pfizer, Inc. Mr. Wiggins’ business development transaction experience includes closing over 20 licensing deals and several global corporate partnerships and company acquisitions. Mr. Wiggins earned his B.S. degree in Finance from Syracuse University and anhis M.B.A. from the University of Arizona. Mr. Wiggins’ expertise in business development activities and the marketing of pharmaceutical products, as well as his extensive management experience within the biopharmaceutical industry, contributed to our board of directors’ conclusion that he should serve as a director of our company.Term Expiring at2018 Annual Meeting Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of Stockholders (Class II)NameAgePresent Position with Zogenix, Inc.James B. Breitmeyer, M.D., Ph.D.63DirectorStephen J. Farr, Ph.D.58Chief Executive Officer, President and DirectorJames B. Breitmeyer, M.D., Ph.D. has served asthe members of a member of ourlisted company’s board of directors since March 2014. Dr. Breitmeyer currently servesmust qualify as the President of Bavarian Nordic, Inc., an international biotechnology company, and serves“independent,” as the President and Chief Executive Officer of Tokalas, Inc., a biotechnology startup developing targeted therapies for cancers. He was previously Executive Vice President at Bavarian Nordic A/S from February 2013 to July 2015. He served as acting Chief Medical Officer to Zogenix, Inc. from August 2012 to February 2013. Dr. Breitmeyer served as Executive Vice President of Development and Chief Medical Officer of Cadence Pharmaceuticals from August 2006 to August 2012. He served as Chief Medical Officer of Applied Molecular Evolution,7Inc., a wholly-owned subsidiary of Eli Lilly and Company, a global pharmaceutical company, from December 2001 to August 2006. From 2000 to 2001, Dr. Breitmeyer served as the President and Chief Executive Officer of the Harvard Clinical Research Institute. From 1991 to 2000, he held a variety of positions at Serono Laboratories Inc., a global biopharmaceutical company, including Chief Medical Officer and Senior Vice President of Research and Development. Prior to Serono Laboratories, he served as a scientific advisor and consultant to ImmunoGen, Inc., and held clinical and teaching positions at the Dana Farber Cancer Institute and Harvard Medical School. Dr. Breitmeyer holds a B.A. in Chemistry from the University of California, Santa Cruz, an M.D. and Ph.D. from Washington University School of Medicine, and is Board Certified in Internal Medicine and Oncology. Dr. Breitmeyer’s extensive experience in the biopharmaceutical industry, including providing strong executive leadership to numerous biopharmaceutical companies, and significant expertise in the medical field, contributed to our board of directors’ conclusion that he should serve as a director of our company.Stephen J. Farr, Ph.D. is one of our co-founders and has served as our President and as a member of our board of directors since our inception in May 2006. Since April 2015, Dr. Farr also serves as our Chief Executive Officer. From May 2006 to August 2006, Dr. Farr also served as our Chief Executive Officer and from August 2006 to March 2013, Dr. Farr also served as our Chief Operating Officer. From 1995 to August 2006, Dr. Farr held positions of increasing responsibility within pharmaceutical sciences and research and development at Aradigm Corporation, and he served most recently as Senior Vice President and Chief Scientific Officer. In 2003, he played a key role in identifying and acquiring the DosePro technology and became technical director and executive sponsor for the development of sumatriptan DosePro at Aradigm Corporation. From 1986 to 1994, Dr. Farr was a tenured professor at the Welsh School of Pharmacy, Cardiff University, United Kingdom, concentrating in the areas of physical pharmacy and biopharmaceutics. He is a fellow of the American Association of Pharmaceutical Scientists and visiting Associate Professor in the Department of Pharmaceutics, School of Pharmacy, Virginia Commonwealth University. Dr. Farr is a registered pharmacist in the United Kingdom and obtained his Ph.D. in Pharmaceutics from the University of Wales. Dr. Farr currently serves onaffirmatively determined by the board of directorsdirectors. In addition, Nasdaq rules require that, subject to specified exceptions, each member of SteadyMed Therapeutics, Inc. As onea listed company’s audit, compensation and nominating committees be independent within the meaning of our co-founders and having served as our President since May 2006, Dr. Farr’s extensive knowledge of our business, history and culture, as well as his significant experienceNasdaq rules. Audit committee members must also satisfy the independence criteria set forth in research and development and thorough knowledgeRule 10A-3 under the Exchange Act.pharmaceutical product development process, contributedindependence of each director and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors’ conclusion that he should serve as a director of our company. IndependenceOur board of directors has determined that all of our directors who served on our board of directors during 2015 were, and alleach of our current directors, are, independent directors within the meaning of the applicable Nasdaq Stock Market LLC, or Nasdaq, listing standards, except for Roger L. Hawley, our former Chief Executive Officer, James B. Breitmeyer, M.D., Ph.D. and other than11 President.Board Leadership StructureThe Board’s Role in Risk OversightPeriodically, theThe audit committee reviews our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the audit committee includes direct communication with our external auditors,independent registered public accounting firm, and discussions with management regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures. The compensation committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive risk-taking. The nominating/corporate governance committee manages risks associated with the independence of the board, corporate disclosure practices, and potential conflicts of interest. While each committee is responsible for8Board of Directors Meetings2015,2020, our board of directors met eight11 times, including telephonic meetings, and in that year, all incumbent directors attended at least 75% of the aggregate number of meetings of the board and the committees on which they served, during the periods in which they served.of theOf The Board ofOf Directorssixfour times during 2015,2020, including telephonic meetings. Our board of directors has determined that all members of the audit committee are independent directors, as defined in the Nasdaq qualification standards and by Section 10A of the Exchange Act. In addition, our board of directors has determined that Mr. Mast qualifies as an “audit committee financial expert” as that phrase is defined under the regulations promulgated by the SEC. The audit committee is governed by a written charter adopted by our board of directors. The audit committee’s main function is to oversee our accounting and financial reporting processes, internal systems of control, independent registered public accounting firm relationships and the audits of our consolidated financial statements. The audit committee’s responsibilities include, among other things:•selecting and engaging our independent registered public accounting firm; 12
preparing the report that the SEC requires in our annual proxy statement;•evaluating the qualifications, independence and performance of our independent registered public accounting firm;•approving the audit and non-audit services to be performed by our independent registered public accounting firm;•reviewing the design, implementation, adequacy and effectiveness of our internal controls and our critical accounting policies;•discussing with management and the independent registered public accounting firm the results of our annual audit and the review of our quarterly unaudited financial statements;•reviewing, overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;•reviewing with management and our auditors any earnings announcements and other public announcements regarding our results of operations;•preparing the report that the SEC requires in our annual proxy statement;•reviewing and approving any related party transactions and reviewing and monitoring compliance with our code of conduct and ethics; and•reviewing and evaluating, at least annually, the performance of the audit committee and its members including compliance of the audit committee with its charter.9Messrs. GarnerMr. Wiggins (chairman), BockDrs. Breitmeyer and Wiggins.Tannenbaum. The compensation committee met fivethree times during 2015,2020, including telephonic meetings. Our board of directors has determined that all members of the compensation committee are independent directors, as defined in the Nasdaq qualification standards. The compensation committee is governed by a written charter approved by our board of directors. The compensation committee’s purpose is to assist our board of directors in determining the development plans and compensation for our senior management and directors and recommend these plans to our board of directors. The compensation committee’s responsibilities include, among other things:•reviewing our compensation philosophy, including our policiesreviewing and discussing with management our compensation discussion and analysis to be included in our annual proxy report or annual report on Form 10-K and producing the report that the SEC requires in our annual proxy statement; and strategy relative to executive compensation;•reviewing and recommending to the full board for approval the compensation of our Chief Executive Officer;•reviewing and approving the compensation of our other executive officers, including executive employment and severance agreements;•reviewing and recommending to the full board for approval the compensation policies for members of our board of directors and board committees;•reviewing, approving and administering our benefit plans and the issuance of stock options and other awards under our equity incentive plans (other than any such awards that must be approved by the full board);•reviewing and discussing with management our compensation discussion and analysis to be included in our annual proxy report or annual report on Form 10-K and producing the report that the SEC requires in our annual proxy statement; and•reviewing and evaluating, at least annually, the performance of the compensation committee and its members including compliance of the compensation committee with its charter.MastGarner and Wiggins. The nominating/corporate governanceMast. This committee met two timesonce during 2015.2020. Our board of directors has determined that all members of the nominating/corporate governance committee are independent directors, as defined in the Nasdaq qualification standards. The nominating/corporate governance committee is governed by a written charter approved by our board of directors. The nominating/corporate governance committee’s purpose is to assist our board of directors by identifying individuals qualified to become members of our board of directors, consistent with criteria set by our board, and to develop our corporate governance principles. The nominating/corporate governance committee’s responsibilities include, among other things:•evaluating the composition, size and governance of our board of directors and its committees and making recommendations regarding future planning and the appointment of directors to our committees; 13 •administering a policy for considering stockholder nominees for election to our board of directors;14•evaluating and recommending candidates for election to our board of directors;•developing guidelines for board compensation;•overseeing our board of directors’ performance and self-evaluation process;•reviewing our corporate governance principles and providing recommendations to the board regarding possible changes; and10•reviewing and evaluating, at least annually, the performance of the nominating/corporate governance committee and its members including compliance of the nominating/corporate governance committee with its charter.Report of the Audit Committee of the Board of Directorsunder generally accepted auditing standards, including the Statement onby Auditing StandardStandards No. 16 (Communications1301, “Communications with Audit Committees), as amended, as adoptedCommittees” issued by the Public Company Accounting Oversight Board in(the “PCAOB”). In addition, the audit committee has received the written disclosures and the letter from Ernst & Young LLP required by PCAOB Ethics and Independence Rule 3200T. In addition,3526, “Communication with Audit Committees Concerning Independence”, and the audit committee has discussed with Ernst & Young LLP itstheir independence from managementZogenix, Inc. and the company, has received from Ernst & Young LLP the written disclosures and the letter required by Public Company Accounting Oversight Board Ethics Rule 3526, Communication with Audit Committees Concerning Independence, regarding Ernst & Young LLP’s communications with the audit committee concerning independence, and has considered the compatibility of non-audit services with the auditors’ independence.2015.2020 filed by the company with the Securities and Exchange Commission. The audit committee and the company’s board of directors also have recommended, subject to stockholder approval, the ratification of the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2016.Respectfully submitted, Committee of the Board of DirectorsErle T. Mast (Chairman)Louis C. BockMark WigginsCompensation Committee Interlocks and Insider ParticipationCam L. Garner, of the Board of DirectorsMark WigginsDrs. Breitmeyer and Tannenbaum served on ourthe compensation committee during 2015.2020. None of the members of our compensation committee has ever been one of our officers or employees. None of our executive officers currently serves, or has11Director Nomination Process•personal and professional integrity, ethics and values;15
strong finance experience;•experience in corporate management, such as serving as an officer or former officer of a publicly held company;
practical and mature business judgment.•commercialization experience in large pharmaceutical companies;•strong finance experience;•experience relevant to our industry;•experience as a board member of another publicly held company;•diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;•diversity of background and perspective, including with respect to age, gender, race, place of residence and specialized experience; and•practical and mature business judgment.1216 20162022 annual meeting, the recommendation should be received by our corporate secretary at our principal executive offices in accordance with our procedures detailed in the section below entitled “Stockholder Proposals.”Director Attendance at Annual Meetingsof our directors attended our 2015the 2020 annual meeting of stockholders.Communications with our Board of Directors58585959 Horton Street, #455,Suite 500, Emeryville, California 94608. The corporate secretary will forward such communications to each member of our board of directors; provided that, if in the opinion of our corporate secretary it would be inappropriate to send a particular stockholder communication to a specific director, such communication will only be sent to the remaining directors (subject to the remaining directors concurring with such opinion).Corporate Governance17 58585959 Horton Street, #455,Suite 500, Emeryville, California 94608.Under ourdirector compensation policy, we provide cash compensation in the form ofdirectors receive an annual cash retainer for service on the board of $40,000directors, plus reimbursement for each non-employee director. We also pay anreasonable out-of-pocket expenses incurred in connection with attendance at board and board committee meetings, as well as additional annual retainer of $60,000 to the retainers for service as our chairman of our board of directors (however the total cash compensation paid to the chairman of the board in all capacities cannot exceed $100,000 in any13$25,000as follows:Service Annual Retainer Board Service $40,000 Non-employee director $40,000 Additional retainer - chairperson $60,000 Audit Committee Service Chair $25,000 Member $10,000 Compensation Committee Service Chair $15,000 Member $7,500 Nominating/Corporate Governance Committee Service Chair $10,000 Member $5,000 the chair of our audit committee, $15,000 to the chair of our compensation committee, and $10,000 to the chair of our nominating/corporate governance committee. We also pay an additional $10,000 per year to members of the audit committee, an additional $7,500 per year to members of our compensation committee and an additional $5,000 per year to members of our nominating/corporate governance committee. There was no change to the cash compensation paid to our non-employee directors when our non-employee director compensation policy, was amended and restated in March 2016.We have reimbursed and will continue to reimburse our non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and committees of the board of directors.Also, under our non-employee director compensation policy, as in effect prior to April 2015, any non-employee director who wasis first elected to the board of directors was granted an option to purchase 9,375 shares of our common stock on the date of his or her initial election to the board of directors. In addition, ondirectors, and each non-employee director continuing in service as a non-employee director as of the date of each annual stockholder meeting of our stockholders, each non-employee director was eligible to receive anis receives a stock option to purchase 6,250 shares of common stock.In April 2015, our board of directors approved an amendment and restatement of our non-employee director compensation policy, pursuant to which any non-employee director who was first elected to the board of directors was granted an option to purchase 12,500 shares of our common stock on the date of his or her initial election to the board of directors. In addition, on the date of each annual meeting of our stockholders, each non-employee director was eligible to receive an option to purchase 9,000 shares of common stock.In March 2016, our board of directors approved a further amendment and restatement of our non-employee director compensation policy, pursuant to which any non-employee director who is first elected to the board of directors is granted an option to purchase 30,000 shares of our common stock on the date of his or her initial election to the board of directors. In addition, on the date of each annual meeting of our stockholders, including the 2016 annual meeting, each non-employee director is eligible to receive an option to purchase 20,000 shares of common stock.Number of shares Vesting Schedule Initial option grant 20,000 36 monthly installments Annual option grant 13,000 12 monthly installments will beare granted under the amended and restated 2010 Equity Incentive Award Plan. All options have an exercise price per share equal to the fair market value of our common stock on the date of grant.18 Summary Director Compensationcash and stockthe compensation received by ourearned or paid to non-employee directors during the year ended December 31, 2015.2020. Dr. Farr and Mr. Hawley areis not included in the following table as theyhe served as an executive officersofficer during 20152020 and theirhis compensation is included in the Summary Compensation Table in the “Executive Compensation and Other Information” section below (including thebelow. Dr. Farr does not receive any compensation Mr. Hawley received during 2015 for his service as a non-employee director following his resignation as our Chief Executive Officer in April 2015).Name Fees Earned or
Paid in Cash
($) Option
Awards
($)(1) Total
($)Louis C. Bock 60,000 236,487 296,487 James B. Breitmeyer, M.D., Ph.D. 47,500 236,487 283,987 Cam L. Garner 100,000 236,487 336,487 Caroline M. Loewy(2) 11,739 289,400 301,139 Erle T. Mast 70,000 236,487 306,487 Mary E. Stutts(2) 11,739 289,400 301,139 Renee P. Tannenbaum, Pharm.D. 46,875 236,487 283,362 Denelle J. Waynick(2) 11,739 289,400 301,139 Mark Wiggins 59,375 236,487 295,862 Name Fees Earned or
Paid in Cash Option
Awards(1) Total Louis C. Bock $ 67,500 $ 74,025 $ 141,525 James B. Breitmeyer, M.D., Ph.D. 40,000 74,025 114,025 Cam L. Garner 100,000 74,025 174,025 Erle T. Mast 70,000 74,025 144,025 Renee P. Tannenbaum, Pharm.D. (2) 39,688 139,267 178,955 Mark Wiggins 56,250 74,025 130,275 (1) RepresentsThe amounts in this column represent the grant dategrant-date fair value of theoption awards granted in 2015 as computedmade to each board member during 2020. The applicable grant-date fair value of each option award was calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“ASC Topic 718.718”) using the Black-Scholes valuation model. For a discussion of the valuation assumptions used, see Note 1312 to our consolidated financial statements for the year ended December 31, 20152020 included in our Annual Report on Form 10-K filed with the SEC on March 15, 2016.1, 2021. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). Whether, and to what extent, a non-employee director realizes a financial benefit from the awards will depend on our actual operating performance, stock price fluctuations and the non-employee director’s continued service on our board.(2) Dr. Tannenbaum received an initial awardThe annual cash retainer reflects a pro-rated amount for partial-year service based on the director’s date of 9,375 options (giving effectappointment to the 1-for-8 reverse stock split of our common stock effectedboard on July 1, 2015) upon initiation of board service effective February 6, 2015.September 21, 2020.1420152020 for each non-employee director was as follows:Name Shares Securities
Underlying
Options Outstanding AtDecember 31, 2015Louis C. Bock 34,65390,000James B. Breitmeyer, M.D., Ph.D. 24,62595,625Cam L. Garner 33,49881,000Caroline M. Loewy 20,000 Erle T. Mast 38,185117,499Mary E. Stutts 20,000 Renee P. Tannenbaum, Pharm.D. 18,37544,000Denelle J. Waynick 20,000 Mark Wiggins 34,625109,375Vote Required; Recommendation of the Board of DirectorsELECTIONBOARD OF ROGER HAWLEY, ERLE T. MAST AND RENEE P. TANNENBAUM.DIRECTORS. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE ON YOUR PROXY CARD.19 152:ACCOUNTANTSaccountantsaccounting firm for the year ending December 31, 20162021 and has further directed that management submit the selection of the independent registered public accountantsaccounting firm for ratification by the stockholders at the annual meeting. Ernst & Young LLP has audited the company’s financial statementsserved as Zogenix, Inc.’s independent registered public accounting firm since its inception in 2006.2007. Representatives of Ernst & Young LLP are expected to be present at the annual meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.accountantsaccounting firm is not required by Delaware law, the company’s amended and restated certificate of incorporation or the company’s amended and restated bylaws. However, the audit committee is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether to retain the firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accountantsaccounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of the company and its stockholders.Independent Registered Public Accountants’ Fees20152020 and 20142019 by Ernst & Young LLP, our independent registered public accounting firm. Year Ended 2020 2019 (in thousands) Audit Fees (1) $ 2,300 $ 2,110 Audit Related Fees (2) — — Tax Fees (3) — — All Other Fees (4) 2 4 Total $ 2,302 $ 2,114 Year Ended December 31, 2015 2014 Audit Fees (1) $ 1,510,209 $ 984,257 Audit Related Fees (2) — — Tax Fees (3) — — All Other Fees (4) 1,715 1,715 Total $ 1,511,924 $ 985,972 (1) Audit Fees consist of fees billed for professional services performed by Ernst & Young LLP for the audit of our annual financial statements, review of our quarterly reports on Form 10-Q, services in connection with securities offerings, review of our registration statements on FormsForm S-3 and S-8 and related services that are normally provided in connection with statutory and regulatory filings or engagements.(2) Audit Related Fees consist of fees billed by Ernst & Young LLP for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. There were no such fees incurred during 20152020 or 2014.2019.(3) Tax Fees consist of fees for professional services, including tax consulting and compliance performed by Ernst & Young LLP. There were no such fees incurred during 20152020 or 2014.2019.(4) All Other Fees consist of fees billed in the indicated year for an annual subscription to Ernst & Young LLP’s online resource library. Pre-Approval Policies and Procedures20152020 and 2014.2019. These services may include audit services, audit-related services, tax services and other services. The audit committee considers whether the provision of each non-audit service is compatible with maintaining the independence of our auditors. Pre-approvalPreapproval is detailed as to the particular service or category of services and is generally subject to a specific budget. Our20 16Vote Required; Recommendation of the Board of DirectorsProposalproposal 2 is a routine proposal on which a broker or other nominee has discretionary authority to vote. Accordingly, no broker non-votes will likely result from this proposal.2016.2021. PROXIES SOLICITED BY OUR BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.21 173:A ONE-TIME STOCK OPTION EXCHANGE PROGRAMapprove a one-time stock option exchange program. If implemented,indicate their support for our named executive officer compensation as described in this one-time stock option exchange program,proxy statement. Pursuant to the Dodd-Frank Act, the stockholder vote on executive compensation is an advisory vote only, and it is not binding on us or option exchange, would allow us to cancel eligible stock options, referred to herein as eligible options, held by certain of our employees and consultants, referred to herein as eligible participants, in exchange for a lesser number of replacement stock options, referred to herein as replacement options, with lower exercise prices to be granted under the Zogenix, Inc. 2010 Equity Incentive Award Plan, or the 2010 Plan. Members of our board of directors and our Chief Executive Officer will not be eligible participants in the option exchange.Our board of directors, upon the recommendation ofdirectors. However, our compensation committee has determined that it would be in the best interests of the company and our stockholders to implement the option exchange on the terms and conditions described in detail below, subject to the exceptions described in this proposal, subject to stockholder approval.In designing the option exchange, we have taken into account our stockholders’ interests and designed the option exchange to include a number of stockholder-favorable features, such as:Our Chief Executive Officer and board members will not be eligible to participate in the option exchange.Members of our board of directors and our Chief Executive Officer will be excluded from participating in the option exchange. Although members of our board of directors and our Chief Executive Officer also hold options that are significantly underwater, these individuals are not eligible to participate in the option exchange because we believe that their compensation should remain at greater risk based on our stock price. All other eligible employees and consultants of our company and our subsidiaries holding eligible options will generally be eligible to participate.Eligible options must be significantly underwater. Only stock options with exercise prices that are greater than a specified percentage above the fair market value of our stock price as measured at the option exchange’s commencement date, which percentage will be determined by the compensation committee but will not be less than 25%, will be eligible to participate in the option exchange.Replacement options will be subject to new vesting terms. All replacement options will be unvested upon grant and subject to new vesting requirements. Eligible option grants that are fully vested on the date of the exchange will be exchanged for replacement options that will vest monthly over two years following the replacement grant date. Eligible option grants that are not fully vested on the date of the exchange will be exchanged for replacement options that will vest monthly over three years following the replacement grant date. Vesting will be subject to the participant’s continued service through the vesting date.Value-for-value exchange. The option exchange will not be a one-for-one exchange. Instead, it will more closely approximate a value-for-value exchange of the eligible options for new replacement options. Our compensation committee will set the exchange ratios (as defined below) shortly prior to the commencement of the option exchange with the intent that the fair value of the replacement options to be granted will be approximately equal to the fair value of the eligible options that are surrendered under Accounting Standards Codification Topic 718 (“ASC 718”), “Compensation-Stock Compensation.” The methodology and assumptions to be used to value the cancelled eligible options and replacement options and set the exchange ratios are set forth below under “Exchange Ratios.”Reduction in issued equity awards overhang. Because a lesser number of shares will be subject to awards granted in exchange for eligible options, the number of shares of common stock subject to all outstanding equity awards will be reduced following the option exchange, thereby reducing our equity award overhang.Reduced number of shares subject to replacement options will conserve equity pool. The reduced number of shares subject to the replacement options will conserve our equity pool. Under the option exchange, pursuant to the terms of the 2010 Plan, shares subject to eligible options that were originally granted under the 2010 Plan or the Zogenix, Inc. 2006 Equity Incentive Plan, or the 2006 Plan, that are surrendered in exchange for a lesser number of replacement options will automatically return to the pool of shares available for future grant under our 2010 Plan. This return of shares will constitute an efficient use of the shares available for future issuance. Shares subject to eligible options that were originally granted under the Zogenix, Inc. 2013 Employment Inducement Equity Incentive Plan, or the 2013 Plan, will be cancelled at the time of the option exchange and the shares subject to such surrendered options will not be available for future issuance under the 2013 Plan.Voluntarily seeking stockholder approval. We are voluntarily seeking stockholder approval of the option exchange. Stockholder approval of the option exchange is not required under the NASDAQ listing rules or under the terms of our 201018Plan, the 2006 Plan or the 2013 Plan, collectively referred to herein as the Plans.If our stockholders approve this proposal, and our board of directors or compensation committee determines to implement the option exchange, we expect the option exchange would be scheduled to commence in the third quarter of 2016. However, our board of directors or compensation committee may, in their sole discretion, determine to postpone the actual start date of the option exchange to a date within 12 months of the date of the annual meeting.If our stockholders do not approve this proposal, we will not implement the option exchange and the eligible options will continue in accordance with their terms.Reasons for the Option ExchangeWe believe that to be successful, our key contributors need to think like owners. Consistent with this philosophy, our equity program is broad-based. This broad-based equity program provides us with a competitive advantage, particularly in our efforts to attract and retain top talent in our industry.During this past year, we have changed the focus of our company from a commercial organization to a development company, requiring us to reduce our headcount and hire employees and leaders with different knowledge and skills. This transition has threatened the retention of some of our most senior and veteran employees and has created the need for a more robust compensation package. In addition, over half of our management team has been with the company in excess of seven years, yet have little or no value in their equity awards.Over the last several years, we have experienced a significant decline in our stock price. Although we continue to aggressively manage our business to maximize our financial and stock price performance, our stock price remains at a low level compared to its historical prices. As a result, a considerable number of eligible participants hold “underwater” stock options with exercise prices significantly above the recent trading prices of our common stock. At the same time, the market for key talent remains extremely competitive and our board of directors believes that retaining our employees and consultants is critical to our future success. We believe that many eligible participants perceive that their options have little or no value. As a result, these underwater stock options are no longer effective as incentives to retain and motivate our key contributors.In addition, although these stock options are not likely to be exercised as long as our stock price is lower than the applicable exercise price, they will remain on our books with the potential to dilute stockholders’ interests for up to the full term of the options, while delivering little or no retentive or incentive value, unless they are surrendered or cancelled.Additionally, under applicable accounting rules, we are required to continue to recognize compensation expense related to these options while they remain outstanding, even if they are never exercised.As of April 30, 2016, we had an aggregate of 3,184,088 shares underlying outstanding stock options under the Plans, of which 76,957 were held by former employees, and approximately 99% of the outstanding options were underwater (based on the closing price per share of our common stock of $10.25 on April 29, 2016). Of these options, 1,238,052, or approximately 40%, had exercise prices per share in excess of $12.81, were held by current employees or consultants other than our Chief Executive Officer and board of directors and would have been considered “eligible options” undervalue the assumptions outlined below had the option exchange commenced on April 30, 2016. As of April 30, 2016, our Chief Executive Officer and the members of our board of directors held stock options to purchase an aggregate of 1,170,447 shares, which options will not be eligible to participate in the option exchange.Aggregate Options Outstanding as of April 30, 2016 (All Current Employees, Consultants and Board Members) Strike Price Unvested Vested Total Under $10.00 17,686 3,462 21,148 $10.00 to $12.99 927,143 202,401 1,129,544 $13.00 to $14.99 372,231 46,031 418,262 $15.00 to $23.99 142,012 801,026 943,038 $24.00 to $29.99 150,442 214,822 365,264 $30.000 and Up 11,321 218,554 229,875 Total 3,107,131 19Aggregate Options Outstanding as of April 30, 2016 (All Current Employees and Consultants other than our Chief Executive Officer and Board Members) Strike Price Unvested Vested Total Under $10.00 17,686 2,525 20,211 $10.00 to $12.99 602,077 76,344 678,421 $13.00 to $14.99 372,231 28,531 400,762 $15.00 to $23.99 108,311 387,735 496,046 $24.00 to $29.99 98,175 125,094 223,269 $30.000 and Up 11,321 106,654 117,975 Total 1,936,684 The following table summarizes the effectopinions of the option exchange understockholders and will consider the Plans, assuming a fair market valueoutcome of the vote when making future compensation decisions.common stockstockholders vote “FOR” the following resolution:$10.25 (the closing price per share of our common stock on April 29, 2016)the named executive officers, as disclosed in Zogenix, Inc.’s Proxy Statement for the valuation2021 Annual Meeting of the eligible options immediately prior to cancellation and for the valuation of the replacement options granted as a result of the option exchange, the determination of the exchange ratiosStockholders, pursuant to the methodology described below, a $12.81 per share exercise price eligibility threshold and a commencement date of April 30, 2016. If the price per share of our common stock is lower than $10.25 when we commence the option exchange, additional options held by eligible participants with exercise prices lower than $12.81 may become eligible options (but in no event may more than 1,936,684 options be eligible options, based on the options outstanding as of April 30, 2016). Shares issuable pursuant to outstanding options under the Plans (excluding former employees) 3,107,131 12.54% 2,728,219 11.01% Weighted average exercise price of outstanding options (excluding former employees) $16.00 -- $13.03 -- Weighted average remaining term of outstanding options (excluding former employees) 7.97 -- 8.93 -- Eligible options /replacement options 1,238,052 5.00% 859,140 3.47% Weighted average exercise price of eligible options/ replacement options $18.56 -- $10.25 -- Weighted average remaining term of eligible options/ replacement options 7.26 -- 10.00 -- Shares issuable pursuant to outstanding RSUs under the Plans 107,492 0.43% 107,492 0.43% Shares available for future grant under the 2013 Plan (assuming Proposal 3 is approved) 0.94% 0.94% Shares available for future grant under the 2010 Plan (assuming Proposal 3 is approved) 2.85% 3.97% 1If our stockholders do not approve the option exchange, the eligible options will remain outstanding and in effect in accordance with their existing terms.2Based on 24,771,568 shares of our common stock outstanding as of April 30, 2016.3Shares subject to eligible options outstanding under the 2013 Plan will be cancelled at the time of the option exchange and the shares subject to the surrendered options will not be available for future issuance under the 2013 Plan. Based on the assumptions above, eligible options to purchase an aggregate of 101,312 shares are outstanding under the 2013 Plan and would result in the issuance of approximately 66,979 replacement options under the 2010 Plan in exchange for such options.204Does not include possible future increases to the share reserve under the evergreen provision of the 2010 Plan. Pursuant to the evergreen provision, additional shares may become available for issuance under the 2010 Plan during its remaining term.Alternatives Considered. Beginning in March 2015, our board of directors and compensation committee began to consider retention issues associated with the reduced trading price of our common stock relative to exercise prices of outstanding stock options. Radford, an AonHewitt company (“Radford”), an independent compensation consulting firm, was retained by the compensation committee in evaluating issues associated with underwater stock options and in structuring a compensation program designed to retain and provide incentives to individuals holding underwater options. Over the coursedisclosure rules of the past year, we evaluated several alternatives with Radford,SEC, including increasing cash compensation and/or granting additional equity awards. We have implemented each of these alternatives to a degree, but do not believe that relying exclusively on such approaches is optimal.Relying entirely on increasing cash compensation would substantially increase our compensation expensesthe Compensation Discussion and reduce our cash flow from operations. Also, we believe that equity is an essential component of compensation to optimize our ability to hire and retain talented individuals, particularly inAnalysis, the competitive labor market in which we operate. Relying entirely on grants of additional stock options at current market prices or restricted stock units, referred to herein as RSUs, would substantially increase our overhang and cause dilution to our stockholders.We also considered an exchange program in which underwater stock options would be exchanged for a lesser number of RSUs. The compensation committee and Radford performed a comprehensive evaluation of the positive and negative attributes of an option-for-RSU exchange program. As part of this evaluation, the compensation committee identified the likely participants of an option-for-RSU exchange program and discussed the value of the exchanged equity awards, the general parameters of an option-for-RSU exchange program2020 Summary Compensation Table and the probable effects of an option-for-RSU exchange program on our current hiring plans and retention goals. However, in order to ensure that the option-for-RSU exchange program is approximately expense-neutral from an accounting perspective, the exchange ratios for such an exchange program would need to be substantially higher than for an option-for-option exchange program (i.e., fewer replacement awards granted). Thus, we believe that participation in an option-for-RSU exchange program would be lower than with an option-for-option exchange program. Additionally, RSUs would be a new form of equity award for many of the eligible participants and we believe that a lack of familiarity with such equity awards could negatively impact participation in the exchange program.Advantages of an Option-for-Option Exchange. After weighing each of these alternatives, our compensation committee recommended, and our board of directors approved, an option-for-option exchange on the terms and conditions described in this Proposal 3, subject to the exceptions described in this proposal. We have determined that a program under which eligible participants generally could exchange significantly underwater stock options for a smaller number of stock options was the most attractive alternative for a number of reasons, including the following:The option exchange offers a reasonable, balanced and meaningful incentive for eligible participants. Under the option exchange, eligible participants would surrender eligible options for a smaller number of stock options that will vest over two or three years, depending on whether the grant that is surrendered is fully vested at the time of surrender. Eligible option grants that are fully vested on the date of the exchange will be exchanged for replacement options that will vest monthly over two years following the replacement grant date. Eligible option grants that are not fully vested on the date of the exchange will be exchanged for replacement options that will vest monthly over three years following the replacement grant date. We believe that the lower number of stock options granted, together with a new vesting requirement, represents a reasonable and balanced option exchange with the potential for a significant positive impact on retention, motivation and performance. Additionally, stock options will provide value to eligible participants only if our share price increases over time, thereby aligning eligible participant and stockholder interests.The option exchange will help to restore retention and motivation incentives. We rely on skilled and educated, technical, and managerial employees and consultants. Competition for these types of employees and consultants is intense. We continue to believe that equity awards are an important component of our compensation program and our ability to retain and motivate our key contributors. We also believe that substantially underwater options do not have sufficient impact on retention and motivation, and that for our stock options to serve their intended purposes, they need to be exercisable at least near the current trading prices of our common stock. The failure to address the underwater option issue in the near to medium term will make it more difficult for us to retain our key contributors. If we cannot retain these individuals, our business, results of operations and future stock price could be adversely affected. We believe that the new replacement options will be more effective in retaining and incentivizing eligible participants than the existing underwater options. Additionally, replacement options will have a two-year or three-year vesting schedule. The company believes that this vesting schedule will provide a strong incentive for employees and consultants to remain with the company and will largely alleviate the need to find other extraordinary compensatory measures to retain key contributors.The option exchange will align compensation costs with the retention and motivation value of the equity awards. Our21underwater options have exercise prices that were equal to the fair market value of our common stock at the time of grant. Under applicable accounting rules, we are required to continue to recognize compensation expense related to these grants while they remain outstanding, even if they are never exercised. We believe that it is an inefficient use of corporate resources to recognize compensation expense on awards that are not valued by our employees and consultants. By replacing underwater options that have diminished retention or incentive value with new replacement options that will provide both enhanced retention and incentive value while incurring only minimal incremental compensation expense as described below, we will be able to use our compensation tools more efficiently.If there is significant participation in the option exchange, the option exchange will reduce our equity award overhang. Not only do the underwater options have little or no retention value, they cannot be removed from our equity award overhang until they are exercised, expire or otherwise terminate (for example, when an employee or consultant leaves the company). The option exchange will reduce our equity award overhang while eliminating the ineffective options that are currently outstanding. Because a lesser number of shares will be subject to awards granted in exchange for eligible options, the number of shares of stock subject to all outstanding equity awards will be reduced following the option exchange, thereby reducing our equity award overhang.The reduced number of shares subject to the replacement options will conserve our equity pool. Under the terms of the 2010 Plan, any surrendered eligible options that were originally granted under the 2010 Plan or the 2006 Plan automatically will be reserved for future issuance under the 2010 Plan as a result of the cancellation of such options pursuant to the option exchange. This return of shares will constitute an efficient use of the shares available for future issuance. Shares subject to eligible options that were originally granted under the 2013 Plan will be cancelled at the time of the option exchange and the shares subject to such surrendered options will not be available for future issuance under the 2013 Plan.The option exchangewill decrease pressure for additional grants. If we are unable to conduct an option exchange in which underwater options with diminished incentive value may be exchanged for a lesser number of new replacement options with higher motivation and retentive value, we may find it necessary to issue significant additional options or other equity awards to employees and consultants above and beyond our ongoing equity grant practices in order to provide renewed incentive to employees and consultants.Details of the Option ExchangeEligibility. The option exchange will be open to all employees and consultants of the company and its subsidiaries (but excluding our Chief Executive Officer and members of our board of directors) who are employed by or providing services to us at the start of the option exchange and hold eligible options. In addition to being an eligible participant as of the start of the option exchange, an individual will only be eligible to participate in the option exchange if he or she continues to provide services to us through the replacement grant date. If an eligible participant is no longer an employee or consultant with us for any reason on the replacement grant date, even if he or she had elected to participate and had tendered his or her eligible options for exchange, such eligible participant’s options will automatically be deemed withdrawn and he or she will not participate in the option exchange. The board of directors will have the authority to exclude otherwise eligible employees and consultants in non-U.S. jurisdictions if it determines that local law or other constraints make the participation of employees or consultants in a certain country infeasible or impractical. As of April 30, 2016, we estimate that approximately 61 employees and 1 consultant will be eligible to participate in the option exchange. As of April 30, 2016, we had a total of 64 employees, approximately 15 consultants, and 7 non-employee directors. We will not make the option exchange available to former employees or former consultants. A vote by an eligible participant in favor of this proposal at the annual meeting does not constitute an election to participate in the option exchange.Eligible Options.The only options that eligible participants may exchange in the option exchange are those outstanding options under the Plans held by an eligible participant that have a per share exercise price greater than a specified percentage above the fair market value of our stock price as measured at the option exchange’s commencement date or a date shortly before the commencement date as determined by our compensation committee, which percentage will be determined by the compensation committee but will not be less than 25%. Our intent in using an exercise price eligibility threshold is to ensure that only outstanding options that are significantly underwater are eligible for the option exchange.If the trading price of our common stock increases to a price higher than the exercise price eligibility threshold at the date of closing of the option exchange, tendered options having an exercise price lower than such trading price automatically will be withdrawn from the offer and will not be exchanged for options having a higher exercise price. All eligible options that are not exchanged will remain outstanding and in effect in accordance with their existing terms.If an eligible participant elects to exchange an eligible option, then all of the shares subject to such eligible option must be exchanged pursuant to the option exchange. If an eligible participant holds more than one eligible option grant, however, the eligible participant may choose, on a grant-by-grant basis, to exchange one or more eligible option grants without having to exchange all of his22or her eligible option grants.Exchange Ratios.The option exchange is not structured as a one-for-one exchange. Instead, it will more closely approximate a value-for-value exchange of the eligible options for new replacement options. Eligible participants surrendering eligible options will receive new replacement options covering a lesser number of shares than are covered by the surrendered eligible options. The number of shares underlying an eligible option to be surrendered in the exchange for the right to receive a replacement option covering one share is referred to as the “exchange ratio.” The total number of replacement options an eligible participant will receive with respect to a surrendered eligible option will be determined on a grant-by-grant basis by dividing the number of shares underlying the surrendered eligible option by the applicable exchange ratio and rounding the result down to the nearest whole share. Stock options for fractional shares will not be issued. Since the exchange ratios will not be calculated until shortly before the commencement of the option exchange (at which time the fair value of the eligible options and replacement options can be estimated), we are unable to definitively determine at this time the number of new replacement options which may be granted in connection with the option exchange.We have retained the services of Radford to determine the terms and exchange ratios appropriate to achieve our desired results. The exchange ratios for the option exchange will be based on the fair value of the eligible options (calculated using the Black-Scholes option pricing model). As a result, the exchange ratios are based on the valuation assumptions used in the Black-Scholes option pricing model, including the exercise price and the remaining term of the eligible options and the fair market value of our common stock on the assumed commencement date of the option exchange. Multiple tranches of options with similar fair values may be aggregated and exchanged based on a single exchange ratio. Setting the exchange ratios in this manner is intended to result in a fair value, for accounting purposes, of the replacement options that will be approximately equal to the fair value of the eligible options that are surrendered in the option exchange (based on valuation assumptions made when the option exchange commences). As a result, the exchange ratios will vary and generally will be higher as the exercise price of the eligible option increases. Our compensation committee will establish the final exchange ratios shortly before the option exchange commences based on Radford’s calculations and recommendations, updated as of the commencement of the option exchange, so that it will closely approximate a value-for-value exchange, but may adjust the exchange ratios prior to the commencement of the option exchange to the extent our compensation committee determines prior to the start of the option exchange that it is necessary or desirable to do so to assist in our retention goals of the option exchange or for other administrative reasons, such as rounding.Although the exchange ratios cannot be determined now, we can provide an example if we make certain assumptions regarding the commencement date of the option exchange, the fair market value of our common stock and a sample methodology for determining the exchange ratios that would achieve our retention goals for the option exchange while striving to structure the option exchange as a value-for-value exchange. Radford used the Black-Scholes option pricing model to calculate the fair value of the eligible options that were used to develop the preliminary exchange ratio groupings shown in the table below. For illustration purposes, assuming a fair market value of our common stock of $10.25 for the valuation of the eligible options immediately prior to cancellation and for the valuation of the replacement options granted as a result of the option exchange, a $12.81 per share exercise price eligibility threshold, assuming a commencement date of April 30, 2016, grouping together eligible options with similar fair values and rounding the resulting ratios to the Radford recommended levels, the following exchange ratios would apply:Exercise Prices of Eligible OptionsSampleExchangeRatio$12.81 to $14.991.25 to 1$15.00 to $23.991.50 to 1$24.00 to $29.991.50 to 1$30.00 and Up2.00 to 1Continuing this example, based on the assumptions described above, the following table summarizes information regarding the eligible options and the number of replacement options that may be issued with respect to such eligible options in the option exchange (assuming 100% participation), as of April 30, 2016.23Exercise Price Greater Than or Equal to… Exercise Price Less Than or Equal to… $12.81 to $14.99 8.99 $13.50 400,762 1.25 to 1 320,610 $15.00 to $23.99 6.40 $15.99 496,046 1.50 to 1 330,697 $24.00 to $29.99 7.30 $24.85 223,269 1.50 to 1 148,846 $30.00 and Up 4.99 $34.62 117,975 2.00 to 1 58,988 Total 1,238,052 1Represents a weighted average remaining term for multiple grant dates. Actual remaining terms range from 0.45years to 9.25 years.2Represents a weighted average exercise price for multiple grants in each grouping. Actual exercise prices range from $13.32 per share to $49.60 per share.3Based on 24,771,568 shares of common stock outstanding as of April 30, 2016.The foregoing exchange ratios are provided merely as an example based on the assumptions described above. We will apply substantially the same methodology once these factors are decided closer to the time of commencement of the option exchange, subject to the potential adjustments described above. We expect the compensation committee’s determination of the final exchange ratios on the terms described above likely will result in some incremental compensation expense for financial accounting purposes. Our board of directors and compensation committee have determined that the recognition of some additional compensation cost may be necessary to achieve our retention goals of the option exchange and for administrative ease, which we believe will benefit the company and its stockholders in the long run.Terms and Conditions of Replacement Options. Each replacement option will be evidenced by a stock option agreement between us and the eligible participant, and will be subject to the following additional terms and conditions:Exercise Price of Replacement Options. All replacement options will be granted with an exercise price equal to the closing price of our common stock on the replacement option grant date as reported by the NASDAQ Global Select Market.Vesting of Replacement Options. The replacement options will be completely unvested at the time of the new grant, regardless of whether the surrendered eligible options were partially or wholly vested. The replacement options will vest monthly as follows:Replacement options granted in exchange for eligible option grants that are unvested or partially vested will vest monthly over three years following the replacement grant date; andReplacement options granted in exchange for eligible option grants that are fully vested will vest monthly over two years following the replacement grant date.The replacement options will vest only if the eligible participant remains an employee or consultant of the company or any of its wholly-owned subsidiaries through each respective vesting date. Replacement options that are unvested at the time of an eligible participant’s termination of service cannot be exercised and will be forfeited, unless otherwise provided by the administrator of the 2010 Plan.Term of Replacement Options. The term of a stock option is the length of time during which it may be exercised. Under the option exchange, each replacement option will have a new term of ten years from the replacement grant date, subject to earlier expiration of the option upon the eligible participant’s termination of service.Other Terms and Conditions of Replacement Options. The other terms and conditions of the replacement options will be governed by the terms and conditions of the 2010 Plan and the stock option agreements entered into thereunder. All replacement options will be non-qualified stock options granted under our 2010 Plan, regardless of the tax status of the eligible options surrendered for exchange.Return of Eligible Options Surrendered; Effect on Plans. The eligible options surrendered for exchange will be cancelled and,24pursuant to the terms of the 2010 Plan, all shares of common stock that were subject to such surrendered eligible options that were originally granted under the 2010 Plan or 2006 Plan will automatically again become available for future awards under the 2010 Plan. These shares along with the shares currently available for grant under the 2010 Plan and the 2013 Plan will be used for grants of new hire and annual refresh awards, as permitted by the terms of such plans, to new and continuing employees, non-employee directors and consultants; however, as all future grants are within the discretion of the board of directors or the compensation committee, such grants are not currently determinable. Shares subject to eligible options originally granted under the 2013 Plan will be cancelled at the time of the option exchange and the shares subject to such surrendered options will not be available for future issuance under the 2013 Plan.As of April 30, 2016, options to purchase 1,238,052 shares of common stock would be eligible options under the proposed option exchange based on the assumptions described above. Assuming all of the 1,238,052 eligible options are surrendered and cancelled pursuant to the option exchange and 859,140 new replacement options are granted in accordance with the applicable exchange ratios, the net effect is that the number of shares subject to outstanding options under the Plans would be reduced by 378,912 shares. Please see the “Reasons for the Option Exchange” section above for further details regarding the approximate reduction in the number of shares underlying options outstanding assuming that 100% of eligible options are exchanged and new replacement options are issued in accordance with the exchange ratios set forth above and for a description of the effect of the option exchange on the shares available for issuance under the Plans. If all of the eligible options were exchanged in accordance with the option exchange, the number of shares of common stock remaining available for issuance for future grants under the 2010 Plan would increase from approximately 706,535 shares to approximately 984,135 shares, excluding any possible future increases to the share reserve under the evergreen provision of the 2010 Plan.Cash Payments.In certain limited cases where we have determined that offering replacement options would provide minimal retentive value, would be overly burdensome to implement or administer or would not provide a meaningful benefit to holders of eligible options, we will provide for a cash payment in exchange for surrendered eligible options. The amount of the cash payment will be calculated similar to the stock option exchange ratio and in a manner intended to provide those receiving cash payments with approximately the same fair value as their surrendered eligible options, less any taxes and social insurance contributions due on the payments. The cash payments will not be subject to any vesting schedule and will be made on the date that replacement options are granted.Implementing the Option ExchangeWe have not commenced the option exchange and will not do so unless our stockholders approve this proposal to permit the option exchange. Our board of directors authorized the option exchange on May 13, 2016, subject to stockholder approval. If this proposal is approved, our board or directors or compensation committee will determine the date upon which the option exchange will begin, which date will be within 12 months of the date of stockholder approval of this proposal. It is currently anticipated that the option exchange will commence during the third quarter of 2016.Upon the commencement of the option exchange, eligible participants will be offered the opportunity to participate in the option exchange pursuant to a written offer that will be distributed to all eligible participants. Eligible participants will be given at least 20 U.S. business days in which to accept the offer of the replacement options in exchange for the surrender of their eligible options. After the option exchange is closed, the eligible options that were surrendered in the option exchange would be cancelled and the replacement options will be granted under the 2010 Plan on the date of cancellation of the surrendered eligible options. In those limited cases where cash payments are made in exchange for surrendered eligible options, such payments also will be made on the date of the cancellation of the surrendered eligible options. The shares of our common stock subject to surrendered eligible options that were originally granted under the 2010 Plan or the 2006 Plan will become available for future issuance under our 2010 Plan pursuant to its terms once the surrendered eligible options are cancelled. Shares subject to eligible options originally granted under the 2013 Plan will be cancelled at the time of the option exchange and the shares subject to such surrendered options will not be available for future issuance under the 2013 Plan.Prior to commencement of the option exchange, we will file the offer to exchange with the Securities and Exchange Commission as part of a tender offer statement on Schedule TO. Eligible participants, as well as stockholders and members of the public, will be able to review the offer to exchange and other related documents filed by us with the Securitiestables and Exchange Commission free of charge on the Securities and Exchange Commission’s website at www.sec.gov.U.S. Federal Income Tax ConsequencesThe following is a summary of the anticipated material U.S. federal income tax consequences of participating in the option exchange. A more detailed summary of the applicable tax considerations to participating holders will be provided in the offer to exchange. The option exchange should be treated as a non-taxable exchange for U.S. federal income tax purposes, and we and the eligible participants should recognize no income for U.S. federal income tax purposes upon the issuance of the replacement options. Recipients of any cash payments will recognize ordinary income for U.S. federal income tax purposes on the date the cash payments25are made to them, and the payments will be subject to applicable tax withholdings. The tax consequences for non-U.S. eligible participants may differ from the U.S. federal income tax consequences described in the preceding sentence. The tax consequences of the option exchange in foreign jurisdictions will depend on applicable foreign tax rules and regulations and will be fully disclosed to participants subject to the tax laws of foreign jurisdictions as part of the offer to exchange options.Accounting ImpactWe account for share-based payments in accordance with ASC 718. Under ASC 718, to the extent the fair value of each award of replacement options granted pursuant to the option exchange exceeds the fair value of the surrendered eligible options, such excess is considered incremental compensation. This excess, in addition to any remaining unrecognized expense for the eligible options surrendered in exchange for the new replacement options, will be recognized by us as an expense for compensation. This expense will be recognized ratably over the vesting period of the new replacement options in accordance with the requirements of ASC 718. In the event that any of the new replacement options are forfeited prior to their vesting due to termination of an eligible participant’s service, the compensation cost related to the forfeited options will not be recognized. We will establish the exchange ratios for the option exchange in a manner intended to result in the issuance of new replacement options that have a fair value approximately equal to the fair value of the exchanged options they replace, but with the ability to establish exchange ratios that result in some additional compensation expense to the extent our compensation committee determines prior to the start of the option exchange that it is necessary or desirable to do so to assist in our retention goals of the option exchange or for other administrative reasons, such as rounding. Additionally, compensation expense may be affected by fluctuations in our stock price after the exchange ratios have been set (which will occur shortly before the option exchange begins) but before the option exchange actually occurs. We do not, however, expect to recognize more than $200,000 in incremental compensation expense as a result of the option exchange. We currently recognize and will continue to recognize compensation expense relating to the eligible options, even though they are underwater and do not fully provide the intended incentive and retention benefits.Potential Modification to Terms to Comply with Governmental Requirements or Changing CircumstancesThe terms of the option exchange will be described in a tender offer document that will be filed with the Securities and Exchange Commission. Although we do not anticipate that the Securities and Exchange Commission would require us to modify the terms materially, it is possible that we will need to alter the terms of the option exchange to comply with potential Securities and Exchange Commission comments. In addition, it is currently our intention to make the program available to our eligible participants, including eligible participants of our wholly-owned subsidiaries who are located outside of the United States, where permitted by local law and where we determine it is feasible and practical to do so. It is possible that we will make modifications to the terms offered to eligible participants in countries outside the United States to comply with local requirements, or for tax or accounting reasons.In addition, while the terms of the option exchange are expected to be materially similar to the terms described in this proposal, our board of directors or compensation committee may find it necessary or appropriate to change the terms of the option exchange to take into account legal requirements, accounting rules or corporate transactions involving the company (including, for instance, a merger or acquisition). The board of directors or the compensation committee reserves the right to amend, postpone or cancel the option exchange once it has commenced. Additionally, we may decide not to implement the option exchange even if our stockholders approve the option exchange. If our stock price increases significantly, we may reassess the advisability of implementing the option exchange.Benefits of the Option Exchange to Eligible ParticipantsBecause the decision whether to participate in the option exchange is completely voluntary, we are not able to predict who will participate, how many eligible options any particular group of eligible participants will elect to exchange, or the number of replacement options that we may grant. The option exchange will not be conditioned on a minimum level of participation. Asnoted above, our Chief Executive Officer, members of our board of directors and former employees and consultants will not be eligible to participate in the option exchange. Because we cannot predict which or how many eligible participants will elect to participate in the option exchange, and which or how many eligible options such eligible participants will elect to exchange, future benefits pursuant to the option exchange are not currently determinable.Effect on StockholdersThe option exchange was designed to provide renewed incentives and motivate the eligible participants to continue to create stockholder value and to reduce the number of shares currently subject to outstanding options, thereby avoiding the dilution in ownership that normally results from supplemental grants of replacement options or other awards. We are unable to predict the precise impact of the option exchange on our stockholders because we cannot predict which or how many eligible participants will elect to participate in the option exchange, and which or how many eligible options such eligible participants will elect to exchange. Please see the “Reasons for the Option Exchange” section above for the approximate reduction in the number of shares underlying options26outstanding assuming that 100% of eligible options are exchanged and new replacement options are issued in accordance with the exchange ratios set forth above and for a description of the effect of the option exchange on the shares available for issuance under the Plans.Financial StatementsOur financial statements and other information required by Item 13(a) are incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission on March 15, 2016.option exchange.advisory vote regarding the compensation of the named executive officers. Abstentions with respect to this proposal will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. Broker non-votes if any, will not be counted as votes cast and will have no effect on this proposal as brokers or other nominees are not entitled to vote on such proposals in the resultabsence of voting instructions from the vote.THE STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.· Increase in Share Reserve. We strongly believe that an employee equity compensation program is a necessary and powerful incentive and retention tool that benefits all stockholders. As of March 29, 2021, a total of 11,500,000 shares of our common stock were reserved under the 2010 Plan, the aggregate number of shares of common stock subject to awards outstanding under the 2010 Plan was 6,858,252, and a total of 1,655,149 shares of common stock remained available under the 2010 Plan for future issuance. 22 · Limit Incentive Stock Options. Under the Restated Plan, no more than 16,000,000 shares may be issued upon the exercise of incentive stock options, or ISOs, subject to potential adjustments, as described below under the heading “Adjustments.” · Extend Term. The Restated Plan will expire, and in no event may any awards be granted under, the Restated Plan after the tenth anniversary of the date our board of directors adopted the Restated Plan. PROPOSAL 3 TO APPROVE THE OPTION EXCHANGE. PROXIES SOLICITED BY OUR BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.Eligible participantsEquity Incentive Awards Are Critical to Long-Term Stockholder Value Creationexpectedessential to our continued progress. Equity awards are intended to motivate high levels of performance, align the interests of our directors, employees and consultants with those of our stockholders by giving directors, employees and consultants the perspective of an owner with an equity stake in our company and providing a means of recognizing their contributions to the success of our company. Our board of directors and management believe that equity awards are necessary to remain competitive in our industry and are essential to recruiting and retaining the highly qualified employees who help our company meet its goals. We recognize that equity compensation awards dilute stockholder equity and must be used judiciously. Our equity compensation practices are designed to be offeredin line with industry norms, and we believe our historical share usage has been responsible and mindful of stockholder interests while providing sufficient flexibility to attract and retain the opportunitybest talent in a time when we most needed to participateattract and retain talent. If the Restated Plan is not approved and we are left with only the approximately 1,655,149 shares remaining available for grant, it will likely create a barrier to hiring and retaining the best talent and it will be necessary to replace components of compensation previously awarded in equity with cash, or with other instruments that may not necessarily align employee interests with those of stockholders as well as equity awards would have.23 Number of
Shares As a % of Shares
Outstanding(1) Dollar Value(2) 2010 Plan Options outstanding 5,669,141 10.2 % $ 10,896,329 Weighted average exercise price of outstanding options $26.66 Weighted average remaining contractual term of outstanding options 7.4 years Restricted stock units outstanding 1,189,111 2.1 % $ 22,022,336 Shares available for grant under the 2010 Plan 1,655,149 3.0 % 30,653,359 Proposed increase to share reserve under Restated Plan 4,500,000 8.1 % $ 83,340,000 Inducement Plan Options outstanding 498,608 * % $ 551,475 Weighted average exercise price of outstanding options $ 37.31 Weighted average remaining contractual term of outstanding options 6.5 years Restricted stock units outstanding 7,500 * $ 138,900 Shares available for grant under the Inducement Plan — — — Employee Stock Purchase Plan Shares available for grant under the Employee Stock Purchase Plan 497,852 * $ 9,220,219 · The shares to be initially reserved for issuance under the Restated Plan represent an increase of 4,500,000 shares over the aggregate number of shares reserved for issuance and available for future grant under the existing 2010 Plan. Our 2010 Plan is the only equity plan under which we will be able to grant future equity awards (other than the shares reserved for issuance under our ESPP). · In setting the size of the share reserve under the Restated Plan, as described above, our board of directors also considered the historical amounts of equity awards granted by our company in the past three years. In 2018, 2019 and 2020, equity awards representing a total of approximately 1,035,000 shares, 1,482,000 shares and 1,865,000 shares, respectively, were granted under our equity plans, for an annual equity burn rate of 2.5%, 2.8% and 3.3%, respectively. This level of equity awards represents a 3-year average burn rate of approximately 2.9%. Equity burn rate is calculated by dividing the number of shares subject to equity awards granted during a fiscal year by the number of common shares outstanding at the end of that fiscal year. · We expect the share authorization under the Restated Plan to provide us with enough shares for awards for approximately one to two years, assuming we continue to grant awards consistent with our current practices and historical usage, as reflected in our historical burn rate, and further dependent on the price of our shares and hiring activity during the next few years, forfeitures of outstanding awards, and noting that future circumstances may require us to change our current equity grant practices. We cannot predict our future equity grant practices, the future price of our shares or future hiring activity with any degree of certainty at this time, and the share reserve under the Restated Plan could last for a shorter or longer time. · In 2018, 2019 and 2020 our end of year overhang rate was 13.5%, 21.2% and 16.3%, respectively. If the 4,500,000 additional shares proposed to be authorized for grant under the Restated Plan are included in the calculation, our overhang at the end of 2020 would have been 24.4%. Overhang is calculated by dividing (1) the sum of the number of shares subject to equity awards outstanding at the end of the fiscal year plus shares remaining available for issuance for future awards at the end of the fiscal year by (2) the number of shares outstanding at the end of the fiscal year. A substantial portion of the options outstanding as of December 31, 2020 included in the numerator of the overhang calculation (approximately 3.1 million of the stock options outstanding at the end of the fiscal year) are “out of the money” with a weighted-average exercise price of $37.96, based on our closing stock price of $19.99 as of December 31, 2020. 24 · In light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the extremely competitive labor markets in which we compete, our board of directors has determined that the size of the share reserve under the Restated Plan is reasonable and appropriate at this time. Our board of directors will not create a subcommittee to evaluate the risk and benefits for issuing shares under the Restated Plan. · No Increase to Shares Available for Issuance without Stockholder Approval. Without stockholder approval, the Restated Plan prohibits any alteration or amendment that operates to increase the total number of shares of common stock that may be issued under the Restated Plan (other than adjustments in connection with certain corporate reorganizations and other events). · No Repricing of Awards. Other than pursuant to the provisions of the Restated Plan described below under the headings “Adjustments” and “Corporate Transactions,” the plan administrator may not without the approval of the Company’s stockholders (1) lower the exercise price of an option or SAR after it is granted or (2) cancel an option or SAR when the exercise price exceeds the fair market value of the underlying shares in exchange for cash or another award. · Limitations on Dividend Payments on Unvested Awards. Dividends and dividend equivalents may not be paid on awards subject to vesting conditions unless and until such conditions are met. Dividend equivalents may not be paid on stock options or SARs. · No In-the-Money Option or Stock Appreciation Right Grants. The Restated Plan prohibits the grant of options or SARs with an exercise or base price less than 100% of the fair market value of our Common Stock on the date of grant. · Independent Administration. The compensation committee of our board of directors, which consists of two or more non-employee directors, generally will administer the Restated Plan. The full board of directors will administer the Restated Plan with respect to awards granted to members of the board. The compensation committee may delegate certain of its duties and authorities to a committee of one or more directors or officers of the Company for awards to certain individuals, within specific guidelines and limitations. However, no delegation of authority is permitted with respect to awards made to individuals who (1) are subject to Section 16 of the Exchange Act, or (2) are officers of the Company and have been delegated authority to grant or amend awards under the Restated Plan. 25 26 exchangeor other right to purchase common stock as part of a deferred compensation arrangement, made in lieu of all or any part of compensation, including bonuses, that would otherwise be payable to employees, consultants or members of our board of directors.27 a tender offer expectedapplicable accounting standards, items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period, any other items of significant income or expense which are determined to be appropriate adjustments, items relating to unusual, infrequently occurring or non-recurring charges, events or developments, items related to amortization of acquired intangible assets, items that are outside the scope of our core, on-going business activities, items relating to changes in tax laws, items relating to gains or losses for litigation, arbitration and contractual settlements, or items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.· a transaction or series of related transactions (other than an offering of our stock to the general public through a registration statement filed with the Securities and Exchange Commission, or SEC) whereby any person or entity or related group of persons or entities (other than us, our subsidiaries, an employee benefit plan maintained by us or any of our subsidiaries or a person or entity that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, us) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the total combined voting power of our securities outstanding immediately after such acquisition; 28 · during any two-year period, individuals who, at the beginning of such period, constitute our board of directors together with any new director(s) whose election by our board of directors or nomination for election by our stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of our board of directors; or · our consummation (whether we are directly or indirectly involved through one or more intermediaries) of (1) a merger, consolidation, reorganization, or business combination or (2) the sale, exchange or transfer of all or substantially all of our assets in any single transaction or series of transactions or (3) the acquisition of assets or stock of another entity, in each case other than a transaction: · which results in our voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into our voting securities or the voting securities of the person that, as a result of the transaction, controls us, directly or indirectly, or owns, directly or indirectly, all or substantially all of our assets or otherwise succeeds to our business (we or such person being referred to as a successor entity)) directly or indirectly, at least a majority of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction, and · after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the successor entity; provided, however, that no person or group is treated as beneficially owning 50% or more of combined voting power of the successor entity solely as a result of the voting power held in us prior to the consummation of the transaction. 29 30 31 Stock
Options
Granted (#) Restricted Stock
Units Granted
(#) Stephen J. Farr, Ph.D.
Chief Executive Officer and President 1,268,955 160,830 Michael P. Smith
Executive Vice President, Chief Financial Officer, Treasurer and Secretary 165,250 45,875 Shawnte M. Mitchell
Executive Vice President, General Counsel and Corporate Secretary 135,000 25,000 Bradley S. Galer, M.D.
Executive Vice President and Chief Medical Officer 355,000 50,875 Ashish M. Sagrolikar
Executive Vice President, Chief Commercial Officer 173,750 68,125 Gail M. Farfel, Ph.D.
Executive Vice President and Chief Development Officer 336,750 50,625 All current executive officers as a group (6 persons) 2,434,705 401,330 All current directors who are not executive officers as a group (9 persons) 610,062 — James B. Breitmeyer, M.D., Ph.D., director nominee 105,625 — Mary E. Stutts, director nominee 20,000 — All employees who are not executive officers as a group (241 persons) 2,843,892 996,734 meeting. This proxy statement andmeeting is required to approve the foregoing description do not constitute an offer to sell or a solicitationRestated Plan.32 offeramendment to buy any securitiesour Amended and Restated Certificate of Incorporation to increase our authorized number of shares of common stock from 100,000,000 shares to 200,000,000 shares.option exchange, nor shall therefuture. The additional shares may be anyused for various purposes without further stockholder approval, except as may be required in certain cases by law or the rules of the Nasdaq Stock Market. These purposes may include expanding our business or product lines through the acquisition of other businesses or products; raising capital; providing equity incentives to employees, officers or directors; establishing strategic relationships with other companies; and other purposes. We believe that the amendment will provide us with additional flexibility to meet business and financing needs as and when they may arise.saleother transaction for the combination of securitiesus with another company that our board of directors determines is not in our best interests or in the best interests of our stockholders. Our board of directors however, does not intend or view this amendment as an anti-takeover measure, nor does it contemplate its use in this manner at any state or jurisdictiontime in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities lawsforeseeable future.any such state or jurisdiction. No offer of securities shall be made except by meansthe holders of a prospectus meeting the requirements of Section 10majority of the Securities Actoutstanding shares of our common stock will be required to approve this amendment to our Amended and Restated Certificate of Incorporation. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. The approval of Proposal 5 is expected to be considered a routine proposal on which a broker or pursuantother nominee is expected to an exemptionhave discretionary authority to vote. Accordingly, no broker non-votes are expected to result from the registration requirements thereof.this proposal.33 34 27May 16, 2016March 29, 2021 for:•· each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of our common stock; •· each of our named executive officers; •· each of our directors; and •· all of our executive officers and directors as a group. 58585959 Horton Street, #455,Suite 500, Emeryville, California 94608. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us by the stockholders, that the persons and entitieseach person or group named in the tablestable below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. We have based our calculationpercentage of beneficial ownership on 24,771,56855,812,590 shares of common stock outstanding on May 16, 2016.In computingMarch 29, 2021 and the number of shares of common stock beneficially owned by athat such person andor group had the percentage ownershipright to acquire within 60 days of that person, we deemed outstanding sharesdate, including, but not limited to, upon the exercise of common stock subject to options or warrants held by that person that are currently exercisable or exercisable as of July 15, 2016, which is 60 days after May 16, 2016. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.options. Beneficial ownership representing less than 1% is denoted with an asterisk (*). Shares Beneficially Owned Beneficial Owner Number Percentage 5% or Greater Stockholders: 4,553,605 15.5 % 3,518,952 12.4 % 2,253,237 8.3 % 1,610,823 6.1 % 1,518,200 5.8 %
Greenwich, CT 06830 1,414,927 5.4 % Executive Officers and Directors: Stephen J. Farr, Ph.D.(7) 317,795 1.3 % Shares Beneficially Owned Beneficial Owner Number Percentage RA Capital Management, L.P. and affiliates (1)
200 Berkeley Street
18th Floor
Boston, MA 02116 5,345,631 9.6 % Cadian Capital Management, LP and affiliates (2)
535 Madison Avenue
36th Floor
New York, NY 10022 5,271,016 9.4 % Blackrock, Inc. (3)
55 East 52nd Street
New York, NY 10055 4,674,689 8.4 % The Vanguard Group (4)
100 Vanguard Blvd.
Malvern, PA 19355 4,113,112 7.1 % Morgan Stanley (5)
1585 Broadway
New York, NY 10036 3,236,165 5.6 % Stephen J. Farr, Ph.D. (6) 853,840 1.5 % Michael P. Smith (7) 151,159 * Bradley S. Galer, M.D. (8) 336,522 * Shawnte M. Mitchell (9) 30,952 * Ashish M. Sagrolikar (10) 137,688 * Gail M. Farfel, Ph.D. (11) 234,471 * Louis C. Bock (12) 88,917 * James B. Breitmeyer, M.D., Ph.D. (13) 94,792 * Cam L. Garner (14) 136,760 * Caroline M. Loewy (15) 4,445 * Erle T. Mast (16) 114,444 * Mary E. Stutts (17) 4,445 * Renee P. Tannenbaum, Pharm.D. (18) 75,789 * Denelle J. Waynick (19) 4,445 Mark Wiggins (20) 107,667 * All current directors and executive officers as a group (15 persons) (21) 2,377,336 4.1 % 28 Ann D. Rhoads(8) 183,694 * Thierry Darcis, M.D.(9) 59,924 * Gail Farfel, Ph.D.(10) 19,687 * Bradley S. Galer, M.D.(11) 55,161 * Renee P. Tannenbaum, Pharm.D.(12) 18,427 * James B. Breitmeyer, M.D., Ph.D.(13) 23,531 * Louis C. Bock(14) 34,653 * Cam L. Garner(15) 74,341 * Roger L. Hawley(16) 440,700 1.7 % Erle T. Mast(17) 41,212 * Mark Wiggins(18) 34,625 * Executive officers and directors as a group (12 persons)(19) 1,303,750 5.0 % (1) Federated Investors, Inc. is the parent holding company of Federated Equity Management Company of Pennsylvania and Federated Global Investment Management Corp., or the Investment Advisers, which act as investment advisers to registered investment companies and separate accounts that own 3,372,356 shares of common stock and warrants to purchase 1,181,249 shares of common stock. The Investment Advisers are wholly-owned subsidiaries of FII Holdings, Inc., which is wholly-owned subsidiary of Federated Investors, Inc. All of Federated Investors, Inc.’s outstanding voting stock is held in the Voting Shares Irrevocable Trust, or the Trust, for which John F. Donahue, Rhodora J. Donahue and J. Christopher Donahue act as trustees, or, collectively, the Trustees. Federated Investors, Inc., the Trust, and each of the Trustees expressly disclaim beneficial ownership of the shares of common stock and warrants. Information regarding these shares is based in part on the Schedule 13G/A filed by Federated Investors, Inc. with the SEC on February 12, 2016. (2) Includes 3,452,521 shares of common stock and warrants to purchase 66,431 shares of common stock beneficially owned by Fidelity SelectCo, LLC, a wholly-owned subsidiary of FMR LLC, in its capacity as an investment adviser to various investment companies. One such investment company, Fidelity Select Biotechnology Portfolio, owns 2,768,431 shares of common stock. Abigail P. Johnson and FMR LLC through its control of Fidelity SelectCo, LLC and the Fidelity SelectCo, LLC funds, each has sole power to dispose of the 3,452,521 shares owned by the funds. Neither FMR LLC nor Ms. Johnson has the sole power to vote or direct the voting of the shares owned directly by the funds, which power resides with the funds’ Boards of Trustees. Fidelity SelectCo, LLC carries out the voting of the shares under written guidelines established by the funds’ Boards of Trustees. Information regarding these shares is based in part on the Schedule 13G/A filed by FMR LLC with the SEC on February 12, 2016. (3) Based on the information contained in the Schedule 13G/A filed with the SEC on February 16, 2016 by RA Capital Management, LLC, RA Capital Healthcare Fund, L.P. and Peter Kolchinsky. According to the Schedule 13G/A, RA Capital Management, LLC and Peter Kolchinsky have shared voting and dispositive power over all of the shares, and RA Capital Healthcare Fund, L.P. has shared voting and dispositive power over 1,867,405 shares. RA Capital Management, LLC is the general partner of RA Capital Healthcare Fund, L.P. and serves as investment adviser for a separately managed account. Peter Kolchinsky is the manager of RA Capital Management, LLC. RA Capital Management, LLC and Peter Kolchinsky disclaim beneficial ownership of these shares other than for the purpose of determining their obligations under Section 13(d) of the Exchange Act. (4) Blackrock, Inc. has sole voting power over 1,578,498 shares and sole dispositive power over 1,610,823 shares based on the information contained in the Schedule 13G filed with the SEC on January 28, 2016. (5) Based on the information contained in the Schedule 13G filed with the SEC on January 12, 2016 by Sabby Management, LLC, Sabby Healthcare Master Fund, Ltd., and Hal Mintz. According to the Schedule 13G, all such reporting persons hold shared voting and dispositive power over the shares. Hal Mintz is the manager of Sabby Management, LLC. Sabby Management LLC and Hal Mintz disclaim beneficial ownership of these shares except to the extent of their pecuniary interest therein. (6) Includes an aggregate of 1,414,927 shares of common stock beneficially owned by Great Point Partners, LLC in its capacity as investment manager to Biomedical Value Fund, L.P., Biomedical Institutional Value Fund, L.P., Biomedical Offshore Value Fund, Ltd., GEF-SMA, L.P. and Class D Series of GEF-PS, LP .Dr. Jeffrey R. Jay, M.D. is the senior managing member of Great Point, and David Kroin is the special managing member of Great Point, LLC. Based partially on the information contained in the Schedule 13G/A filed with the SEC on February 16, 2016, Great Point Partners, LLC, Dr. Jeffrey R. Jay, M.D. and David Kroin have shared voting and dispositive power over all of the shares. Great Point LLC, Dr. Jay and Mr. Kroin disclaim beneficial ownership of the BVF Shares, the BIVF Shares, the BOVF Shares, the GEF-SMA Shares and the GEF-PS Shares, except to the extent of their respective pecuniary interests. (7) Includes 273,407 shares Dr. Farr has the right to acquire pursuant to outstanding options which are exercisable as of July 15, 2016. (8) Includes 157,221 shares Ms. Rhoads has the right to acquire pursuant to outstanding options which are exercisable as of July 15, 2016. (9) Includes 4,250 shares of common stock owned by Dr. Darcis, 37,549 shares of common stock owned by his spouse, and 18,125 shares Dr. Darcis has the right to acquire pursuant to outstanding options which are exercisable as of July 15, 2016. (10) Includes 19,687 shares Dr. Farfel has the right to acquire pursuant to outstanding options which are exercisable as of July 15, 2016. 2935 (1) Based on information contained in Schedule 13G/A filed with the SEC on February 16, 2021 by, RA Capital Management, L.P. (“RAC Management”), Peter Kolchinsky, Rajeev Shah and RA Capital Healthcare Fund, L.P. The Schedule 13G, as amended, states that RAC Management, Peter Kolchinsky and Rajeev Shah have shared voting and dispositive power over all such shares and that 4,923,421 of the shares are held by RA Capital Healthcare Fund, L.P. (the “RAC Fund”) for which RAC Management acts as the general partner, and that 422,210 shares are held in a separately managed account for which the RAC Fund serves as the investment advisor. he RAC Fund has delegated to RAC Management the sole power to vote and the sole power to dispose of all securities held in the Fund’s portfolio, including all of the reported shares. Dr. Kolchinsky and Mr. Shah are the controlling persons of RA Capital Management GP, LLC, the general partner of RAC Management. (2) (11)Includes 54,974 shares Dr. GalerBased on information contained in Schedule 13G filed with the SEC on February 12, 2021 by Cadian Capital Management, LP, Cadian Capital Management GP, LLC and Eric Bannasch (collectively, the “Cadian Advisors”). The Schedule 13G states that Cadian Advisors has shared voting and dispositive power over all the right to acquire pursuant to outstanding options which are exercisable as of July 15, 2016.(12)Includes 13,427 shares Dr. Tannenbaum has the right to acquire pursuant to outstanding options which are exercisable as of July 15, 2016.(13)Includes 22,281 shares Dr. Breitmeyer has the right to acquire pursuant to outstanding options which are exercisable as of July 15, 2016.(14)Includes 34,653reported shares of common stock Mr. Bockheld by Cadian Master Fund L.P., for which Cadian Capital Management, LP serves as investment adviser. Cadian Capital Management GP, LLC is the general partner of the Cadian Capital Management, LP. Eric Bannasch is the sole managing member of Cadian Capital Management GP, LLC.(3) Based on information contained in Schedule 13G/A filed with the SEC on February 1, 2021 by Blackrock, Inc. The Schedule 13G, as amended, states that Blackrock, Inc. has sole voting power over 4,591,519 shares and sole dispositive power over all the right to acquirereported shares.(4) Based on information contained in Schedule 13G filed with the SEC on February 10, 2021 by The Vanguard Group. The Schedule 13G/A states that The Vanguard Group has shared voting power over 128,671 shares of our common stock, sole dispositive power over 3,941,629 shares of our common stock, and shared dispositive power over 171,483 shares of our common stock. (5) Based on information contained in Schedule 13G filed with the SEC on February 12, 2021 by Morgan Stanley. The Schedule 13G states that Morgan Stanley has shared voting power over 3,200,352 shares of our common stock, and shared dispositive power over all the reported shares. (6) Includes 763,006shares issuable pursuant to outstandingstock options which are exercisable aswithin 60 days of July 15, 2016.March 29, 2021 and 90,834 shares held directly by Dr. Farr.(7) Includes 144,136shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 7,023 shares held directly by Mr. Smith. (8) Includes 314,719shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 21,803 shares held directly by Dr. Galer. (9) Includes 30,952shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 118 shares held directly by Ms. Mitchell. (15)(10) Includes 124,947shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 12,741 shares held directly by Mr. Sagrolikar. (11) Includes 219,695shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 14,776 shares held directly by Dr. Farfel. (12) Consists solely of 88,917 shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021. (13) Includes 94,542 shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 1,250 shares held directly by Dr. Breitmeyer. (14) Includes 79,917 shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021, 40,843 shares held by Garner Investments, LLC, ofan entity Mr. Garner serves as managing member, and 16,000 shares held by Garner Family Trust for which Mr. Garner is the managing member, and 33,498serves as trustee.(15) Consists solely of 4,445 shares Mr. Garner has the right to acquireissuable pursuant to outstandingstock options which are exercisable aswithin 60 days of July 15, 2016.March 29, 2021.(16) Includes 350,127111,417 shares Mr. Hawley has the right to acquireissuable pursuant to outstandingstock options which are exercisable aswithin 60 days of July 15, 2016.March 29, 2021 and 3,027 shares held directly by Mr. Mast.(17) Includes 38,185Consists solely of 4,445 shares Mr. Mast has the right to acquireissuable pursuant to outstandingstock options which are exercisable aswithin 60 days of July 15, 2016.March 29, 2021.(18) Includes 34,62542,917 shares Mr. Wiggins has the right to acquireissuable pursuant to outstandingstock options which are exercisable aswithin 60 days of July 15, 2016.March 29, 2021 and 32,872 shares held directly by Dr. Tannenbaum.(19)Includes 1,050,210 shares of common stock subject to outstanding options which are exercisable as of July 15, 2016.36(19) Consists solely of 4,445 shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021. (20) Includes 105,167 shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 2,500 shares held directly by Mr. Wiggins. (21) Includes 2,133,549shares issuable pursuant to stock options exercisable within 60 days of March 29, 2021 and 243,787 shares beneficially owned by current directors and executive officers. 37 Executive OfficersMay 16, 2016:Name Age Position Executive Officers:Stephen J. Farr, Ph.D. 5761 Chief Executive Officer, President and Director Ann D. RhoadsMichael P. Smith 5152 Executive Vice President, Chief Financial Officer Treasurer and SecretaryTreasurerBradley S. Galer, M.D. 5458 Executive Vice President, Chief Medical Officer Gail M. Farfel, Ph.D. 5256 Executive Vice President, Chief Development Officer Thierry J.P. Darcis, M.D.Shawnte M. Mitchell 5343 Executive Vice President, General Manager, Europe, Zogenix International LimitedCounsel and Corporate SecretaryAshish M. Sagrolikar 54 Executive Vice President, Chief Commercial Officer "Board“Board of Directors” heading.Ann D. Rhoadsand Secretary since March 2010.January 2017. From 2000 toJanuary 2015 through December 2009, Ms. Rhoads was the2016, Mr. Smith served as Chief Financial Officer for Premier, Inc.of Raptor Pharmaceutical Corp., a healthcare serviceglobal biopharmaceutical company where she had responsibilityfocused on the development and commercialization of transformative therapeutics for all areas of financial management, strategic planning, business development, information technology, and ethics and compliance. From August 1998 to 2000, Ms. Rhoads served as Vice President for strategic initiatives at Premier, where sherare diseases that was acquired by Horizon Pharma plc. in October 2016. In this role, he was responsible for overseeing strategic investments, including a venture capital fund,the finance, accounting, corporate development, corporate strategy, intellectual property, and information management business functions. From May 2012 to January 2015, Mr. Smith served as well as assisting Premier operating divisions with long range strategic planning.Chief Financial and Business Advisor at Catalyst Biosciences. Prior to joining Premier, Ms. Rhoads held various positionsthat role, from September 2010 to April 2011, he was Vice President of Business Development at Sprout Group, a venture capital affiliateiPierian, Inc., and from June 2006 to July 2009, he served as Head of Donaldson, Lufkin & Jenrette (now partBusiness Development and Chief Financial Officer of Credit Suisse First Boston), Bain & Company and Merrill Lynch Capital Partners (now known as Stonington Partners). Ms. Rhoads is currently a member of the board of directors of Globus Medical Inc. and Evoke Pharma, Inc. Ms. RhoadsMemory Pharmaceuticals Corporation. Mr. Smith received ahis B.S. in Commerce from the University of ArkansasVirginia and anhis M.B.A. from the HarvardHaas School of Business School., has served as our Executive Vice President and Chief Medical Officer since December 2013. Prior to joining the company, Dr. Galer served as President of the Pain Group at Nuvo Research, Inc., a specialty pharmaceutical company with three commercialized topically delivered pain products from December 2009 to December 2013. In this position, he oversaw the strategy and operations of the Pain Group, including its commercialization, drug development andactivities, business development activities,and licensing opportunities and liaising with partners. Prior to joining Nuvo, Research, Dr. Galer was employed at Endo Pharmaceuticals Inc., as Senior Medical Officer and Group Vice President, Scientific Affairs from August 2002 to October 2005, where he was responsible for the departments of Clinical and Biostatistics, Medical Affairs, Pharmacovigilance, Medical Liaison and Medical Information. He and his team provided clinical and scientific leadership for the development and marketing of analgesic and migraine products, including Lidoderm, Percocet, Opana, Opana ER and Frova. Dr. Galer has also held numerous other industry positions,30,Dr. Farfel has over 20 years of experience in leading drug development projects for multiple central nervous system indications, including epilepsy. From December 2012 to June 2015, sheDr. Farfel was Chief Clinical and Regulatory Officer of Marinus Pharmaceuticals, where she establishedestablishing and oversawoverseeing clinical, medical and regulatory strategies for adult and pediatric seizure disorders, including a pediatric epileptic orphan disease. From May 2008 until December 2012, Dr. Farfel served as President of G. Meredith Consulting LLC, a firm providing strategic consulting and support to biopharmaceutical and software development companies. Dr. Farfel was Vice President, Therapeutic Area and Head for Neuroscience Clinical Development and Medical Affairs at Novartis Pharmaceuticals Corporation, from March 2006 through April 2008, in which capacitywhere she oversaw a portfolio of products including Gilenya® for multiple sclerosis, Exelon® and the Exelon® Patch for Alzheimer’s disease and Parkinson’s disease, and the antidepressant, agomelatine. From November 1996 to February 2006, Dr. Farfel held a variety of leadership positionsbegan her career in pharmaceutical drug development at Pfizer, Inc., where she worked in Clinical Development and Global Medical Affairs, at Pfizer, Inc. where she directeddirecting programs through all stages of clinical development and regulatory submissions. Dr. Farfel is the author of over 50 scientific articles in the areas of neuropsychopharmacology and drug effects, and holds aearned her Ph.D. in neuropsychopharmacologyNeuropsychopharmacology from the University of Chicago, where she received the Ginsburg Prize for Dissertation Excellence, andExcellence. Dr. Farfel also holds a Bachelor’s degree in Biochemistry from the University of Virginia.Thierry J.P. Darcis, M.D.,38 General Manager, Europe of our subsidiary Zogenix International LimitedChief Commercial Officer since July 2015. Prior to joining the company, Dr. Darcis2018. Mr. Sagrolikar has over twenty five years of global pharmaceutical sales, marketing and operations experience. Mr. Sagrolikar previously served as the Vice President, Marketing at GlaxoSmithKline plc from April 2014 through June 2018 after joining GlaxoSmithKline plc as Commercial Leader, Rare Diseases in June 2013. From November 2009 through June 2013, Mr. Sagrolikar served in various sales, marketing and General Managerbusiness development roles at Baxter International Inc. Mr. Sagrolikar earned his MBA at the Institute of the EMEA Region for NPS Pharmaceuticals, Inc. from March 2014 to March 2015. He was the Vice President and General Manager of ViroPharma Europe for ViroPharma Inc. from June 2007 to February 2014,Management Development (IMD) in which role he served as the director of several ViroPharma subsidiaries. Previously, Dr. Darcis was the Vice President, Global Marketing HeadLausanne, Switzerland, in 2000, and a memberBachelor of the executive team at Novartis Vaccines. Prior to joining Novartis Vaccines, Dr. Darcis spent over five years with GlaxoSmithKline Biologicals in Belgium, and also worked at UCB Pharma and as a physician in Cape Town and Pretoria, South Africa. Dr. Darcis received his M.D.Pharmacy from the Catholic UniversityGovernment College of Leuven, Belgium, his M.B.A. from the University of Stellenbosch, South Africa, and his B.S.Pharmacy, Karad, India, in marketing and advertising from the Solvay Business School in Brussels.39 Overviewofficers,”officers” for 2020, consisting of the following persons:•· Stephen J. Farr, Ph.D., our Chief Executive Officer and President; · •Ann D. Rhoads,Michael P. Smith, our Executive Vice President, Chief Financial Officer Treasurer and Treasurer;· Shawnte M. Mitchell, our Executive Vice President, General Counsel and Corporate Secretary; •· Bradley S. Galer, M.D., our Executive Vice President and Chief Medical Officer; · Ashish M. Sagrolikar, our Executive Vice President, Chief Commercial Officer; and •· Gail M. Farfel, Ph.D., our Executive Vice President, Chief Development Officer;•Thierry J.P. Darcis, M.D., the Executive Vice President, General Manager, Europe of Zogenix International Limited; and•Roger L. Hawley, our former Chief Executive Officer.2015. All2020.share numbersCOVID-19 pandemic in this compensation discussion and analysisMarch created an unprecedented business environment. Early in the pandemic, Zogenix’s executive team refocused the company’s efforts on the most critical business objectives. Despite the challenges presented during 2020, Zogenix achieved a number of key successes:· Obtained FDA approval of FINTEPLA in Dravet syndrome and launched the product in the U.S. · Obtained European Medicines Agency (“EMA”) approval of FINTEPLA in Dravet syndrome. · Established business operations for future FINTEPLA launches in Germany, Italy and France and for a Japanese New Drug Application (“J-NDA”) submission and approval in Japan. · Made significant development progress for FINTEPLA in Lennox-Gastaut syndrome (“LGS”) and MT1621 in TK2 deficiency; · Raised $420 million to finance the corporate strategic plan and objectives. · Reinforced our commitment to rare epilepsies with an R&D collaboration for gene therapies with Tevard Biosciences. · Took immediate action to ensure employee safety and wellbeing in light of COVID-19, including creating two task forces resulting in support programs for remote employees and establishment of new health and wellness policies. · Established a Diversity and Inclusion Committee to address current guidelines and corporate culture expectations. 40 tablesof our named executive officers, commonly referred to as a say-on-pay vote. Our stockholders overwhelmingly approved the compensation of our named executive officers, with approximately 95% of stockholder votes cast in favor of our 2020 say-on-pay resolution (excluding abstentions and broker non-votes). Over the past four years, stockholder support of our annual say-on-pay-resolutions has been consistently high, with an average support level of 96% of stockholder votes cast.give effecthowever, commencing in 2021, the compensation committee has approved a few key changes to the 1-for-8 reverse stock splitexecutive compensation program to further align the interests and compensation of our common stock that occurred on July 1, 2015.31Executive Summary•· To attract, engage and retain an executive team who will provide leadership for our future success by providing competitive total pay opportunities. •· To establish a direct link between our business results, individual executive performance and total executive compensation. •· To align the interests of our executive officers with those of our stockholders. The primary elements of our executive compensation program are (1) base salary, (2) annual short-term cash incentives, (3) long-term equity incentives, (4) post-termination benefits, and (5) other benefits, such as health insurance and retirement benefits. We believe that each component aligns the interests of our named executive officers with the interests of our stockholders in different ways, whether through focusing on short-term and long-term performance goals, promoting an ownership mentality toward one’s job, or linking individual performance to our performance.•· The performance measures in our short-term cash incentive program are linked to key corporate objectives. •· Corporate achievement represents the majority90% of each executive’snamed executive officer’s annual bonus opportunity, and 100% of our Chief Executive Officer’s annual bonus opportunity.•· Our long-term equity incentives are primarily grantedprovided to our named executive officers in the form of stock options and restricted stock units, or RSUs, and, commencing in 2021, performance stock units (“PSUs”), which vest over multi-year periods.Base Salaries Annual Cash Incentives 41 Long-Term Incentive Compensation executives only ifstockholders, as fewer shares of our common stock are granted to achieve an equivalent value relative to stock options, and because RSU awards are an effective retention tool that maintain value even in cases where the share price increases.is trading lower than the initial grant price.This mixcompensation is intendedour named executive officers with our stockholders and to ensure thatfurther tie target total compensation reflectsfor our overall success or failure and to motivatenamed executive officers to meet appropriatelong-term company performance.Addition of Performance Stock Units to Executive Long-Term Incentive Award Program Adopted Clawback Policy measures. increases, so does the proportion of at-risk compensation. Target long-term incentive compensation grows proportionately as job responsibilities increase, which encourages our executives to focus on our long-term success and aligns with the long-term interests of our stockholders.42 (1) For purposes of these charts, target compensation consists of base salary and target annual incentive awards as set by the compensation committee in February 2020 and target annual equity awards determined based on market data. It does not include other forms of compensation the executive officers received. 43 44 WHAT WE DO Pay for Performance. We design our executive compensation program to align pay with company performance. Significant Portion of Compensation is at Risk. Under our executive compensation program, a significant portion of compensation is “at risk” based on our performance, including short-term cash incentives and long-term cash and equity incentives, to align the interests of our executive officers and stockholders. Independent Compensation Committee. The compensation committee is comprised solely of independent directors. Independent Compensation Advisor Reports Directly to the Compensation Committee. The compensation committee engages its own compensation consultant to assist with making compensation decisions. Annual Market Review of Executive Compensation. The compensation committee and its compensation consultant annually assess competitiveness and market alignment of our compensation plans and practices. Multi-Year Vesting Requirements. The equity awards granted to our executive officers vest over multi-year periods, consistent with current market practice and our retention objectives. Annual Say-on-Pay Vote. We hold an annual say-on-pay advisory vote for stockholders. Clawback Policy. In March 2021, we adopted a policy that provides for the recoupment of certain incentive compensation paid to any of our executives if we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under securities laws and it is determined that such noncompliance was due in whole or in part to such executive’s misconduct. Cap on Annual Cash Bonuses. Each executive officer’s annual bonus is capped at 125% of the target award amount. Minimize Inappropriate Risk Taking. Our compensation program is weighted toward long-term incentive compensation to discourage short-term risk taking, and it includes goals that are quantifiable with objective criteria, multiple performance measures and caps on short-term incentive compensation. Competitive Peer Group. Our compensation committee selects our peers from biotechnology and pharmaceutical companies that are similar to us with respect to market capitalization, revenue, headcount and commercialization stage, while also taking into account a number of qualitative criteria. WHAT WE DON’T DO No Special Health or Welfare Benefits for Executives. Our executive officers participate in broad-based, company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees. Executives do not have access to special benefits programs. No Post-Employment Tax Gross-Ups. We do not provide any post-employment tax reimbursement payments (including “gross-ups”) on any severance or change-in-control payments or benefits. Prohibition on Hedging and Pledging. Our insider trading policy prohibits our employees (including executive officers) and directors from engaging in hedging or short-term speculative transactions involving our securities. No Stock Option Repricing. Our equity plan does not permit repricing underwater stock options without stockholder approval. 45 our board of directors and our compensation committee consider and determine each element individually and then review the resulting total compensation and determine whether it is reasonable and competitive. We do not have a pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation.20152020 was appropriate when viewed in light of our corporate achievements during 20152020 and the individual performance of our named executive officers.Percentage of 2020 Target Compensation(1) Chief Executive Officer Average of Other Named
Executive OfficersDescription and Purpose Base Salary Competitive fixed cash compensation used to attract and retain talented executives. Annual Cash Incentive Awards Cash incentives designed to reward executive officers for successful corporate performance against board approved annual bonus targets and, for our named executive officers other than our Chief Executive Officer, individual performance toward achieving corporate goals. Annual Long-Term Equity Awards Stock option, RSU and, commencing in 2021, PSU awards subject to time-based and/or performance-based vesting designed to align each executive officer’s incentives with stockholder value creation. (1) For purposes of the charts in this table, target compensation consists of base salary and target annual incentive awards as set by the compensation committee in February 2020 and target annual equity awards determined based on grant value. It does not include other forms of compensation the executive officers received.. 46 stock optionequity awards to our named executive officers and certain other eligible employees for the then-current fiscal year.Chief Financial OfficerGeneral Counsel and our human resources department, aids the compensation committee by providing annual recommendations regarding the compensation32Our compensation committee has not historically established compensation levels based on benchmarking. Our compensation committee has instead relied upon the judgment of its members in making compensation decisions, after reviewing our performance and carefully evaluating a named executive officer’s performance during the year against established goals, leadership qualities, operational performance, business responsibilities, career with our company, current compensation arrangements and long-term potential to enhance stockholder value.asto assist in its evaluation of executive compensation, including the committee sees fit, in connection with compensation matters. Compensation consultantsauthority to approve the consultant’s reasonable fees and other advisors retained byretention terms.will report directly to the compensation committee which has the authority to select, retain and terminate any such consultants or advisors.In 2015, the compensation committee determined to engageagain retained Radford, as itsa business unit of AON plc (“Radford”), an independent compensation consultant to providethird-party compensation consulting services.firm for guidance in making compensation decisions. Specifically, for 2015,2020, the compensation committee requested Radford to advise it on a variety of compensation-related issues, including:· conducting market research and analysis of current practices of comparable public companies to assist the compensation committee in developing director and executive compensation levels; · •compiling, analyzing and presenting third-party survey data regarding the compensation of executives at comparable companies;•evaluating our current equity compensation program relative toreviewing our peer group includingto determine whether additional or different peer companies or groups are necessary to provide appropriate information on market practices and compensation levels;· advising with regard to the amendment and restatement of our equity ownership levels;plan during 2021; and•· providing general information concerning director and executive compensation trends and developments. 20152020 beyond its engagement as an advisor to the compensation committee on director and executive compensation matters. After review, theThe compensation committee has determinedassessed the independence of Radford pursuant to SEC and Nasdaq rules and concluded that there is no conflict of interest resultingexisted that would have prevented Radford from retaining Radfordserving as an independent consultant to the compensation committee currently or during the year ended December 31, 2015. In reaching these conclusions, the2020.consideredreviews our peer group annually to reflect changes in market capitalization and other factors, including acquisitions, and revises the factors set forthcompanies included in Exchange Act Rule 10C-1.2015,2020, Radford assisted the compensation committee in confirming aidentifying an appropriate peer group of companies to be used in the compensation setting process. For 2015,for use as a reference when determining 2020 director and executive compensation.2324 life sciences companies in similar phases of development as us with the following characteristics was selected based on the following parameters and not on the basis of executive compensation levels:•Market Capitalization Market capitalization less than $1.0between $600 million and $5.4 billion, (averagewhen the peer group was first approved by the compensation committee for 2020 compensation purposes. Zogenix had a 30-day average market capitalization of $547.9 million) (as$1.9 billion as of February 2, 2015);such date, and ranked in the 38th percentile relative to the peer group on this metric.47 •Sector and Stage Annual revenuesPublicly-traded commercial biopharma/biotech companies in late-stage of less than $200.0 million;drug development (Phase III) and companies with New Drug Application (“NDA”) filings or recently commercial. Zogenix was considered a Phase III company at the time the peer group was approved. •Headcount Less than 500 employees. Zogenix had 115 employees as of the same date and ranked in the 10th percentile relative to the peer group on this metric. Geographic Location Focus on companies in the Bay Area, Boston or other biotech “hub” locations. Zogenix’s headquarters is in Emeryville, California. 33Our 2015Acceleron Pharma • AcelRx Pharmaceuticals• HalozymeEidos TherapeuticsAerie Pharmaceuticals FibroGen • Adamas PharmaceuticalsAimmune Therapeutics• ImmunomedicsGlobal Blood TherapeuticsAlder BioPharmaceuticals • AMAG Pharmaceuticals• MomentaGW PharmaceuticalsAmicus Therapeutics Heron Therapeutics • Antares PharmaArena PharmaceuticalsInsmed Arrowhead Pharmaceuticals • OrexigenMirati TherapeuticsAtara Biotherapeutics MyoKardia Biohaven Pharmaceutical Portola Pharmaceuticals Blueprint Medicines Sangamo Therapeutics • ArenaDeciphera Pharmaceuticals• Progenics PharmaceuticalsUltragenyx PharmaceuticalDicema Pharmaceuticals • BioDelivery Sciences International• Spectrum Pharmaceuticals• Corcept Therapeutics• Sucampo Pharmaceuticals• CTI BioPharma• Supernus Pharmaceuticals• DepoMed• Vanda Pharmaceuticals• DURECT• VIVUS• Exelixis• XenoPort• Galena BiopharmaXencor Although we maintain the peer group for executive compensation purposes, the peer group compensation data is limited to publicly available information and therefore does not necessarily provide comparisons for all officers by position as is offered by more comprehensive survey data, which has the advantage of including data on executive positions beyond what is available in public filings. In light of this, during 2015, the compensation committee also reviewed data from The Radford Global Life Sciences Compensation Survey, which consists of public companies throughout the United States primarily from the life sciences industry, with revenues under $200 million. With respect to the survey data presented to the compensation committee, the identities of the individual companies included in the survey were not provided to the compensation committee, and the compensation committee did not refer to individual compensation information for such companies. We believe that by utilizing both sets of survey data, our compensation committee is able to review an appropriate set of competitive data for use in making compensation decisions. We believe that by utilizing both publicly available peer group data and the survey data from the published surveys, we are able to develop the best set of competitive data for use in making compensation decisions.20152020 base salaries, target bonuses and equity awards for our named executive officers. However, ourThe compensation committee didgenerally does not attempt to set our compensation levels or awards at a certain target percentile with respect to the comparable company data or otherwise rely entirely on that data to determine named executive officer compensation. Instead, as described above and consistent with past practice, the compensation committee members relied on their judgment and experience in setting those compensation levels and making those awards.We strive to achieve an appropriate mix between equity incentive awards and cash payments in order to meet our objectives. Any apportionment goal is not applied rigidly and does not control our compensation decisions, and our compensation committee does not have any formal policies for allocating compensation between long-term and short-term compensation or cash and non-cash compensation.34We do not yet have a formal policy to adjust or recover awards or payments if the relevant performance measures upon which they are based are restated or are otherwise adjusted in a manner that would otherwise reduce the size of the initial payment or award.48 Our Chief Executive Officer’s base salary is based upon the same policies and criteria used for other named executive officers as described above. Each year the compensation committee reviews the Chief Executive Officer’s compensation arrangements and his individual performance for the previous fiscal year, as well as our performance as a whole, and makes recommendations to the full board of directors of adjustments to such compensation, if appropriate.March 2015,February 2020, the compensation committee reviewed the base salaries of our named executive officers.officers other than Ms. Mitchell, whose employment commenced in April 2020. The compensation committee, in consultation with our Chief Executive Officer (with respect to the salaries of our other named executive officers) and its independent compensation consultant, determined that the base salaries of our named executive officers would be as follows, which increases were effective April 1, 2015: Dr. Farr, $412,000; Ms. Rhoads, $360,500;2020:Named Executive Officer 2020 Base
Salary
Approved in
February 2020 Percentage
Increase Dr. Farr $ 626,000 7.0% Mr. Smith $ 440,000 6.8% Ms. Mitchell $ 430,000 — Dr. Galer $ 450,000 5.3% Mr. Sagrolikar $ 425,000 8.8% Dr. Farfel $ 440,000 6.8% Dr. Galer, $360,500. These increases represented a 3% increase overtarget total cash compensation closer to the 50th percentile of similarly-situated executives, in line with the company’s pay positioning philosophy. Based on the comparable market information provided to the compensation committee by Radford in February 2020, the base salaries and target total cash compensation of the named executive officers’ 2014 salary levels, which was consistent withofficers were significantly below the merit-based salary50th percentile. In general, for 2020, after the foregoing increases, for all employees generally. Upon his promotion to Chief Executive Officer in April 2015, Dr. Farr’s base salary was further increased to $450,000. Mr. Hawley did not receive a base salary increase in 2015.Upon their hiring in July 2015, the compensation committee determined that the base salaries forof our named executive officers generally approximated the 50th percentile of similarly-situated executives among our peer group, with the exception of Dr. Farfel and Dr. Darcis would be as follows: Dr. Farfel, $350,000; and Dr. Darcis £230,000.20152020 are set forth in the “Summary Compensation Table” below.20152020 were as follows: 60%65% of base salary for theour President and Chief Executive Officer (100% of which is based on corporate objectives), 55% of base salary for our President (90% of which is based on corporate objectives and 10% of which is based on individual performance), and 45% of base salary for our Executive Vice President and Chief Financial Officer, Executive Vice President and Chief Medical Officer, Executive Vice President and Chief Development Officer and Executive Vice President and General Manager, Europeother named executive officers (90% of which is based on corporate objectives and 10% of which is based on individual performance). Dr. Farr’sIn general, the target bonus was increased to 60%bonuses of base salary upon his promotion to Chief Executive Officerour named executive officers approximate the 50th percentile of similarly-situated executives among our peer group, which generally results in April 2015.3549 2015Bonuses. For 2015,Goals and Performance levelsobjectives fell into the following four categories: development and preparationperformance goals for commercialization of ZX008 (50%); readying our Relday program for potential strategic partnering (20%); contract work relating to Sumavel DosePro and Zohydro ER (15%); and value realization from the sale of Zohydro ER (15%). Objectives2020 were weighted based on their level of importance to the business plan.In evaluating management’s performance against our 2015 corporate goals, our board of directors determined to award a corporate achievement level of 98% relative to those goals. Both qualitative and quantitative guidelines were established for purposes of evaluating performance relative to the corporate objectives during 2015. These performance objectives were used as a guideapproved by the board of directors in subjectively determining overall corporateFebruary 2020. The 2020 performance asgoals were aggressive and set at challenging levels such that the attainment of executive target annual cash incentive award opportunities was not assured at the time they represented those areas in whichwere set and would require a high level of effort and execution on the namedpart of the executive officers and others in order to achieve the goals. The compensation committee believes that each of these goals is strongly aligned to the creation of stockholder value.employees generallycorporate performance percentage for 2020, the compensation committee employed a holistic analysis that took into account both the extent to which the performance goals had been achieved or exceeded as well as the relative difficulty of achieving the goals that were expected to focus their efforts. The board of directors believedmet and that it was better to evaluate our overall performance in these areas throughout the year inwere only partially met. In light of our strong performance and the general economicchallenging nature of the goals and industry conditions in which we operate. In coming to its final determination regarding the overall corporate achievement percentage,pandemic environment, the compensation committee determined our board of directors awarded 97.5% credit for corporate performance relativepercentage to the first objective, noting that we submitted an Investigational New Drug Application for ZX008 and developed a publication strategy and global commercialization plan, though the initiation of Phase 3 clinical studies was delayed. With respect to the second objective, our board of directors awardedbe 96% credit, noting that we successfully completed a multi-dose clinical trial for Relday and are ready to advance partnering discussions. With respect to the third objective, our board of directors awarded 100% credit, noting that we met the contractual requirements to our partners with respect to both Sumavel DosePro and Zohydro ER. With respect to the fourth objective, our board of directors awarded 100% credit, noting that significant value was realized due to the sale of the Zohydro ER business.2020 Corporate
ObjectiveWEIGHTING 2020 HIGHLIGHTS performance weighted
performanceFINTEPLA® Dravet syndrome REGULATORY APPROVAL AND COMMERCIALIZATION 45% 102% 46% FINTEPLA® Indication expansion 25% 88% 22% MT1621 Development 20% 88% 18% Pipeline advancement and expansion 10% 100% 10% TOTAL 96% 50 98%96% achievement level was then used to determine each named executive officer’s bonus. For the named executive officers other than Dr. Farr, each of his or her target bonus was split into its corporate and individual components, based on the weighting applicable to such named executive officer as described above.20152020 bonus awards for our named executive officers was not based on the achievement of any predetermined individual performance objectives, criteria or guidelines, but rather on the compensation committee’s subjective assessment of each officer’s overall performance of their duties during 2015. The2020. Our named executive officers each received the individual performance achievement percentages indicated in the table below. Target Cash Incentive
Award for 2020 Annual
Cash Named Executive Officer Percentage
of Base
SalaryDollar
Amount Corporate
Performance
Weighting Corporate
Performance
Percentage Individual
Performance
Weighting Individual
Performance
Percentage Incentive
Award
for 2020 Dr. Farr 65% $ 100% 96% 0% — $390,600 Mr. Smith 45% $ 90% 96% 10% 100% $190,870 Ms. Mitchell 45% $ 90% 96% 10% 100% $186,530 Dr. Galer 45% $ 90% 96% 10% 110% $197,240 Mr. Sagrolikar 45% $ 90% 96% 10% 110% $186,280 Dr. Farfel 45% $ 90% 96% 10% 100% $190,870 100% individual achievement level. Mr. Hawley did not receive an annual bonus duepercentage of base salary remained unchanged from 2019. For 2020, Dr. Farr’s target cash incentive award changed from 60% to the fact that he resigned from65% of base salary to more closely align his position as Chief Executive Officer in April 2015.20152020 are set forth in the “Summary Compensation Table” below.For 2015, while our compensation committee reviewed competitive market data prepared by Radford in connection with its grantWe have had no program, plan or practice pertaining to the timing of long-term equity incentive awardsstock option grants to the named executive officers such awards were not determined by reference to any specific target levelcoinciding with the release of compensation or benchmarking. Based upon these factors, the compensation committee determines the size of the long-term equity incentives at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value. During 2015, we granted stock options to the named executive officers.To reward and retain our named executive officers in a manner that best aligns employees’ interests with stockholders’ interests, we use stock options as the primary incentive vehicles for long-term compensation. We believe that stock options are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance. Because employees are able to profit from stock options only if our stock price increases relative to the stock option’s36exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time.stock optionsequity awards to compensate our named executive officers both in the form of initial grants in connection with the commencement of employment and annual refresher grants. Annual grants of optionsequity awards are typically approved by the compensation committee during the first quarter of each year. While we intend that the majority of stock option awards to our employees be made pursuant to initial grants or our annual grant program, the compensation committee retains discretion to make stock optionequity awards to employees at other times, including in connection with the promotion of an51 · Stock options are an important vehicle for tying executive pay to performance, because they deliver future value only if the value of our common stock increases above the exercise price. As a result, they provide strong incentives for our executive officers to increase the value of our common stock over the long term, and they tightly align the interests of our executives with those of our stockholders. · RSU awards are granted because they are less dilutive to our stockholders, as fewer shares of our common stock are granted to achieve an equivalent value relative to stock options, and because RSU awards are an effective retention tool that maintain value even in cases where the share price is trading lower than the initial grant price. · In 2021, our compensation committee also granted PSU awards, including to our Chief Executive Officer to further align the compensation of our Chief Executive Officer with company performance, as further described below. For a description of certain accelerated vesting provisions applicable to such options, see “— Post Termination and Change in Control Benefits” and “— Employment Agreements” below. We do not have any stock ownership requirements for our named executive officers.In March 2015,awardeddetermines the following optionsvalue of each executive officer’s annual equity grant using a holistic evaluation that takes into account a competitive market analysis prepared by our independent compensation consultant with market data for each role, the recommendations of our Chief Executive Officer based on his evaluation of their individual performance (except with respect to the Chief Executive Officer’s performance), the extent to which the executive officer is currently vested in his or her stock awards, scope and criticality of the executive’s role and parity in targets among executives in roles of a given level. For 2020, while our compensation committee reviewed competitive market data prepared by Radford in connection with its grant of long-term equity incentive awards to the named executive officers, (which give effectsuch awards were not determined by reference to any specific target level of compensation or benchmarking. Based upon these factors, the 1-for-8 reverse stock splitcompensation committee determines the size of the long-term equity incentives at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value.that occurred on July 1, 2015): Mr. Hawley, options to purchase 31,250 shares; Dr. Farr, options to purchase 31,250 shares; Ms. Rhoads, options to purchase 28,125 shares; and Dr. Galer, options to purchase 28,125 shares. In addition, in May 2015, the compensation committee awarded options to purchase 93,750 shares to Dr. FarrMitchell in connection with his promotionher commencement of employment in April 2020. The option vests and becomes exercisable with respect to Chief Executive Officer. Each of these option awards vests monthly over a four-year period.In July 2015, the compensation committee awarded Dr. Farfel options to purchase 56,250 shares and Dr. Darcis options to purchase 50,000 shares. Each of these option awards vest over a four-year period, with 25% of the options vestingunderlying shares on the first anniversary of the vesting commencement date, of grant and with respect to the remainder vestingremaining shares in 36 equal monthly installments over the three years thereafter.In October 2015, the compensation committee awarded the following optionsofficers: Ms. Rhoads, options to purchase 30,000 shares; Dr. Galer, options to purchase 30,000 shares; Dr. Farfel, options to purchase 15,000 shares; and Dr. Darcis, options to purchase 15,000 shares. One-halfofficers for 2020 are set forth in the “Grants of Plan-Based Awards Table” below, each of which vests over four years in accordance with the shares subject to each option award will vest monthly over a three-year period, and the remaining one-half of the shares subject to each option award will vest based on the following performance milestone: the U.S. Food and Drug Administration’s acceptance of our New Drug Application for ZX008 on or before the three-year anniversary of the date of grant.52 thecertain accelerated vesting provisions applicable to the foregoing equitystock awards see “— Employment Agreements” below.We have had no program, plan or practice pertaininggranted to the timing of stock option grants to named executive officers coinciding with the release of material non-public information.Retirement SavingsAll of our full-time employees in the United States, including our named executive officers, are eligible to participatesee “— Post Termination and Change in our 401(k) plan. Pursuant to our 401(k) plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit ($18,000 in 2016), with additional salary deferrals not to exceed $6,000 available to those employees 50 years of age or older,Control Benefits” and to have the amount of this reduction contributed to our 401(k) plan. While we may elect to make matching contributions, no such contributions have been made. For so long as we do not maintain any company-paid pension scheme in the United Kingdom“— Employment Agreements” below.Dr. Darcis resides in the United Kingdom, Dr. Darcis receives a monthly stipend to purchase individually-obtained pension benefits in the United Kingdom.37Health and WelfareRetirement Benefits Perquisites and Other CompensationBenefits.Benefits. Our named executive officers other than Dr. Darcis are eligible to participate in all of our employee benefit plans, including our medical, dental, vision, group life and disability insurance plans, in each case on the same basis as other employees. We believe that these health and welfare benefits help ensure that we have a productive and focused workforce through reliable and competitive health and other benefits. For so long as we do not maintain any company-paid health planKingdomStates, including our named executive officers, are eligible to participate in our 401(k) plan. Pursuant to our 401(k) plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit ($19,500 in 2020), with additional salary deferrals not to exceed $6,000 available to those employees 50 years of age or older, and Dr. Darcis residesto have the amount of this reduction contributed to our 401(k) plan. Our 401(k) Plan permits us to make discretionary matching contributions, and in the United Kingdom, Dr. Darcis receives a monthly stipend to purchase individually-obtained medical and life insurance in the United Kingdom.Perquisites.2020 we made matching contributions for all plan participants, including our named executive officers.Dr. Darcis receives an annual car allowance.53 Response2014 Say on Pay VoteIn May 2014, we held a stockholder advisory vote onrecover incentive compensation paid to an executive officer in this situation, the company further demonstrates its commitment to strong corporate governance. This compensation of our named executive officers, commonly referredrecovery policy is in addition to as a say-on-pay vote. Our stockholders overwhelmingly approvedany policies or recovery rights that are provided under applicable laws, including the compensation of our named executive officers, with over 98% of stockholder votes cast in favor of our 2014 say-on-pay resolution (excluding abstentionsSarbanes-Oxley Act and broker non-votes). As we evaluatedthe Dodd-Frank Act.practices and talent needs throughout 2015, we were mindful of the strong support our stockholders expressed for our compensation philosophy. As a result,recovery policy, if the compensation committee has decideddetermines that an accounting restatement due to generally retain our existing approach tomaterial noncompliance with any financial reporting requirement under U.S. securities laws was caused by an executive compensation for our continuing executives, with an emphasis on short- and long-termofficer’s fraudulent, willful or negligent misconduct, it may require forfeiture of unvested incentive compensation or any unpaid incentive compensation, vested or unvested, or reimbursement of the after-tax portion of any incentive compensation paid to the executive officer. The amount of compensation that rewards our senior executives for corporatemay be recovered is the portion of any bonus or incentive payment paid to, any performance-based equity award earned by, the executive officer that the executive officer would not have received if the Company’s financial results had been reported properly. The right to cause a forfeiture or recovery of incentive compensation applies to incentive compensation awarded, vested and/or paid during the one year prior to the date on which the company is required to prepare an accounting restatement.individual performance.In addition, when determining how often to hold a stockholder advisory vote onaccounting considerations the board of directors took into account the strong preference for a triennial vote expressed by our stockholders at our 2011 annual meeting. Accordingly, the board of directors determined that we will hold an advisory stockholder vote on the compensation of our named executive officers every three years until the next say-on-pay frequency vote.Tax Deductibility of Executive Compensationour Chief Executive Officer“covered employees.” Prior to the Tax Cuts and eachJobs Act of 2017, covered employees generally consisted of a company’s chief executive officer and its three most highly compensated executive officers serving at the end of the othertaxable year (other than its chief financial officer), and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As part of the Tax Cuts and Jobs Act of 2017, the ability to rely on this exemption was, with certain limited exceptions, eliminated; in addition, the definition of covered employees was expanded to generally include all named executive officers (other than our Chief Financial Officer), unlessofficers. Although we historically maintained plans that were intended to permit the payment of deductible compensation under Section 162(m) of the Code if the requirements of Section 162(m) were satisfied, subject to the limited transition relief rules in the Tax Cuts and Jobs Act of 2017, we may no longer be able to take a deduction for any compensation in excess of $1 million that is performance based.paid to a covered employee. While we consider the tax deductibility of each element of executive compensation as a factor in our overall compensation program, the compensation committee, however, retains the discretion to approve compensation that may not qualify for the compensation deduction if, in light ofconsidering all applicable circumstances, it would be in our best interest for such compensation to be paid without regard to whether it may be tax deductible.38We follow Financial Accounting Standards Board Accounting Standards Codification Topic(formerly known as SFAS No. 123(R)), or ASC Topic 718, for our stock-based compensation awards. ASC Topic 718 requires companieswe are required to calculateestimate the grant date “fair value” for each grant of their stock-based awardsequity award using a variety ofvarious assumptions. This calculation is performed for accounting purposes and reported in the compensation tables below, even though recipients may never realize any value from their awards. ASC Topic 718 also requires companiesus to recognize the compensation cost of their stock-based awards in theirour income statements over the period that an employee is required to render service in exchange for the award.54 the company’sour board of directors has submitted the following report for inclusion in this proxy statement:2015,2020, filed by us with the SEC.Cam L. Garner (Chairman)Louis C. Bock55 39fiscal years ended December 31, 2015, 20142020, 2019 and 2013.Name and Principal Position Year Bonus
($) Stock
Awards
($)(1) Option
Awards
($)(1) All Other
Compensation
($)(3) Total
($)Stephen J. Farr, Ph.D. 2020 615,750 — 752,400 2,977,359 390,600 11,400 4,747,509 Chief Executive Officer and President 2019 578,750 — 1,053,200 8,425,600 280,800 8,400 10,346,750 2018 545,000 — 853,000 4,927,552 319,200 5,500 6,650,252 Michael P. Smith 2020 433,000 177,840 703,739 190,870 9,723 1,515,172 Executive Vice President, Chief Financial Officer, Treasurer and Secretary 2019 409,000 — 427,863 3,357,075 156,700 7,639 4,358,277 2018 396,250 — 266,563 1,154,895 171,000 5,080 1,993,788 Shawnte M. Mitchell(4) 2020 301,326 — — 1,914,759 186,530 96,772 2,499,387 Executive Vice President, General Counsel and Corporate Secretary Bradley S. Galer, M.D. 2020 444,375 177,840 703,739 197,240 — 1,523,194 Executive Vice President and Chief Medical Officer 2019 424,375 — 427,863 3,357,075 157,700 — 4,367,013 2018 409,648 — 266,563 1,700,357 178,300 — 2,554,868 Ashish M. Sagrolikar(5) 2020 416,450 273,600 1,082,676 186,280 14,250 1,973,256 Executive Vice President and Chief Commercial Officer 2019 389,350 — 427,863 3,357,075 144,200 7,687 4,326,175 2018 192,500 — 655,500 3,138,210 165,500 4,018 4,155,728 Gail M. Farfel, Ph.D. 2020 433,000 — 164,160 631,561 190,870 14,250 1,433,841 Executive Vice President and Chief Research Officer 2019 409,000 — 427,863 3,357,075 148,300 11,200 4,353,438 2018 391,477 — 277,225 1,504,619 174,600 8,019 2,355,940
Compensation
Compensation Year
($) Bonus
($)(1) Stock
Awards
($)(2) Option
Awards
($)(3)
Incentive Plan
Compensation All Other
Compensation
($) Total ($) Stephen J. Farr, Ph.D. 2015 434,909 — — 921,650 264,600 — 1,621,159 Chief Executive Officer and President 2014 387,544 — — 773,325 200,000 — 1,360,869 2013 350,174 20,000 75,000 797,591 160,000 — 1,402,765 Ann D. Rhoads 2015 357,875 — — 471,932 159,305 — 989,112 Executive Vice President and Chief Financial Officer 2014 346,269 — — 364,568 139,073 — 849,910 2013 335,075 — 69,000 416,759 137,213 — 958,047 Bradley S. Galer, M.D.(5) 2015 357,875 — — 471,932 159,305 — 989,112 Executive Vice President and Chief Medical Officer 2014 346,250 — — 97,032 145,000 — 588,282 2013 11,507 60,000 — 917,915 — — 989,422 Gail M. Farfel, Ph.D. 2015 177,651 (6) 50,000 — 665,682 95,892 — 989,225 Executive Vice President and Chief Development Officer Thierry J.P. Darcis, M.D. 2015 178,989 (7) — — 606,639 85,741 12,985 (8) 884,354 Executive Vice President and General Manager, Europe Roger L. Hawley(9) 2015 224,359 — — 299,975 — 551,013 (10) 1,075,347 Former Chief Executive Officer 2014 483,780 17,250 — 1,325,700 282,750 — 2,109,480 2013 435,120 14,196 90,000 1,099,382 195,804 — 1,834,502 (1) For 2013, represents an additional discretionary componentThe amounts shown in these columns constitute stock options and RSUs, as applicable, granted under our equity incentive programs. The amounts are valued based on the aggregate grant date fair value of the annual bonus paid to Roger L. Hawley pursuantaward in accordance with ASC 718. See Note 14 to our executive bonus program,consolidated financial statements in our 2020 Annual Report on Form 10-K filed with the SEC on March 1, 2021, for a one-time signing bonus for Bradley S. Galer, M.D., subject to a right of repayment should he leave the Company prior to December 17, 2014, and a discretionary supplemental bonus for Stephen J. Farr, Ph.D. For 2014, represents and additional discretionary componentdiscussion of the annual bonuses paid to Roger L. Hawley pursuant to our executive bonus program. For 2015, represents a one-time signing bonus for Gail M. Farfel, Ph.D., subject to a right of repayment should she leave the Company prior to June 29, 2016.(2)Representsrelevant assumptions used in determining the grant date fair value of equity awards pursuant to ASC 718. These amounts do not reflect whether the restrictedrecipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock units granted in June 2013 as computed in accordance with ASC Topic 718. The restrictedoptions). Whether, and to what extent, a named executive officer realizes a financial benefit from the awards will depend on our actual operating performance, stock units granted in June 2013 were granted in connection with our company-wide retention program, followingprice fluctuations and the restructuring of our workforce in May 2013. For a discussion of the valuation assumptions, see Note 13named executive officer’s continued service to our consolidated financial statements for the year ended December 31, 2015 included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 15, 2016.us.(3)Represents the grant date fair value of the stock options granted in the relevant fiscal year as computed in accordance with ASC Topic 718. For a discussion of the valuation assumptions, see Note 13 to our consolidated financial statements for the year ended December 31, 2015 included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 15, 2016.The performance objectives to which the vesting of the performance-based option awards granted during 2015 were subject were deemed probable of achievement as of the date of grant and no adjustment was made at that date to the fair value of such awards.(4)(2)These amounts represent performance bonuses earned under our executive bonus program, which is described above under “— Compensation“Compensation Discussion and Analysis — Performance Bonuses.”40(3) The amounts represent 401(k) plan matching contributions paid by us and generally available to all full-time U.S. employees and, for Ms. Mitchell, relocation expenses in the amount of $61,203 and related tax gross-ups for such relocation expenses in the amount of $27,447. (4) Amounts reported for Ms. Mitchell’s 2020 salary received reflect pro-rated amounts for her April 20, 2020 start date. Pursuant to her employment agreement, her bonus received was not subject to proration for 2020. (5) For 2013, reflects a pro-rated salary for Dr. Galer due to the fact that Dr. Galer was appointed Executive Vice President and Chief Medical Officer in December 2013.(6)For 2015, reflects a pro-rated salary for Dr. Farfel due to the fact that Dr. Farfel was appointed Executive Vice President and Chief Development Officer in July 2015.(7)For 2015, reflects a pro-rated salary for Dr. Darcis due to the fact that Dr. Darcis was appointed Executive Vice President and General Manager, Europe in July 2015. Dr. Darcis’ annual salary of £230,000 was paid in pounds sterling. The amount shown represents the salary payments made to Dr. Darcis based on an exchange rate of £1.5332 to $1.00, which is the average exchange rate for the period from July 1, 2015 to December 31, 2015.(8)The amount shown represents the aggregate stipend paid to Dr. Darcis to purchase individually-obtained medical and life insurance benefits and pension benefits in 2015 (£2,378 pounds sterling, or approximately $3,646 U.S. dollars (converted from pounds sterling to U.S. dollars using an exchange rate of £1.5332 to $1.00, which was the average exchange rate for the period from July 1, 2015 to December 31, 2015), and his automobile allowance of £6,091 pounds sterling, or approximately $9,339 U.S. dollars (converted from pounds sterling to U.S. dollars using an exchange rate of £1.5332 to $1.00, which was the average exchange rate for the period from July 1, 2015 to December 31, 2015).(9)For 2015, reflects a pro-rated salaryAmounts reported for Mr. Hawley dueSagrolikar’s 2018 salary received reflect pro-rated amounts for his July 2, 2018 start date. Pursuant to the fact thathis employment agreement, his bonus received was not subject to proration for 2018. Mr. Hawley ceased serving as our Chief Executive Officer upon his resignation on April 27, 2015. He continues to serve as a member of our board of directors. Also includes $57,692 in vacation payoutSagrolikar’s 2018 stock and option awards were granted in connection with his termination of employment.new hire compensation package.(10)Reflects severance in the amount of $500,000 paid to Mr. Hawley following his resignation from his position as our Chief Executive Officer, $25,000 paid to Mr. Hawley for post-termination consulting services, $17,033 in cash paid as a retainer to Mr. Hawley for his service as a non-employee director following his resignation, and $8,980 in continued health benefits provided to Mr. Hawley in connection with his separation agreement.564120152015. All Other All Other Stock Option Awards Awards Exercise Grant Date Estimated Future Payouts Number of Number of or Base Fair Value of Date of Under Non-Equity Incentive Shares of Securities Price of Stock and Approval Plan Awards(1) Stock or Underlying Option Option Grant of Equity Threshold Target Maximum Units Options Awards Awards Name Date Awards ($) ($) ($) (#)(2 (#)(3) ($/sh) ($)(4) Stephen J. Farr, Ph.D. — — — 406,900 508,625 — — — — 3/4/2020 2/25/2020 — — — — 165,000 27.36 2,977,359 3/4/2020 2/25/2020 — — — 27,500 — — 752,400 Michael P. Smith — — — 198,000 247,500 — — — — 3/4/2020 2/25/2020 — — — — 39,000 27.36 703,739 3/4/2020 2/25/2020 — — — 6,500 — — 177,840 Shawnte M. Mitchell — — 193,500 241,875 — — — — 4/20/2020 3/17/2020 — — — — 110,000 26.68 1,914,759 Bradley S. Galer, M.D. — — — 202,500 253,125 — — — — 3/4/2020 2/25/2020 — — — — 39,000 27.36 703,739 3/4/2020 2/25/2020 — — — 6,000 — — 164,160 Ashish M. Sagrolikar — — — 191,250 239,063 — — — — 3/4/2020 2/25/2020 — — — — 60,000 27.36 1,082,676 3/4/2020 2/25/2020 — — — 10,000 — — 273,600 Gail M. Farfel, Ph.D. — — — 198,000 247,500 — — — — 3/4/2020 2/25/2020 — — — — 35,000 27.36 631,561 3/4/2020 2/25/2020 — — — 6,500 — — 177,840
Under Non-Equity Incentive
Plan Awards(1)
Under Equity Incentive
Plan Awards(1) Name Grant Date
($) Target ($)
($)
(#) Target (#)
(#)
Stock
Awards:
Number of
Shares of
Stock or
Units (#)
Option
Awards:
Number of
Securities
Underlying
Options (#)(2)
or Base
Price of
Option
Awards
($/Sh)(2)
Fair Value of
Stock and
Option Awards
($)(2)(3)Stephen J. Farr, Ph.D. 3/17/2015 — 270,000 337,500 — — — — 31,250 (4) 10.64 225,950 5/13/2015 — — — — — — — 93,750 (4) 11.04 695,700 Ann D. Rhoads 3/17/2015 — 162,225 202,781 — — — — 28,125 (4) 10.64 203,355 10/5/2015 — — — — 15,000 (5) — — 15,000 (5) 13.32 268,577 Bradley S. Galer, M.D. 3/17/2015 — 162,225 202,781 — — — — 28,125 (4) 10.64 203,355 10/5/2015 — — — — 15,000 (5) — — 15,000 (5) 13.32 268,577 Gail M. Farfel, Ph.D. 7/1/2015 — 97,650 122,063 — — — — 56,250 (6) 13.96 531,394 10/5/2015 — — — — 7,500 (5) — — 7,500 (5) 13.32 134,289 Thierry J.P. Darcis, M.D. 7/1/2015 — 87,313 109,141 — — — — 50,000 (6) 13.96 472,350 10/5/2015 — — — — 7,500 (5) — — 7,500 (5) 13.32 134,289 Roger L. Hawley 3/17/2015 — 300,000 375,000 — — — — 31,250 (4) 10.64 225,950 6/18/2015 — — — — — — — 9,000 (7) 12.80 74,025 (1) These amountsAmounts in this column represent the target and maximum 2015cash performance bonusesbonus opportunities for the named executive officers in 2020 under our executive bonus program, which is described above under “— Compensation Discussion and Analysis — Performance Bonuses.”42(2) Gives effect toThe RSUs vest over a four-year period at the 1-for-8 reverse stock splitrate of our common stock effected on July 1, 2015.(3)Represents the grant date fair value25% of the awards as computed in accordance with ASC Topic 718. For a discussionRSUs on each of the valuation assumptions, see Note 13 to our consolidated financial statements for the year ended December 31, 2015 included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 15, 2016. The performance objectives2021, 2022, 2023 and 2024, subject to which the vesting of the performance-based option awards granted during 2015 were subject were deemed probable of achievement as of the date of grant and no adjustment was made at that date to the fair value of such awards.(4)The options vest in equal monthly installments over the four-year period of continuous service following the grant date and all options have a 10-year term from the date of grant.through each vesting date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” below.(5)One-half of the shares subject to each(3)The option awardawards vest in equal monthly installments over the three-yearfour-year period of continuous service following the grant date, and the remaining one-half of the shares subject to each option award vest based on the following performance milestone: the U.S. Food and Drug Administration’s acceptance of the Company’s New Drug Application for ZX008 on or before the three-year anniversary grant date. All optionsoption awards have a ten-year10-year term from the date of grant.grant date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” below.(6)(4) The options vest overapplicable grant-date fair value of each option and RSU award was calculated in accordance with ASC 718. For a four-year period,discussion of our valuation methodology used, see Note 14 to our consolidated financial statements for the year-end December 31, 2020 included in our Annual Report on Form 10-K filed with 25% of the options vestingSEC on March 1, 2021. These amounts do not reflect whether the first anniversary ofrecipient has actually realized or will realize. Whether, and to what extent, a named executive officer realizes a financial benefit from the grant dateawards will depend on our actual operating performance, stock price fluctuations and the remainder vesting in equal monthly installments over the three years thereafter, subject to thenamed executive officer’s continued employment with the Company on each vesting date. All options have a ten-year term from the date of grant.(7)These options were granted to Mr. Hawley following his resignation as Chief Executive Officer for service as a non-employee director. The options vest in equal monthly installments over the one-year period following the grant date, subject to Mr. Hawley’s continued service to the Company on each vesting date.us.20152020 Grants of Plan-Based Awards table was paid or awarded, are described above under “Compensation Discussion and Analysis.” A summary of certain material terms of our employment agreements and compensation plans and arrangements is set forth below.We have entered into anagreementagreements with each of our named executive officers.Pursuant to each of the employment agreements,officers, if we terminate such officer’s employment without cause (as defined below) or such officer resigns for good reason (as defined below) or such officer’s employment is terminated as a result of his or her death or following his or her permanent disability, the executive officer or his or her estate, as applicable, is entitled to the following payments and benefits: (1) his or her fully earned but unpaid base salary through the date of termination at the rate then in effect, plus all other benefits, if any, under any group retirement plan, nonqualified deferred compensation plan, equity award or agreement, health benefits plan or other group benefit plan to which he or she may be entitled to under the terms of such plans or agreements; (2) a lump sum cash payment in an amount equal to 12 months of his or her base salary as in effect immediately prior to the date of57 period (provided that the performance options granted in October 2015 will not accelerate pursuant to this provision).stockequity awards (including the performance options granted in October 2015) shall be automatically accelerated.accelerated (although the service-based RSUs granted to the executives will not be eligible to receive the enhanced change in control vesting pursuant to this provision based on an involuntary termination without cause or resignation for good reason preceding a change in control, in which case the standard acceleration upon an involuntary termination will apply). For a further description of the potential compensation payable to our named executive officers under their employment agreements, please see “— Potential Payments Upon Termination or Change in Control” below.Dr. Galer’salsoprovides she will be eligible to receive relocation assistance and related tax gross-ups to the extent such relocation payments are taxable income to her up to an aggregate of $100,500. In the event Ms. Mitchell terminates her employment without good reason within one year following the date upon which she relocates to the San Francisco Bay Area, she will be required to repay a pro rata portion of the relocation payments and any related tax gross-up payment based on the number of days elapsed in the one year period ending on the first anniversary of her relocation date.was entitledwill be eligible to a one-time signing bonus of $60,000, subjectreceive relocation assistance (and related tax-gross ups to a right of repayment which expired on December 17, 2014. Dr. Galer was also entitledthe extent such relocation payments are taxable income to reimbursement for relocation expenses,him) up to a totalan aggregate of $100,000, subject$220,000, plus temporary housing at our expense until his relocation to a right of repayment should he leave the company prior to June 30, 2015.43Dr. Farfel’s employment agreement also provides that she was entitled to a one-time signing bonus of $50,000, subject to a right of repayment should she leave the Company prior to June 29, 2016. Dr. Farfel was also entitled to reimbursement for legal expenses of up to $5,000San Francisco Bay Area (but in connection with the negotiation of her employment agreement.Dr. Darcis’ employment agreement also provides that, for so long as we do not provide Company-paid insurance or pension schemes in the United Kingdom and Dr. Darcis resides in the United Kingdom, he receives a monthly stipend of £390 to purchase individually-obtained health and life insurance and pension benefits in the United Kingdom.•the acquisition by any person or entity or related group of persons or entities (other than us, our subsidiaries, an employee benefit plan maintained by us or any of our subsidiaries or a person or entity that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, us) of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the total combined voting power of our securities outstanding immediately after such acquisition; 58 •during any two-year period, individuals who, at the beginning of such period, constitute our board of directors together with any new director(s) whose election by our board of directors or nomination for election by our stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of our board of directors; or (1) a merger, consolidation, reorganization, or business combination or (2) the sale, exchange or transfer of all or substantially all of our assets in any single transaction or series of transactions or (3) the acquisition of assets or stock of another entity, in each case other than a transaction:•◦ which results in our voting securities outstanding immediately before the transaction continuing to represent, directly or indirectly, at least a majority of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction, and •◦ after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of us or our successor; provided, however, that no person or group is treated as beneficially owning 50% or more of combined voting power of us or our successor solely as a result of the voting power held in us prior to the consummation of the transaction. 44Separation Arrangements with Roger HawleyEffective April 27, 2015, Roger L. Hawley resigned as our Chief Executive Officer. Mr. Hawley continues to serve as a member of our board of directors.In connection with his resignation, we entered into a General Release of Claims with Mr. Hawley, or the Release, pursuant to which (1) we paid Mr. Hawley a lump sum cash payment equal to $500,000, (2) we agreed to continue Mr. Hawley’s health benefits for a period of 18 months following his date of termination, and (3) the vesting and/or exercisability of Mr. Hawley’s outstanding unvested stock options was accelerated as to the number of stock awards that would have vested over the 12-month period following his date of termination had Mr. Hawley remained continuously employed by us during such period.45concerning unexercised stock options for each ofregarding the outstanding equity awards held by our named executive officers outstanding as ofat December 31, 2015. Option Awards Name Grant Date Number of
Securities
Underlying
Unexercised
Options
Exercisable (#)(1) Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#)(1)
Exercise
Price
($)(1)
Expiration
DateStephen J. Farr, Ph.D. 5/13/2015 15,462 (2) 78,288 (2) 11.04 5/13/2025 3/17/2015 5,859 (2) 25,390 (2) 10.64 3/17/2025 3/25/2014 19,139 (2) 24,610 (2) 24.56 3/25/2024 3/15/2013 47,693 (2) 21,680 (2) 15.92 3/15/2023 4/27/2012 80,207 (2) 7292 (2) 15.04 4/27/2022 3/1/2011 31,249 (2) — 33.92 3/1/2021 5/25/2010 12,500 (3) — 32.00 5/25/2020 9/1/2009 5,312 (4) — 20.00 9/1/2019 10/21/2008 937 (3) — 28.00 10/21/2018 Ann D. Rhoads 10/5/2015 833 (5) 29,167 (5) 13.32 10/5/2025 3/17/2015 5,273 (2) 22,852 (2) 10.64 3/17/2025 3/25/2014 9,023 (2) 11,602 (2) 24.56 3/24/2024 3/15/2013 24,921 (2) 11,328 (2) 15.92 3/15/2023 4/27/2012 51,561 (2) 4,688 (2) 15.04 4/27/2022 3/1/2011 22,499 (2) — 33.92 3/1/2021 5/25/2010 16,625 (2) — 32.00 5/25/2020 5/25/2010 2,500 (3) — 32.00 5/25/2020 Bradley S. Galer, M.D. 10/5/2015 833 (5) 29,167 (5) 13.32 10/5/2025 3/17/2015 5,273 (2) 22,852 (2) 10.64 3/17/2025 6/2/2014 3,047 (2) 5,078 (2) 16.64 6/2/2024 12/17/2013 26,562 (3) 26,563 (3) 24.16 12/17/2023 Gail M. Farfel, Ph.D. 10/5/2015 417 (5) 14,583 (5) 13.32 10/4/2025 7/1/2015 — (3) 56,250 (3) 13.96 6/30/2025 Thierry J.P. Darcis, M.D. 10/5/2015 417 (5) 14,583 (5) 13.32 10/5/2025 7/1/2015 — (3) 50,000 (3) 13.96 7/1/2025 Roger L. Hawley 6/18/2015 4,500 (6) 4,500 (6) 12.80 6/18/2025 3/17/2015 10,545 (2) 20,704 (2) 10.64 3/17/2025 3/25/2014 44,061 (2) 30,938 (2) 24.56 3/25/2024 3/15/2013 76,450 (2) 19,173 (2) 15.92 3/15/2023 4/27/2012 124,999 (2) — 15.04 4/27/2022 3/1/2011 37,499 (2) — 33.92 3/1/2021 5/25/2010 18,750 (3) — 32.00 5/25/2020 9/1/2009 7,500 (4) — 20.00 9/1/2019 10/21/2008 11,249 (3) — 28.00 10/21/2018 46 Option Awards Stock Awards Name Grant
DateNumber of
Securities
Underlying
Unexercised
Options
Exercisable
(#)Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)(2)Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(1)(3)Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)(4)Stephen J. Farr, Ph.D. 3/4/2020(5) 30,938 134,062 27.36 3/4/2030 — — 3/4/2020 — — — — 27,500 549,725 3/22/2019 70,000 90,000 52.66 3/22/2029 — — 3/22/2019 — — — — 15,000 299,850 3/15/2018 110,000 50,000 42.65 3/15/2028 — — 3/15/2018 — — — — 10,000 199,900 3/14/2017 75,625 10,312 10.20 3/14/2027 — — 3/14/2016 90,767 — 10.35 3/14/2026 — — 5/13/2015 93,750 — 11.04 5/13/2025 — — 3/17/2015 26,583 — 10.64 3/17/2025 — — 3/25/2014 43,749 — 24.56 3/25/2024 — — 3/15/2013 69,373 — 15.92 3/15/2023 — — 4/27/2012 87,499 — 15.04 4/27/2022 — — 3/01/2011 31,249 — 33.92 3/1/2021 — — Michael P. Smith 3/4/2020(5) 7,313 31,687 27.36 3/4/2030 3/4/2020 — — — — 6,500 129,935 3/22/2019 27,891 35,859 52.66 3/22/2029 — — 59 3/22/2019 — — — — 6,093 121,799 3/15/2018 25,781 11,719 42.65 3/15/2028 — — 3/15/2018 — — — — 3,124 62,449 1/16/2017(6) 64,688 2,812 10.35 1/16/2027 — — Shawnte M. Mitchell 4/20/2020(6) — 110,000 26.68 4/19/2030 — — Bradley S. Galer, M.D. 3/4/2020(5) 7,313 31,687 27.36 3/4/2030 3/4/2020 — — — — 6,500 129,935 3/22/2019 27,891 35,859 52.66 3/22/2029 — — 3/22/2019 — — — — 6,093 317,628 3/15/2018 25,781 11,719 42.65 3/15/2028 — — 3/15/2018 — — — — 3,124 162,854 3/14/2017 56,250 3,750 10.20 3/14/2027 — — 3/14/2016 60,000 — 10.35 3/14/2026 — — 10/05/2015 28,500 — 13.32 10/5/2025 — — 3/17/2015 28,125 — 10.64 3/17/2025 — — 6/02/2014 8,125 — 16.64 6/2/2024 — — 12/17/2013 53,125 — 24.16 12/17/2023 — — Ashlish M. Sagrolikar 3/4/2020(5) 11,250 48,750 27.36 3/4/2030 — — 3/4/2020 — — — — 10,000 199,900 3/22/2019 27,891 35,859 52.66 3/22/2029 — — 3/22/2019 — — — — 6,093 121,799 7/2/2018(6) 60,417 39,583 43.70 7/2/2028 — — 7/2/2018(7) — — — — 7,500 149,925 Gail M. Farfel, Ph.D. 3/4/2020(5) 6,563 28,437 27.36 3/4/2030 — — 3/4/2020 — — — — 6,000 119,940 3/22/2019 27,891 35,859 52.66 3/22/2029 — — 3/22/2019 — — — — 6,093 121,799 3/15/2018 27,500 12,500 42.65 3/15/2028 — — 3/15/2018 — — — — 3,250 64,968 3/14/2017 49,219 3,281 10.20 3/14/2027 — — 3/14/2016 45,000 — 10.35 3/14/2026 — — 10/05/2015 14,250 — 13.32 10/5/2025 — — 7/01/2015 30,289 — 13.96 7/1/2025 — — (1) Gives effect toVesting of each stock option and stock award is contingent upon the 1-for-8 reverse stock split of our common stock effectednamed executive officer’s continued service, except as may be accelerated on July 1, 2015.certain events described above under “—Employment Agreements” and under “—Potential Payments Upon Termination or Change in Control” described below.(2) The optionsExcept as described below in footnotes 5 and 6, all option awards have a term of ten years from the date of grant and vest on ain successive equal monthly basisinstallments over a four-year period of continuous service following the grant date and havedate.(3) Except as described below in footnote 7, the RSUs vest in a 10-year term fromseries of four successive equal annual installments on each March 15 of the first four calendar years following the calendar year in which the grant date. For a descriptiondate occurs.(4) Market value is calculated based on the closing price of our common stock of $19.99 per share on December 31, 2020 times the accelerated vesting applicablenumber of shares subject to the foregoing equity awards, see “Employment Agreements” above.stock award.(5) The option award vests in a series of forty-eight (48) successive, equal monthly installments with the first tranche vesting on April 15, 2020. (3)(6)25% of the shares underlying the options vest on the first anniversary of the grant date and the remaining options75% vest on a monthly basis over the subsequent three-year period of continuous service and all options have a 10-year term from the grant date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” above.(4)The options vest on a monthly basis over a two-year period of continuous service following the grant date and have a 10-year term from the grant date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” above.(5)One-half of the shares subject to each option award vest monthly over the three-year period of continuous service following the grant date, and the remaining one-half of the shares subject to each option award vest based on the following performance milestone: the U.S. Food and Drug Administration’s acceptance of the Company’s New Drug Application for ZX008 on or before the three-year anniversary grant date. All options have a ten-year term from the date of grant. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” above.(6)The options vest in successive equal monthly installments over the one-yearfollowing 36 months of continuous service.(7) The RSUs vest over a four-year period followingat the rate of 25% of the stock award on each of the first four anniversaries of the grant date, subject to Mr. Hawley’s continued service to the Company on each vesting date. The options have a ten-year term from the date of grant.None ofofficers exercised options or had stock awards vest during 2015. officers. 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)Stephen J. Farr, Ph.D. 43,886 1,420,338 37,500 993,400 Michael P. Smith 22,500 932,465 3,595 79,126 Shawnte M. Mitchell — — — — Bradley S. Galer, M.D. — — 13,595 360,326 Ashish M. Sagrolikar — — 5,782 154,187 Gail M. Farfel, Ph.D. — — 12,407 326,541 60 (1) The amount shown for value realized on exercise of stock options equals (i) the number of shares of our common stock to which the exercise of the stock option related, multiplied by (ii) the difference between the per-share market price of the shares on the date of exercise and the per-share exercise price of the option. If the stock acquired upon exercise was sold on the day of exercise, the market price was determined as the actual sales price of the stock. If the stock acquired upon exercise was not sold on the day of exercise, the market price was determined as the closing price of the stock on the Nasdaq Stock Market on the exercise date. (2) The value realized is based on the closing price of our common stock on the vesting date as reported on the Nasdaq Stock Market multiplied by the number of RSUs vested. control;control (“CIC”); (2) upon termination by us following the executive’s permanent disability or as a result of the executive’s death; (3) upon termination by us without cause or the executive’s resignation for good reason within 60 daysthree months prior to or 12 months following a change in control;CIC; or (4) in the event of a change in controlCIC without a termination of employment. The table assumes that the termination of employment or change in control,CIC, as applicable, occurred on December 31, 2015.2020. The definitions of “cause”, “good reason” and “bonus” are contained in the applicable employment agreement for each of our named executive officers, which are described above under the heading “— Employment Agreements.” Mr. Hawley is not included in the table as his employment terminated on April 27, 2015, and his actual separation arrangements are described above under the heading “— Separation Arrangements with Roger Hawley.”47Name and Position Benefit Type
the Event of a
Termination
by the
Company
Without
Cause or by
Executive for
Good Reason
Apart from a
Change in
Control(1)(2)
the Event of a
Termination
by the
Company
following
Executive’s
Permanent
Disability or
as a Result of
Executive’s
Death(1)(2)
the Event of a
Termination
by the
Company
Without
Cause or by
Executive for
Good Reason
Within 60
Days Prior to
or 12 Months
Following a
Change in
Control(3)(4)
Event of a
Change in
Control
Without
Termination(5)Stephen J. Farr, Ph.D. Severance $ 450,000 $ 450,000 $ 658,200 $ — Chief Executive Officer and President Benefits(6) 27,428 27,428 27,428 — Equity Awards 117,847 117,847 393,765 196,882 Ann D. Rhoads Severance 360,500 360,500 505,697 — Executive Vice Pres. and Chief Financial Officer Benefits(6) 7,629 7,629 7,629 — Equity Awards 35,927 35,927 135,110 67,550 Bradley S. Galer, M.D. Severance 360,500 360,500 512,653 — Executive Vice Pres. and Chief Medical Officer Benefits(6) 28,917 28,917 28,917 — Equity Awards 35,923 35,923 135,110 67,550 Gail M. Farfel, Ph.D. Severance 350,000 350,000 445,892 — Executive Vice Pres. and Chief Development Officer Benefits(6) 27,669 27,669 27,669 — Equity Awards 20,003 20,003 64,583 32,291 Thierry J.P. Darcis, M.D.(7) Severance 340,400 340,400 426,141 — Executive Vice Pres. and General Manager, Europe Benefits(6) 6,926 6,926 6,926 — Equity Awards 18,175 18,175 59,708 29,853 61 Triggering Event Lump Sum
Cash Severance
($)(1)Accelerated
Options
($)(2)Accelerated
RSUs
($)(3)Health
Benefits
($)(4)Total
($)Stephen J. Farr, Ph.D. Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC 626,000 100,954 337,331 30,061 1,094,346 Death/Disability 626,000 100,954 337,331 30,061 626,000 Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC 956,200 100,954 1,049,475 30,061 2,136,690 CIC Only (Continued Employment) — 50,477 524,738 — 575,215 Michael P. Smith Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC 440,000 27,108 104,308 23,541 594,957 Death/Disability 440,000 27,108 104,308 23,541 594,957 Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC 612,857 27,108 314,183 23,541 977,689 CIC Only (Continued Employment) — 13,554 157,092 — 170,646 Shawnte M. Mitchell Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC 430,000 — — 22,922 452,922 Death/Disability 430,000 — — 22,922 452,922 Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC 616,530 — — 22,922 639,452 CIC Only (Continued Employment) — — — — — Bradley S. Galer, M.D. Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC 450,000 36,713 104,308 40,046 631,067 Death/Disability 450,000 36,713 104,308 40,046 631,067 Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC 627,747 36,713 314,183 40,046 1,018,689 CIC Only (Continued Employment) — 18,357 157,092 — 175,449 Ashish M. Sagrolikar Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC 425,000 — 165,537 26,161 616,698 Death/Disability 425,000 — 165,537 26,161 616,698 Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC 590,327 — 471,624 26,161 1,088,112 CIC Only (Continued Employment) — — 235,812 — 235,812 Gail M. Farfel, Ph.D. Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC 440,000 32,121 103,068 29,429 604,618 Death/Disability 440,000 32,121 103,068 29,429 604,618 Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC 611,257 32,121 306,707 29,429 979,514 CIC Only (Continued Employment) — 16,061 153,354 — 169,415 (1) CashLump sum cash severance amount represents 12 months of base salary for each named executive officer payable in cash in a lump sum.(2)Value of equity award acceleration represents the value of those options that would immediately vest as a result of the named executive officer’s termination or as a result of the named executive officer’s death or disability. The value attributable to stock options not previously exercised that would vest in such event is the positive difference, if any, between the fair market value per share of our common stock on December 31, 2015 ($14.74) less the exercise price per share of such stock option multiplied by the number of shares that would vest.(3)Cash severance represents the sum of the following, payable in a lump sum cash payment: (a) 12 months of base salary for each executive officer payable in a lump sum cash payment, plus (b) the average of the bonuses awarded to the executive officer for the fiscal years 2015, 2014 and 2013. The bonus amount for Dr. Galer is the average of his 2014 and 2015 bonus amounts. The bonus amount for each of Dr. Farfel and Dr. Darcis is equal to his or her bonus for 2015. Please see the definition of “bonus” under the heading “Employment Agreements” above.48(4)A named executive officer’s equity awards will vest in full(except in the event he or she is terminatedof an involuntary termination without cause or he or she resignsresignation for good reason within three months60 days prior to, or 12 months following a change in control, in which is a slightly different trigger than applies to eligibility for cash severance. Value of equity award acceleration represents the value of those options that would immediately vest as a result of thecase each named executive officer’s termination. officer is entitled to receive 12 months of base salary plus the average of his or her bonus awarded for fiscal 2020, 2019 and 2018 (or such lesser number of years he or she has been employed by us)). The definition of “bonus” is described above under the heading “Employment Agreements.”(2) The value attributable to stockthe accelerated options not previously exercised that would vest in such event isrepresents the positive difference, if any, betweenexcess of the fair market value per share of our common stock of $19.99 on December 31, 2015 ($14.74) less2020 over the exercise price per share of the unvested options the vesting of which accelerates in connection with the specified event. In the event of an involuntary termination without cause or resignation for good reason apart from a CIC and death/disability, shares subject to acceleration represent the vesting and exercisability of outstanding unvested option awards as to the number of option awards that would have vested over the 12-month period following termination had such officer remained continuously employed by us during such period. In the event of a change in control, shares subject to acceleration represent the vesting and exercisability of 50% of all outstanding unvested option awards and, in the event an executive officer is terminated without cause or resigns for good reason within three months prior to (as opposed to 60 days prior to for cash severance) or 1262 months following a change in control, shares subject to acceleration represent the vesting and exercisability of 100% of all outstanding unvested option awards. (3) Represents the aggregate value of the accelerated vesting of RSU awards, calculated by multiplying the fair market value of our common stock option multipliedof $19.99 on December 31, 2020 by the number of RSUs the vesting of which accelerates in connection with the applicable triggering event. In the event of an involuntary termination without cause or resignation for good reason apart from a CIC and death/disability, shares subject to acceleration represent the vesting and exercisability of outstanding unvested RSUs as to the number of RSUs that would vest.(5)Valuehave vested over the 12-month period following termination had such officer remained continuously employed by us during such period. In the event of equity award acceleration represents the value of those options that would immediately vest upon a change in control, shares subject to acceleration represent the vesting and exercisability of 50% of all outstanding unvested RSU awards and, in the event an executive officer is terminated without cause or resigns for good reason within 12 months following a terminationchange in control, shares subject to acceleration represent the vesting and exercisability of employment. The value attributable to stock options not previously exercised that would vest in such event is the positive difference, if any, between the fair market value per share100% of our common stock on December 31, 2015 ($14.74) less the exercise price per share of such stock option multiplied by the number of shares that would vest.all outstanding unvested RSUs.(6)(4)Represents the value of the continuation of health benefits for a period of 12 months following the date of the named executive officer’s termination. (7)Payment amounts for Dr. Darcis are converted from pounds sterling to U.S. dollars using an exchange rate of £1.48 to $1.00, which was the exchange rate in effect on December 31, 2015.63Risk Assessment of Compensation ProgramIn April 2016, management assessed our compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that are reasonably likely to have a material adverse effect on us. As part of that assessment, management reviewed the primary elements of our compensation program, including base salary, short-term incentive compensation and long-term incentive compensation. Management’s risk assessment included a review of the overall design of each primary element of our compensation program, and an analysis of the various design features, controls and approval rights in place with respect to compensation paid to management and other employees that mitigate potential risks to us that could arise from our compensation program. Following the assessment, management determined that our compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on us and reported the results of the assessment to our compensation committee.20152020 (in thousands, except per share data). (A)
Number of Securities
To Be Issued
Upon Exercise
Outstanding Options,
Warrants and Rights(2) (B)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Right(3) (C)
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (A)) Equity compensation plans approved by security holders: Equity compensation plans approved by security holders(1)(4) 5,189 $ 28.28 3,899 Equity compensation plans not approved by security holders(1) 514 $ 36.77 — Total Equity Incentive Plans (1) 5,703 3,899 Weighted average per share exercise price of stock options Equity compensation plans approved by security holders: 2006 Equity Incentive Plan $ 27.86 115 — 115 0 $ 16.88 2,464 — 2,464 325 Total Equity Incentive Plans 2,579 — 2,579 325 2010 Employee Stock Purchase Plan — — — 151 Total Equity compensation plans approved by security holders 2,579 — 2,579 476 Equity compensation plans not approved by security holders: $ 26.72 80 — 80 202 (1) The material features of our 2010 Equity Incentive Plan, including the evergreen provision under the 2010 Equity Incentive Plan,equity incentive plans are more fully described in Note 1314 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015,2020 filed with the SEC on March 15, 2016.1, 2021.49(2) Includes shares subject to outstanding options and RSUs granted under our equity compensation plans. (2)(3)The material featuresweighted-average exercise price is calculated based solely on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs, which have no exercise price.(4) Represents 497,852 shares available for issuance under the 2020 Employee Stock Purchase Plan as of December 31, 2020 (all of which were eligible to be purchased during the offering period in effect on such date), and 3,401,157 available for future issuance under our Employment InducementRestated 2010 Equity Incentive Award Plan are described in Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 15, 2016.Plan.64 2015,2020, to which we were a party or will be a party, in which:•the amounts involved exceeded or will exceed $120,000; and•a director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.-— Employment Agreements.”that during the fiscal year ended December 31, 2015, all executiveSection 16(a) reporting requirements applicable to our officers, directors and greater than 10% stockholdersbeneficial owners during 2020 were complied with, all applicable filing requirements.20172022, including any stockholder nominations for election to the board of directors, must be received by us no later than December , 2021, which is 120 days prior to the first anniversary of the mailing date of this proxy, in order to be included in our proxy statement and form of proxy relating to that meeting. These proposals must comply with the requirements as to form and substance established by the SEC for such proposals in order to be included in the proxy statement. In addition, our amended and restated bylaws establish an advance notice procedure with regard to certain matters, including stockholder proposals not included in our proxy statement, to be brought before an annual meeting of stockholders. In general, notice20172021 annual meeting of stockholders, such a proposal must be received by us no earlier than March 15, 2017January 27, 2022 and no later than April 14, 2017.February 26, 2022. However, if the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice must be received not less than 90 calendar days before nor more than 120 calendar days in advance of such annual meeting, or if later, ten calendar days following the date on which public announcement of the date of the meeting is first made. If the stockholder fails to65 5020172022 annual meeting may exercise discretionary voting power regarding any such proposal. Stockholders are advised to review our amended and restated bylaws which also specify requirements as to the form and content of a stockholder’s notice.58585959 Horton Street, #455,Suite 500, Emeryville, California 94608, Attention: Corporate Secretary.OTHER MATTERSBy Order of the Board of Directors, /s/ Stephen J. Farr, Ph.D.Stephen J. Farr, Ph.D.Chief Executive Officer and DirectorEmeryville, California , 2016ZOGENIX, INC.5858 HORTON STREET, #455EMERYVILLE, CA 94608VOTE BY INTERNET - www.proxyvote.comUse 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 cut-off date or 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.ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIf 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 - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, 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:E11554-P80680 KEEP THIS PORTION FOR YOUR RECORDS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.ZOGENIX, INC.ForAllWithholdAllFor AllExceptTo 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.The Board of Directors recommends you vote FOR the following:1.Election of three (3) directors for a three-yearterm to expire at the 2019 annual meeting of stockholders.ooo Nominees01) Roger L. Hawley02) Erle T. Mast 03) Renee P. Tannenbaum, Pharm.D.The Board of Directors recommends you vote FOR proposals 2 and 3.ForAgainstAbstain2.Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2016.ooo3.To approve a one-time stock option exchange program.oooNOTE: Such other business as may properly come before the meeting or any adjournment thereof.For address change/comments, mark here. (see reverse for instructions)oPlease indicate if you plan to attend this meeting.ooYesNoPlease 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]DateSignature (Joint Owners)DateImportant Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.52M73560-P52143- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -ZOGENIX, INC.Annual Meeting of StockholdersJuly 13, 2016 8:30 AM, PDTThis proxy is solicited by the Board of DirectorsThe shareholder(s) hereby appoint(s) Ann D. Rhoads, and each of them, as proxies, each with the power to appoint (his/her) substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of ZOGENIX, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 8:30 AM, PDT on July 13, 2016, at the Claremont Hotel, located at 41 Tunnel Road, Berkeley, California 94705, and any adjournment or postponement thereof.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 Board of Directors’ recommendations.Address Change/Comments: Director(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)Continued and to be signed on reverse side 66 A-1 53