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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1))
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
Preliminary Proxy Statement | ||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
Definitive Proxy Statement | ||
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
VIVUS, INC. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: |
PRELIMINARY COPY - SUBJECT TO COMPLETION DATED MAY 28, 2013
VIVUS, INC.1172 Castro Street351 East Evelyn Avenue
Mountain View, CA 9404094041
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on July 15, 2013September 12, 2014
TO THEOUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of VIVUS, Inc., a Delaware corporation, (sometimes referred to herein as the Company), will be held on Monday, July 15, 2013,Friday, September 12, 2014, at 8:00 a.m., Pacificlocal time, at the New York Marriott East Side, 525 Lexington Avenue at 49th Street, New York, New York 10017 for the following purposes:
The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.
Only stockholders of record at the close of business on MayJuly 31, 20132014 are entitled to notice of and to vote at the Annual Meeting.
Our Board of Directors has selected the nine persons named in the attached Proxy Statement as its nominees for election to the Board of Directors at the Annual Meeting. Each of our nominees is currently serving as a director of the Company.
Please note that on May 1, 2013, in connection with its previously announced intention to present proposals at the Annual Meeting, First Manhattan filed with the United States Securities and Exchange Commission, or SEC, a preliminary proxy statement. On May 24, 2013, First Manhattan filed with the SEC an amended preliminary proxy statement presenting proposals to (i) nominate nine nominees for election to the Board at the Annual Meeting, or the First Manhattan Nominees, (ii) vote against the Company's proposal to approve, on an advisory basis, the compensation of the Company's named executive officers, (iii) ratify the appointment of OUM & Co., LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2013 and (iv) repeal any bylaw amendment in effect at the time of the Annual Meeting that was not included in our bylaws in effect as of April 18, 2012, as amended on February 20, 2013, and that is inconsistent with the election of the First Manhattan Nominees at the Annual Meeting. We do not endorse the election of any of the First Manhattan Nominees to become a director. You may receive proxy solicitation materials from
First Manhattan, including an opposition proxy statement and a white proxy card.OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THE BOARD'S NOMINEES USING THE ENCLOSED GOLD PROXY CARD AND URGES YOU NOT TO SIGN OR RETURN OR VOTE ANY WHITE PROXY CARD SENT TO YOU BY OR ON BEHALF OF FIRST MANHATTAN. Even if you have previously signed a white proxy card sent by or on behalf of First Manhattan, you have the right to change your vote by telephone or by Internet by following the instructions on theGOLD proxy card, or by signing, dating and returning the enclosedGOLD proxy card in the postage-paid envelope provided. Only the latest dated proxy you submit will be counted. We urge you to disregard any white proxy card sent to you by or on behalf of First Manhattan.
We are not responsible for the accuracy of any information provided by or relating to First Manhattan and their nominees contained in any proxy solicitation materials filed or disseminated by, or on behalf of, First Manhattan or any other statements that First Manhattan may otherwise make. First Manhattan chooses which stockholders receive its proxy solicitation materials.
If you have any questions or require any assistance with voting your shares, or if you need additional copies of the proxy materials, please contact:
MORROW & CO., LLC470 West AvenueStamford, CT 06902
Stockholders May Call Toll-Free: (800) 662-5200Banks & Brokers May Call Collect: (203) 658-9400Email: vivusinfo@morrowco.com
By order of the Board of Directors | ||
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Mountain View, California , 2013August 15, 2014
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO VOTE BY TELEPHONE, BY THE INTERNET, OR BY COMPLETING, SIGNING, DATING, AND RETURNING THE ENCLOSED GOLD PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. ANY STOCKHOLDER ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF SUCH STOCKHOLDER HAS RETURNED A PROXY. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BANK, BROKER OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT RECORD HOLDER.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on July 15, 2013.September 12, 2014. The Notice of Annual Meeting of Stockholders, the Proxy Statement and our 2013 Annual Report on Form 10-K for fiscal year 2012, as supplemented by a Form 10-K/A, are available electronically at www.morrowco.com/VIVUS.www.edocumentview.com/VVUS. You are encouraged to access and review all of the important information contained in the Proxy Materials before voting.
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INFORMATION CONCERNING SOLICITATION AND VOTING | 1 | |||
General | 1 | |||
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND OUR | ||||
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PROPOSAL NO. 1: ELECTION OF DIRECTORS | ||||
Overview of Election of Directors | ||||
Background to the Board's Recommendation in Favor of Our Nominees | ||||
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Biographical Information for Nominees | ||||
Required Vote | ||||
Board Recommendation | 11 | |||
PROPOSAL NO. 2: ADVISORY VOTE ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS | ||||
Proposal | ||||
Required Vote | ||||
Board Recommendation | 13 | |||
PROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||
Proposal | ||||
Principal Accountant Fees and Services | ||||
Pre-Approval Policy and Procedures | ||||
Required Vote | ||||
Board Recommendation | 15 | |||
PROPOSAL NO. 4: | ||||
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Summary of U.S. Federal Income Tax Consequences | 23 | |||
Number of Awards Granted to Employees and Directors | 25 | |||
Required Vote | ||||
Board Recommendation | 27 | |||
BOARD OF DIRECTORS MEETINGS AND COMMITTEES | ||||
Board Meetings | ||||
Board Independence | ||||
Board Leadership Structure | ||||
Risk Oversight | ||||
Board Committees | ||||
Compensation Committee Interlocks and Insider Participation | ||||
Stockholder Communications to Directors | ||||
Code of Business Conduct and Ethics | ||||
Corporate Governance Guidelines | ||||
EXECUTIVE OFFICERS | ||||
AUDIT COMMITTEE REPORT | ||||
EXECUTIVE COMPENSATION | ||||
Compensation Discussion and Analysis | ||||
Compensation Committee Report | ||||
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Outstanding Equity Awards at Fiscal Year-End | ||||
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Potential Payments Upon Termination or Change of Control for each Named Executive Officer | ||||
Director Compensation | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||||
Section 16(a) Beneficial Ownership Reporting Compliance | ||||
Equity Compensation Plan Information | ||||
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | ||||
Change of Control and Severance Agreements with Executive Officers | ||||
Indemnification Agreements | ||||
Review, Approval or Ratification of Transactions with Related Parties | ||||
STOCKHOLDER PROPOSALS FOR | ||||
HOUSEHOLDING OF PROXY MATERIALS | ||||
OTHER MATTERS |
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VIVUS, INC.
PROXY STATEMENT FOR THE 20132014
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosedGOLD proxy card Proxy is solicited on behalf of the Board of Directors, or the Board, of VIVUS, Inc., a Delaware corporation, or the Company, for use at the Annual Meeting of Stockholders, or the Annual Meeting, to be held on Monday, July 15, 2013,September 12, 2014, at (Pacific8:00 a.m. (local time), or at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at .the New York Marriott East Side, 525 Lexington Avenue at 49th Street, New York, New York 10017.
We are sending the Notice theof Annual Meeting of Stockholders, this Proxy Statement, our 2013 Annual Report and other related materials ona form of Proxy Card or about , 2013Voting Instruction Card, as applicable, to all stockholders entitled to vote at the Annual Meeting. Our principal executive office is located at 1172 Castro Street,351 East Evelyn Avenue, Mountain View, CA 94040.94041. Our telephone number is (650) 934-5200. Our website is www.vivus.com. We make our current and periodic reports that are filed with the Securities and Exchange Commission, or the SEC, available, free of charge, on our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
On May 1, 2013, in connection with its previously announced intention to present proposals at the Annual Meeting, First Manhattan filed with the SEC a preliminary proxy statement. On May 24, 2013, First Manhattan filed with the SEC an amended preliminary proxy statement presenting proposals to (i) nominate nine nominees for election to the Board at the Annual Meeting, (ii) vote against the Company's proposal to approve, on an advisory basis, the compensation of the Company's named executive officers, (iii) ratify the appointment of OUM & Co., LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2013 and (iv) repeal any bylaw amendment in effect at the time of the Annual Meeting that was not included in our bylaws in effect as of April 18, 2012, as amended on February 20, 2013, and that is inconsistent with the election of the First Manhattan Nominees at the Annual Meeting.
The First Manhattan Nominees are NOT endorsed by our Board of Directors. We urge stockholders NOT to vote or execute any white proxy card that you may receive from First Manhattan. Instead, our Board of Directors urges you to use theGOLD proxy card to vote "FOR ALL" of our nominees for director: Leland F. Wilson, Peter Y. Tam, Mark B. Logan, J. Martin Carroll, Charles J. Casamento, Ernest Mario, Ph.D., Jorge Plutzky, M.D., Linda M. Dairiki Shortliffe, M.D. and Robert N. Wilson.
We are not responsible for the accuracy of any information provided by or relating to First Manhattan and their nominees contained in any proxy solicitation materials filed or disseminated by, or on behalf of, First Manhattan or any other statements that First Manhattan may otherwise make. First Manhattan chooses which stockholders receive its proxy solicitation materials.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND
OUR 20132014 ANNUAL MEETING OF STOCKHOLDERS
Q:
A list of stockholders entitled to vote at the Annual Meeting will be available during ordinary business hours at 351 East Evelyn Avenue, Mountain View, CA 94041 for a period of at least ten days prior to the Annual Meeting.
stockholders of record prior to your being admitted to the Annual Meeting. You should be prepared to present government-issued photo identification for admission. If you are a beneficial holder, you will need to provide proof of beneficial ownership on the Record Date, such as a brokerage account statement showing that you owned our stock as of the Record Date, a copy of the GOLD voting
instruction formVoting Instruction Form provided by your broker, bank or other nominee, a legal proxy, or other similar evidence of ownership as of the Record Date, as well as your government-issued photo identification, for admission. If you do not provide proper photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the Annual Meeting.
You may obtain directions to the Annual Meeting by contacting our Corporate Secretary via email at corporatesecretary@vivus.com, via telephone at 650-934-5200, via fax at 650-934-5389 or via mail to VIVUS, Inc., 1172 Castro Street,351 East Evelyn Avenue, Mountain View, CA 94040,94041, Attention: Corporate Secretary.
broker offers Internet and telephone voting, you will receive instructions from them that you must follow in order for your shares to be voted. If you vote by the Internet or by telephone, you do not need to return yourGOLD proxy card Proxy Card to the Company orGOLD voting instruction form Voting Instruction Form to your broker. Internet and telephone voting facilities will
close at (Pacific11:59 p.m. (Eastern Time) on Thursday, September 11, 2014 for the voting of shares held by stockholders of record and for the voting of shares held in street name.
Your vote is important and we strongly encourage you to vote your shares by following the instructions provided on the enclosed GOLD proxy cardProxy Card or GOLD voting instruction form.Voting Instruction Form. Please vote promptly.
To ensure stockholders have the Company's latest proxy information and materials to vote, the Board of Directors expects to conduct multiple mailings prior to the date of the Annual Meeting and, as a result, you may receive more than one copy of theGOLD proxy card orGOLD voting instruction form regardless of whether or not you have previously submitted your proxy or voting instructions. Whether or not you plan to attend the Annual Meeting in person, you are urged to mark, date, sign and return aGOLD proxy card orGOLD voting instruction form in the postage-paid envelope provided, or vote electronically over the Internet or by telephone, as promptly as possible.Only the latest dated proxy or voting instructions you submit will be counted.
We urge you to disregard any white proxy card or white voting instruction form sent to you by or on behalf of First Manhattan or on behalf of anyone other than VIVUS. Please note that if you submit a white proxy card or white voting instruction form to "WITHHOLD" authority to vote
your shares with respect to any First Manhattan Nominees, that submission will not cause your shares to be counted as a vote "FOR" any of our Board's nominees and will result in the revocation of any previous proxy or voting instructions you may have submitted using ourGOLD proxy card orGOLD voting instruction form.
Please note that the submission of a later dated proxy cardProxy Card or voting instruction form, including any white proxy card or white voting instruction form that you may have received from First Manhattan or on behalf of anyone other than us,Voting Instruction Form will revoke any proxyProxy or voting instructions you may have previously submitted by telephone, over the Internet or by mail, including by using aGOLD proxy card orGOLD voting instruction form. Accordingly, please note that if you submit a white proxy card or white voting instruction form to "WITHHOLD" authority to vote your shares with respect to any of the First Manhattan Nominees, that submission will not cause your shares to be counted as a vote "FOR" any of the Board's nominees and will result in the revocation of any previous proxy or voting instructions you may have submitted using ourGOLD proxy card orGOLD voting instruction form.
OUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY WHITE PROXY CARD SENT TO YOU BY OR ON BEHALF OF FIRST MANHATTAN.mail.
determine whether or not a quorum is present. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum. See "What effect do withhold votes, abstentions and
broker non-votes have on the proposals?" below for more information concerning the effect of withhold votes, abstentions and broker non-votes.
Other Proposals.Proposals. The proposals regarding advisory approval of the Company's executive compensation, the ratification of the appointment of OUM and the Bylaw Repeal Proposal,approval of an amendment to the Company's 2010 Equity Incentive Plan each requires the affirmative vote of a majority of the shares present in person or represented by proxyProxy and entitled to vote on that proposal. Please note, however, that the proposals regarding the advisory approval of the Company's executive compensation and the ratification of OUM are advisory only and will not be binding on the Company, the Board or any committee of the Board. The results of the votes on these two advisory proposals will be taken into consideration by the Company, the Board or the appropriate committee of the Board, as applicable, when making future decisions regarding these matters.
Abstentions.Abstentions. Pursuant to Delaware law, abstentions are counted for purposes of determining both (i) the presence or absence of a quorum for the transaction of business and (ii) the total number of votes cast with respect to a proposal, other than the election of directors. We intend to treat abstentions in this manner. With respect toFor all proposals other than the election of directors, only the nine nominees receiving the most "FOR" votes will be elected as directors. For all other proposals, abstentions will have the same effect as a vote against the proposal. Abstentions will be counted as present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting.
Broker Non-Votes.Non-Votes For brokerage accounts that receive proxy materials from or on behalf of both the Company and First Manhattan, all items listed in the notice for the meeting will be considered non-routine matters. In that case, if you do not submit any voting instructions to your broker, your shares will not be counted in determining the outcome of any of the proposals at the Annual Meeting, nor will your shares be counted for purposes of determining whether a quorum exists. However, if you receive proxy materials only from us, a. A broker is entitled to vote shares held for a beneficial holder on routine matters, such as the ratification of the appointment of OUM as the Company's independent registered public accounting firm, without instructions from the beneficial holder of those shares. On the other hand, a broker is not entitled to vote shares held for a beneficial holder on certain non-routine items, such as the election of directors, the advisory
approval of the Company's executive compensation and the Bylaw Repeal Proposal.amendment to the Company's 2010 Equity Incentive Plan.If you are a beneficial holder and want your vote to count on these non-routine proposals, it is critical that you instruct your broker how to vote your shares.shares on these non-routine proposals. Consequently, if you receive proxy materials only from us and you do not submit any voting instructions to your broker, your broker may
exercise its discretion to vote your shares only on the proposal to ratify the appointment of OUM. If your shares are voted on this item as directed by your broker, your shares will constitute "broker non-votes" on each of the non-routine items and will not be counted in determining the number of shares necessary for approval of the non-routine items, although they will count for purposes of determining whether a quorum exists.
Other than matters and proposals described in this Proxy Statement, we have not received valid notice of any other business to be acted upon at the Annual Meeting.
Morrow has informed us that it intends to employ approximately 50 persons to solicit proxies.$15,000. Proxies may also be solicited by certain of our directors, officers and regular employees, without additional compensation, by mail, facsimile, telephone, telegraph, Internet, in person and by advertisement. Our expenses related to the solicitation of proxies, including fees for attorneys and other advisers and advertising, printing and related costs, but excluding salaries and wages of our regular employees, are currently expected to be approximately $4,045,000, of which $611,000 has been incurred to date.
MORROW & CO., LLC470 West AvenueStamford, CT 06902
Stockholders May Call Toll-Free: (800) 662-5200Banks & Brokers May Call Collect: (203) 658-9400Email: vivusinfo@morrowco.com
PARTICIPANTS IN THE PROXY SOLICITATION
Under applicable regulations of the SEC, in addition to the Company, each person who is a member of the Board and each person who is an executive officer of the Company listed below under "VIVUS's Board of Directors and Certain Executive Officers" inAnnex A is deemed to be a "participant" in the proxy solicitation. Information relating to the participants in our solicitation is contained inAnnex A andAnnex B attached hereto. Proxies may also be solicited by certain of our regular employees, without additional compensation.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Overview of Election of Directors
Our bylawsAmended and Restated Bylaws currently authorize a Board of Directors of nineeleven directors. On the recommendation of our Nominating and Governance Committee, the Board of Directors has nominated Lelandthe following seven directors: Samuel F. Wilson, PeterColin, M.D., Alexander J. Denner, Ph.D., Seth H. Z. Fischer, Johannes J.P. Kastelein, M.D., Ph.D., David Y. Tam, Mark B. Logan, J. Martin Carroll, Charles J. Casamento, Ernest Mario, Ph.D.,Norton, Jorge Plutzky, M.D., Linda M. Dairiki Shortliffe, M.D. and Robert N. WilsonHerman Rosenman for election as directors. All nineseven of the nominees are currently members of the Board. Three of our incumbent directors, Michael J. Astrue, J. Martin Carroll and Mark B. Logan, will not stand for re-election at the Annual Meeting. Robert N. Wilson resigned from the Board effective June 20, 2014. The Board has not nominated a replacement for Messrs. Astrue, Carroll, Logan and Wilson for election at the Annual Meeting. The Board may elect directors to fill the vacancies after the Company's Annual Meeting if it identifies a candidate or candidates with the necessary skills, qualifications and experience. Any directors elected by the Board will hold office until the next annual meeting of Directors.shareholders and until his or her successor is duly elected and qualified.
Unless otherwise instructed, the proxy holdersProxy Holders will vote the proxiesProxies received by them for the nineseven nominees named below. In the event that any of our nominees is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be votedpersons named in this Proxy reserve the right, in their discretion, to vote for anya substitute nominee who shall be designated by the current Board of Directors to fill the vacancy.Board. It is not expected that any of the nominees will be unable or will decline to serve as a director. In the event that additional persons are nominated for election as directors, the proxy holdersProxy Holders intend to vote all proxiesProxies received by them in such a manner as will assure the election of as many of the nominees listed below as possible.
All directors hold office until the next Annual Meetingannual meeting of Stockholdersstockholders or until their successors have been elected and qualified. Officers serve at the discretion of the Board of Directors.Board. There are no family relationships between any of our directors or executive officers.
Background to the Board's Recommendation in Favor of Our Nominees
We believe that each of our nineseven nominees has professional experience in areas relevant to our strategy and operations and offers experience, leadership and continuity at a critical time for our future. We also believe that our nominees have other attributes necessary to create an effective board of directors: high personal and professional ethics, integrity and values; vision and strategic perspective; experience with regulatory and government processes; practical judgment and excellent decision-making skills; the ability to devote significantthe necessary time to serve on our Board and its committees and to work in a
collaborative manner with other Board members; and a commitment to representing the interests of all our stockholders.
In addition, our sevensix independent directors, who comprise three-quartersthe majority of our Board, bring valuable experience and leadership in critical areas. Our independent directors serve significant roles on our Board committees. In light of their complementary experience, relevant expertise, and diverse industry and educational backgrounds, these nominees provide the Board with the executive leadership necessary to lead us into the future.
More information regarding our Board nominees is set forth below.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR ALL""FOR" ALL OF THE BOARD'S NINESEVEN NOMINEES FOR DIRECTOR ON THE ENCLOSED GOLD PROXY CARD OR GOLD VOTING INSTRUCTION FORM. OUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY WHITE PROXY CARD SENT TO YOU BY OR ON BEHALF OF FIRST MANHATTAN.
The persons named as proxies intend to vote the proxies "FOR ALL" of these nominees unless you indicate on theGOLD proxy card orGOLD voting instruction form a vote to "WITHHOLD" your vote or a vote "FOR ALL EXCEPT" any of the nominees. If for some reason any director nominee is unable to serve, or for good cause will not serve if elected, the persons named as proxies may vote for a substitute nominee recommended by the Board, and unless you indicate otherwise on theGOLD proxy card orGOLD voting instruction form, the proxies will be voted in favor of the remaining nominees. If any substitute nominees are designated, we will file an amended proxy statement that, as applicable, identifies the substitute nominees, discloses that such nominees have consented to being named in the revised proxy statement and to serve if elected, and includes certain biographical and other information about such nominees required by the SEC's rules and regulations.
Background to Potential Contested Solicitation
On March 7, 2013, First Manhattan announced its intention to nominate a slate of directors for election to our Board of Directors at the 2013 Annual Meeting and present a proposal to repeal any bylaw amendment in effect at the time of the Annual Meeting that was not included in our bylaws in effect as of April 18, 2012, as amended on February 20, 2013, and that is inconsistent with the election of the First Manhattan Nominees at the Annual Meeting. First Manhattan provided the Company with the identity of its six nominees for election to the Board at the Annual Meeting as well as two alternate/additional nominees.
In a letter dated March 21, 2013, First Manhattan requested, pursuant to Section 220 of the General Corporation Law of the State of Delaware, or DGCL, to inspect certain books and records of the Company relating to ownership of the Company's stock; it also submitted a proposed confidentiality agreement to govern its use of such information. In a letter dated March 29, 2013, the Company notified First Manhattan that it was willing to provide the requested information provided that First Manhattan execute a revised form of the proposed confidentiality agreement and reimburse the Company for its reasonable costs incurred in producing such information. As of May 10, 2013, the Company has not received any further response from First Manhattan with respect to this information request.
In a letter dated April 2, 2013, the Company requested that the Nominating and Governance Committee of the Board of Directors be given the opportunity to evaluate and interview each First Manhattan Nominee for election to the Board of Directors. The Company enclosed with its letter an abbreviated version of the Company's standard directors and officers questionnaire regarding director independence and related matters and requested that each such nominee complete it and return a copy to the Nominating and Governance Committee.
In a letter dated April 9, 2013, First Manhattan informedThe persons named as Proxies intend to vote the Company that it was willing to make its nominees for election to the Board of Directors available for interviews by the Nominating and Governance Committee, and such nominees were willing to undertake such interview and provide the Nominating and Governance Committee with completed copies of the director nominee questionnaire, provided that the Company would first agree with First Manhattan to announce the date of the Annual Meeting, to be no later than June 30, 2013, and confirm that the Annual Meeting would not be delayed without the mutual written agreement of First Manhattan and the Company. First Manhattan also requested that the interviews of its director nominees by the Nominating and Governance Committee be completed by April 21, 2013.
In a letter dated April 11, 2013, First Manhattan requested, pursuant to Section 220 of the DGCL, to inspect certain books and records of the Company relating to certain historical (i) regulatory and commercial developments in connection with the Company, (ii) stock trades by former directors of the Company and (ii) financing arrangements of the Company.
In a letter dated April 12, 2013, the Company, in reply to First Manhattan's letter of April 9, 2013, informed First Manhattan that the evaluation process of the Nominating and Governance Committee did not lend itself to an abbreviated timeline, but that the Nominating and Governance Committee was actively evaluating candidates with the goal of completing such review in the next several weeks. It also informed First Manhattan that the Board of Directors did not believe it was appropriate to enter into an agreement with a single stockholder that would restrict the Board of Directors' ability to comply with its fiduciary obligations to schedule the Annual Meeting on a date and in a manner that is in the best interests ofProxies "FOR" all of these nominees unless you indicate on the Company's stockholders. It also informed First Manhattan that it remained the Nominating and Governance Committee's expectation and hope that the First Manhattan Nominees for electionProxy Card or Voting Instruction Form a vote to the Board of Directors would cooperate in the Nominating and Governance Committee's evaluation of their suitability for nomination for election to the Board of Directors.
In a letter dated April 15, 2013, First Manhattan informed the Company that it was willing to submit its nominees for election to the Board of Directors for interviews by the Nominating and Governance Committee provided that the Company publicly and firmly commit to a specified meeting date no later than June 30, 2013 and the Committee firmly commit to a near-term date for completion of its interview process.
In a letter dated April 18, 2013, the Company declined to grant the inspection right sought by First Manhattan in its letter of April 11, 2013 because, in the view of the Company's Delaware counsel, the First Manhattan demand did not state a proper purpose under the DGCL.
In a letter dated April 19, 2013, the Company, in reply to First Manhattan's letter of April 15, 2013, informed First Manhattan that the Board of Directors believed it was not appropriate to enter into a commitment or agreement with a single stockholder that would restrict the Board of Directors' ability to comply with its fiduciary obligations to schedule the Annual Meeting on a date and in a manner that is in the best interests of all of the Company's stockholders. It also informed First Manhattan that the Nominating and Governance Committee was not in a position to commit to completing its evaluation of nominees for election to the Board of Directors by a near-term date, but that the goal of the Nominating and Governance Committee was to complete its current review of candidates in the next several weeks. It also informed First Manhattan that it remained the Nominating and Governance Committee's expectation and hope that the First Manhattan Nominees for election to the Board of Directors would cooperate in the Nominating and Governance Committee's evaluation of their suitability for nomination for election to the Board of Directors.
In a letter dated April 24, 2013, First Manhattan informed the Company that First Manhattan would not have its nominees for election to the Board of Directors participate in the Nominating and Governance Committee's interview process.
In a letter dated April 25, 2013, First Manhattan, in reply to the Company's letter of April 18, 2013, renewed its request of April 11, 2013, to inspect the books and records of the Company identified in such letter and explained further the reasons it sought access to such information.
In a letter dated May 1, 2013, the Company declined once again to grant the inspection right sought by First Manhattan in its letter of April 25, 2013 because, in the view of the Company's Delaware counsel, the renewed request did not state a proper purpose under the DGCL.
On May 1, 2013, First Manhattan filed with the SEC its preliminary proxy statement.
On May 23, 2013, First Manhattan notified the Company of its intent to nominate three additional persons for election to our Board of Directors at the Annual Meeting.
On May 24, 2013, First Manhattan filed with the SEC an amended preliminary proxy statement presenting proposals to (i) nominate nine persons for election to the Board of Directors at the Annual Meeting, (ii) vote against the Company's proposal to approve, on an advisory basis, the compensation of the Company's named executive officers, (iii) ratify the appointment of OUM & Co., LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2013 and (iv) repeal any bylaw amendment in effect at the time of the Annual Meeting that was not included in our bylaws in effect as of April 18, 2012, as amended on February 20, 2013, and that is inconsistent with the election of the First Manhattan Nominees at the Annual Meeting.
On April 16, 2013, the U.S. Food and Drug Administration (FDA) approved the Company's amendment and modification to the Risk Evaluation and Mitigation Strategy (REMS) for Qsymia®, the Company's anti-obesity drug. The amendment, submitted in October 2012, allows Qsymia to be dispensed through certified retail pharmacy locations, in addition to the existing network of certified mail-order pharmacies.
On April 24, 2013, the Company entered into a Commercial Rebate Agreement with Medco Health Solutions, Inc., or Medco, whereby Qsymia has been added to Medco's national formulary in a tier-3 position with a prior authorization. Under the Medco agreement, patients will pay an estimated $50.00 to $60.00 for their co-payment for a monthly prescription of Qsymia, approximately one-third of the retail price. This agreement, together with our existing agreement with Express Scripts, results in Qsymia being available to the 64 million lives covered collectively by these plans.
On April 26, 2013, the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending the granting of a marketing authorization in the European Union for the European version of STENDRA, known as SPEDRA™, for the treatment of erectile dysfunction. The CHMP recommendation will now be referred to the European Commission, which grants marketing authorization for medicines in the European Union. A final decision from the EC regarding the SPEDRA Marketing Authorization Application is expected within approximately two months of the CHMP's opinion.
On April 26, 2013, the Company appointed Robert N. Wilson, Chairman of Mevion Medical Systems and former Vice Chairman of the board of directors of Johnson & Johnson, to our Board of Directors as an independent director.
In April 2013, the National Pharmacy Benefits Management Services, U.S. Department of Veterans Affairs, published a "Criteria for Use" for Qsymia. As a result, veterans whose body mass index (BMI) and other health criteria fall within the Qsymia label can access Qsymia for a $9 co-pay.
On May 7, 2013, the Company announced that Richard Fante, former President U.S., CEO North America and Regional Vice President Americas at AstraZeneca, has agreed to provide advisory services
to the Company regarding commercial options to access the primary care market and maximize the value of Qsymia.
On May 9, 2013, the Company appointed J. Martin Carroll and Jorge Plutzky, M.D., to the Board as new independent directors. Dr. Plutzky's appointment was effective as of May 10, 2013.
During the past year, the Company has achieved important milestones in the execution of its commercial strategy. The Board has played a critical role in our recent progress, including positioning the Company with the flexibility to maintain a full range of options to maximize value for all of our stockholders. The Board is comprised of proven business leaders who possess a broad range of management, finance, clinical and operational experience. We believe that a near complete turnover of the Board at this time would significantly jeopardize the progress we are making on our strategic objectives."WITHHOLD" your vote. Our Board recommends that you vote "FOR ALL""FOR" all of the Board's nineseven nominees for director.
Biographical Information for Nominees
The nominees, and certain information about them as of May 13, 2013,July 31, 2014, are set forth below.
Name of Nominee | Age | Position Held with the Company | First Became a Director | ||||||
---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson | 69 | Chief Executive Officer and Director | 1991 | ||||||
Peter Y. Tam | 49 | President and Director | 2009 | ||||||
Mark B. Logan(1)(3) | 74 | Chairman of the Board of Directors | 1999 | ||||||
J. Martin Carroll | 63 | Director | 2013 | ||||||
Charles J. Casamento(1)(2)(3) | 67 | Director | 2008 | ||||||
Ernest Mario, Ph.D.(1)(2) | 74 | Director | 2012 | ||||||
Jorge Plutzky, M.D. | 54 | Director | 2013 | ||||||
Linda M. Dairiki Shortliffe, M.D.(2)(3) | 64 | Director | 1999 | ||||||
Robert N. Wilson | 72 | Director | 2013 |
Name of Nominee | Age | Position Held with the Company | First Became a Director | ||||||
---|---|---|---|---|---|---|---|---|---|
Samuel F. Colin, M.D.(2)(3) | 49 | Director | 2013 | ||||||
Alexander J. Denner, Ph.D.(3) | 45 | Director | 2013 | ||||||
Seth H. Z. Fischer. | 58 | Chief Executive Officer and Director | 2013 | ||||||
Johannes J.P. Kastelein, M.D., Ph.D. | 60 | Director | 2013 | ||||||
David Y. Norton(2)(3) | 62 | Director | 2013 | ||||||
Jorge Plutzky, M.D.(3) | 55 | Director | 2013 | ||||||
Herman Rosenman(1)(2) | 66 | Director | 2013 |
LelandSamuel F. Wilson has served as a director since April 1991 and our Chief Executive Officer since November 1991. Mr. Wilson also served as our President from April 1991 to October 2009. From 1989 to 1991, Mr. Wilson was Vice President of Marketing and Corporate Development of Genelabs Technologies, Inc.Colin, M.D., a biopharmaceuticals and diagnostics company. From 1986 to 1989, Mr. Wilson was Group Product Director, later promoted to Director of Marketing, at LifeScan, Inc., a Johnson & Johnson company, which manufactures and markets blood glucose monitoring systems. Mr. Wilson holds a B.S. and an M.S. in Reproductive Physiology from Pennsylvania State University.
Mr. Wilson's long tenure with the Company as its Chief Executive Officer brings necessary historic, operational and leadership experience to the Board of Directors. Mr. Wilson's scientific background and extensive drug development and marketing experience afford the Board of Directors unique insight and guidance into strategic issues and opportunities that face the Company.
Peter Y. Tam has served as a director and our President since October 2009. From January 2009 to October 2009, Mr. Tam served as our Chief Operating Officer. From July 2004 to January 2009, Mr. Tam served as our Senior Vice President of Product and Corporate Development. From November 2002 to July 2004, Mr. Tam served as our Vice President of Strategic Planning and Corporate Development. Mr. Tam joined the Company in 1993 as Manager of Clinical Research and in 1999 he assumed the responsibilities of Director of Clinical and Corporate Development. Mr. Tam holds a B.S. in Chemistry from University of California Berkeley and an M.B.A. from Santa Clara University.
Mr. Tam's scientific and business background in the areas of clinical, regulatory and corporate development have resulted in building the Company's product portfolio, guiding the development of product candidates and achieving multiple regulatory approvals in the United States during his service with the Company.
Mark B. Logan has served as a director of the Company since March 1999July 19, 2013. Dr. Colin is currently a Senior Managing Director at First Manhattan Co., which provides investment management services to individuals, partnerships, trusts, retirement accounts and was elected Chairman of the Board of Directors in April 2007. Frominstitutional clients. He has been employed at First Manhattan since 1994, until his retirement in 2001, Mr. Loganand has served as Chairman and Chief Executive Officerthe sole portfolio manager, since inception, of VISX, Inc. (now a parttwo pooled investment vehicles, beginning in 1998; the vehicles currently have assets under management of Abbott Laboratories), a public ophthalmic device company, which invented, obtained FDA approval and commercialized the procedure for correcting refractive vision errors known as LASIK.over $500,000,000. From 1992 to 1994, Mr. LoganDr. Colin was Chairman, Presidentan intern and Chief Executive Officerresident in dermatology at Yale-New Haven Hospital. Dr. Colin earned his M.D. from the Yale School of Insmed Pharmaceuticals, Inc., a development stage biopharmaceutical company,Medicine, where he had served on its board since its founding in 1988. From 1990 to 1992, Mr. Logan was a principal at McManus Associates, Inc., a researchresearched molecular neuropharmacology, and management firm, specializing in the health care field. From 1981 to 1985, Mr. Logan served as Executive Vice President, Chief Operating Officer, andhis B.Sc. Human Biology from Brown University.
Dr. Colin's qualifications as a member of the board of Bausch & Lomb, Inc., a company focusing on eye health products. From 1975 to 1981, he was Consumer Group President of Becton, Dickinsondirector include his investment expertise and Co., a publichis medical technology company. From 1967 to 1974, Mr. Logan served as President and General Manager of a subsidiary of Wyeth, Inc. (formerly American Home Products Corp., now a part of Pfizer, Inc.), a public pharmaceutical company. Since November 2010, Mr. Logan has also served on the board of STAAR Surgical Company, a public company that designs, develops and manufactures intraocular lenses. Since 2011, he has served on the board of Gencia Corporation, a private biotechnology company. From 1997 to 2006, he served on the board of Abgenix, Inc., a public biotechnology company which was acquired by Amgen Corporation. From 2000 to 2001, he also served on the board of Somnus Medical Technologies, a public company that designs, develops, manufactures and markets medical devices and which was acquired by Gyrus Group PLC. From 1996 to 1997, he served on the board of Imagyn Medical, Inc., a public company that designs and markets medical devices and which was acquired by Urohealth Systems, Inc. In addition, since 2002, Mr. Logan has served on the advisory board of The University of Virginia Heart and Vascular Center and has been a Trustee and member of the Executive Committee of the Southern Environmental Law Center since 2002. In 1999, Mr. Logan was inducted into the Ernst & Young Entrepreneur of the Year Hall of Fame. Mr. Logan holds a B.A. from Hiram College, was a Woodrow Wilson Fellow at New York University and completed the Program for Management Development at Harvard Business School.
Mr. Logan's prior extensive executive level operational experience at public pharmaceutical and medical device companies brings essential experience to the Board of Directors and its committees needed for strategic planning, product development and commercialization, finance and operations and executive compensation. Mr. Logan's long tenure on our Board of Directors, experience on other public boards and foundations, and previous experience as the chairman and chief executive officer of a publicly traded company bring necessary leadership and governance skills to the Board of Directors and its committees.background.
Alexander J. Martin CarrollDenner, Ph.D., has served as a director of the Company since May 9,July 19, 2013. From August 2002 through March 2013, Mr. Carroll served at Boehringer Ingelheim GmbH (BI),Dr. Denner is a pharmaceutical company, most recently as Head, Global Strategy and Development. After joining BI in August 2002, Mr. Carroll was appointed Presidentfounding partner and Chief ExecutiveInvestment Officer of Boehringer Ingelheim USSarissa Capital Management LP, a registered investment advisor formed in January 20032012. Sarissa Capital focuses on improving the strategies of companies to better provide shareholder value. From 2006 to November 2011, Dr. Denner served as a Senior Managing Director of Icahn Capital, an entity through which Carl C. Icahn conducts his investment activities. Prior to that, he served as a portfolio manager at Viking Global Investors, a private investment fund, and served through 2011. From 1985 to 2001, Mr. Carroll served in various marketing, business development, sales and administrative positions at Merck & Co.,Morgan Stanley Investment Management, a global asset management firm. Dr. Denner is a director of Biogen Idec Inc., a publicpublicly traded biopharmaceutical company, where he has served since 2009, and ARIAD Pharmaceuticals, Inc., a publicly traded pharmaceutical company. From 1984 to 1985, Mr. Carrollcompany, where he has served since 2014. During the past five years, Dr. Denner has served as a Merck Executive ondirector of the President's Commission on Executive Exchange at the United States Environmental Protection Agency. From 1976 to 1984, he served in various operational roles at Merck & Co., Inc. From 2004 to 2005, he served on the board of Accredo Health Group,following publicly traded companies: Amylin Pharmaceuticals, Inc., a publicpublicly traded biopharmaceutical company, acquired by Medco Health Solutions,from 2009 until 2012; Enzon Pharmaceuticals, Inc., whicha publicly traded biopharmaceutical company, from 2009 until 2013; ImClone Systems Incorporated, a publicly traded biopharmaceutical company where he was Chairman of the Executive Committee, from 2006 until its acquisition in 2008; and Mast Therapeutics, Inc. (formerly named Adventrx Pharmaceuticals, Inc.), a publicly traded biopharmaceutical company, from 2006 until 2009. Dr. Denner received his S.B. degree
provides specialty pharmacyfrom the Massachusetts Institute of Technology and related services.his M.S., M.Phil. and Ph.D. degrees from Yale University.
Dr. Denner has significant experience overseeing the operations and research and development of healthcare companies and evaluating corporate governance matters. He also has extensive experience as an investor, particularly with respect to healthcare companies, and possesses broad healthcare industry knowledge.
Seth H. Z. Fischer has served as the Chief Executive Officer and as a director of the Company since September 3, 2013. Mr. CarrollFischer served in positions of increasing responsibility with Johnson & Johnson, a public healthcare company, from 1983 until his retirement in 2012. Most recently, Mr. Fischer served as Company Group Chairman Johnson & Johnson and Worldwide Franchise Chairman, Cordis Corporation from 2008 to 2012, which included responsibility for Cordis and Biosense Webster, and as Company Group Chairman, North America Pharmaceuticals from 2004 to 2007, which included responsibility for Ortho-McNeil Pharmaceuticals, Janssen and Scios. Prior to this position, Mr. Fischer served as President of Ortho-McNeil Pharmaceuticals from 2000 to 2004, with his operating responsibilities encompassing the commercialization of products in multiple therapeutic categories including Topamax® for epilepsy and migraine and products in the analgesic, anti-infective, cardiovascular, neurologic, psychiatric and women's health areas. Since 2013, Mr. Fisher has served on the board of BioSig Technologies, Inc., a medical device company, and since 2013, Mr. Fischer has served as an advisor of MedHab, LLC, a medical device limited liability company. From April 2013 to September 2013, Mr. Fischer served on the Board of Trius Therapeutics, Inc., a public pharmaceutical company, until it was acquired by Cubist Pharmaceuticals. Mr. Fischer holds a B.A.Bachelor of General Studies from Holy Cross CollegeOhio University and served as a M.B.A. from Babson University.captain in the U.S. Air Force.
Mr. Carroll'sFischer's prior extensive executive level operational experience in operations, marketing, sales and business development at pharmaceutical companiesJohnson & Johnson brings essential experience to the Board of Directors needed for strategic planning, product development and commercialization finance and operations and executive compensation.operations.
Charles J. Casamento has served as a director of the Company since April 2008. Since 2007, Mr. Casamento has been Executive Director and Principal of The Sage Group, Inc.Johannes J.P. Kastelein, M.D., a public healthcare advisory company specializing in business development strategy and transactions. From October 2004 to April 2007, Mr. Casamento was President and Chief Executive Officer of Osteologix, Inc., a public specialty pharmaceutical company, and served on Osteologix's board of directors. From 1999 until August 2004, he was Chairman, Chief Executive Officer and President of Questcor Pharmaceuticals, a public specialty pharmaceutical company. From 1993 to 1999, he served as Chairman, Chief Executive Officer and President of RiboGene, Inc., a public company which merged with Cypros, Inc. to form Questcor Pharmaceuticals. From 1989 to 1993, Mr. Casamento co-founded and was Chief Executive Officer and a member of the board of Indevus Pharmaceuticals, Inc. (formerly known as Interneuron Pharmaceuticals Inc.), a public company which invented a weight loss product approved by the FDA. From 1985 to 1989, he was the Senior Vice President & General Manager for Pharmaceuticals and Biochemicals at Genyzme Corporation, a public biotechnology company. From 1983 to 1985, Mr. Casamento served as the Vice President of Business Development and Strategic Planning for the Critical Care division of American Hospital Supply Corporation, a public medical supply, device and pharmaceutical company. From 1979 to 1983, he served as the Director of New Medical Products and Acquisitions of Johnson & Johnson, a public medical devices, pharmaceutical and consumer packaged goods manufacturer. From 1977 to 1979, he also served as the Product Development Manager of Hoffmann-LaRoche Inc., a public healthcare company. From 1970 to 1977, Mr. Casamento served as the Director of New Product Planning and Licensing of Novartis International AG (formally known as Sandoz AG), a public pharmaceutical company. Since July 2011, he has served on the board of Astex Pharmaceuticals, Inc., a public biotechnology company. Since July 2010, he has served on the board of International Stem Cell Corporation, a public biotechnology company. From July 1997 to March 2013, Mr. Casamento served on the board of Cortex Pharmaceuticals, Inc., a public pharmaceutical company. From 1999 to 2003, he served as a director of LifePoint Inc., a public company which develops rapid, non-invasive testing products. From September 2002 to July 2011, he served on the board of SuperGen, Inc., a public pharmaceutical company. He is a member of the Fordham University Science Council and was previously Vice Chairman of The Catholic Medical Mission Board, a large international non-profit organization providing health care services to third world countries. Mr. Casamento holds a B.S. in Pharmacy from Fordham University and an M.B.A. from Iona College.
Mr. Casamento's extensive executive level operational experience and healthcare focused business development consulting experience bring significant experience to the Board of Directors and its committees needed for strategic planning, product development and commercialization, finance and operations and executive compensation. Mr. Casamento's director level corporate governance experience on public company boards brings governance skills to the Board of Directors and its committees.
Ernest Mario, Ph.D. has served as a director of the Company since April 2012.July 19, 2013. Since August 2007,January 2003, Dr. MarioKastelein has servedbeen a Professor of Medicine at the Department of Vascular Medicine at the Academic Medical Center of the University of Amsterdam, where he holds the Strategic Chair of Genetics of Cardiovascular Disease. In 2012, Dr. Kastelein founded Dezima Pharma B.V., a pharmaceutical company that develops assets for the treatment of dyslipidemia, and currently serves on its board of directors. Dr. Kastelein was also one of the founders of Amsterdam Molecular Therapeutics, Inc. (currently, UniQure B.V.), a gene therapy company that achieved the first approved gene therapy worldwide, and currently serves as the Chief Executive Officermajor consultant for the distribution of the gene therapy in the European Union. He also is an executive consultant to the cardiovascular and Chairmanmetabolic franchises of many leading biotechnology and pharmaceutical companies, including Amarin, Amgen, Bristol-Myers Squibb, Genentech, Merck, Novartis, Pfizer, Regeneron and Sanofi-Aventis. His advisory work has also included accompanying numerous companies to meetings with the European Medicines Agency and interacting with individual country regulatory authorities for Aegerion, CSL Behring, Eli Lilly, Genzyme, ISIS, The Medicines Company and UniQure (formerly Amsterdam Molecular Therapeutics). Dr. Kastelein has also served on Steering Committees of many landmark cardiovascular outcome trials including TNT (Lipitor, Pfizer), IDEAL (Lipitor, Ideal), JUPITER (Crestor, AstraZeneca), ACCELERATE (Evacetrapib, Eli Lilly) and the Sanofi PCSK9 Phase III ODYSSEY outcome programme (Sanofi-Aventis). Dr. Kastelein also serves on the board of directorsthe Dutch Atherosclerosis Society and as Chair of Capnia, Inc.,the National Scientific Committee on Familial Hypercholesterolemia. He is a privately held company focused onmember of the developmentRoyal Dutch Society for Medicine & Physics, the Council for Basic Science of the American Heart Association, the European Atherosclerosis Society and commercializationis a fellow at the European Society of novel therapeutic and diagnostic products to address significant unmet healthcare needs. From January 1992 until March 1993, Dr. MarioCardiology. He has also served as Deputy Chairmana board member of Glaxo Holdings plc., a public pharmaceutical company,the International Task Force for CHD Prevention, and as Chiefa member of the Executive from May 1989 to March 1993. From November 1997 to December 2001, he served as ChairmanBoard of the International Atherosclerosis Society. Dr. Kastelein has authored hundreds of publications and Chief Executive Officer of ALZA Corporation,is a
recognized world leader in the significance of lipoprotein metabolism for the development of atherosclerotic vascular disease.
Dr. Kastelein's qualifications as a director include his expertise in cardiovascular outcome trials, his regulatory experience in the European Union, his many professional associations, and his position as a director on the boards of several medical associations and pharmaceutical companies.
David Y. Norton has served as a director of the Company since July 19, 2013. Until his retirement in September 2011, Mr. Norton was Company Group Chairman, Global Pharmaceuticals for Johnson & Johnson, a multi-national company that manufactures pharmaceutical, diagnostic, therapeutic, surgical and biotechnology products. In this position he was responsible for leading and developing the strategic growth agenda, including the strategy for licensing, acquisitions and divestments, and ensuring alignment with its global strategic functions, research basedand development and commercial organizations. Mr. Norton began his Johnson & Johnson career in 1979, and held a number of positions at the company, including Company Group Chairman, Worldwide Commercial and Operations for the CNS, Internal Medicine franchise from 2006 to 2009, Company Group Chairman for the pharmaceutical businesses in Europe, the Middle East and Africa from 2004 to 2006, and Company Group Chairman for the pharmaceutical businesses in North America from 2003 to 2004. Mr. Norton also serves as a director of Savient Pharmaceuticals Inc., a pharmaceutical company, providing drug delivery solutions, and Co-Chairman and Chief Executive Officer from August 1993 to November 1997. Since June 2012, Dr. Mariowhere he has served onsince September 2011 and as Chairman of the board of XenoPort, Inc., a public biopharmaceutical company. Since November 2010, Dr. Mario has served on the board of TONIX Pharmaceuticals Holding Corp., a public specialty pharmaceutical company. Since August 2007, he has also served on the board of Celgene Corporation, a public biopharmaceutical company. Since 2001, he has served on the board of Boston Scientific Corporation, a public company which develops, manufactures and markets medical devices and Maxygen, Inc., a public biotechnology company. In addition, from 1993 to 2011, Dr. Mario served on the board of Pharmaceutical Product Development, Inc., a contract research organization company which was later acquired by affiliates of The Carlyle Group and Hellman & Friedman. From 2003 to 2007, he also served as Chairman and Chief Executive Officer of Reliant Pharmaceuticals, Inc., a privately held pharmaceutical company. He currently serves as Chairmandirectors of the American Foundation for Pharmaceutical Education.Suicide Prevention, a not-for-profit organization exclusively dedicated to understanding and preventing suicide. Since 1996, he2012, Mr. Norton has served as an advisorSenior Advisor to The Ernest Mario SchoolTapestry Networks, a company that creates leadership networks to promote collaboration among professional leaders. He previously served as a member of Pharmacy at Rutgers University. Dr. Mario is the recipient of the 2007 Remington Medal, the American Pharmacists Association's highest honor. Dr. Mario holds a B.S. in Pharmacy from Rutgers University, and an M.S. and a Ph.D. in Physical Sciences from the University of Rhode Island.
Dr. Mario's significant prior and current executive level operational experience at therapeutic and pharmaceutical companies brings essential experience to the Board of Directors of the Alliance for Aging Research, on the board of directors of the Pharmaceutical Research and its committees needed for strategic planning, product developmentManufacturers of America, and commercialization, financeas a committee member of the Australian Pharmaceutical Manufacturers Association.
Mr. Norton's qualifications as director include his extensive global commercial experience in the pharmaceutical and operations, risk managementbiotechnology industry and executive compensation decisions. Dr. Mario'shis experience serving on otherseveral boards of directors, including as Chairman of the board of a public and private company boards and foundations brings necessary leadership and governance skills to the Board of Directors and its committees.pharmaceutical company.
Jorge Plutzky, M.D. has served as a director of the Company since May 10, 2013. Since 1996, he has served as the Director of The Vascular Disease Prevention Program, which includes the Lipid/Prevention Clinic, in the Cardiovascular Medicine Division at Brigham and Women's Hospital, where he is also Co-Director of Preventive Cardiology. Since 1995, he has been on the faculty at Harvard Medical School and has directed a basic science laboratory focused on transcriptional mechanisms involved in adipogenesis, lipid metabolism, and diabetes, and their relationship to inflammation and atherosclerosis. Throughout his career, Dr. Plutzky has also been involved in translational clinical studies investigating links between metabolic disorders and cardiovascular disease. Dr. Plutzky has been a member of the scientific advisory boards of the Sarnoff Cardiovascular Research Foundation since 2009 and Ember Therapeutics since 2012. Dr. Plutzky has been elected to the American Society for Clinical Investigation and is a Fellow of the American College of Cardiology. Dr. Plutzky's papers have appeared in journals that includeScience,PNAS,Diabetes,Lancet, Annals of Internal Medicine, andNature Medicine. Dr. Plutzky has been involved with the U.S. Food and Drug Administration, serving both as a member of the Endocrinologic and Metabolic Drugs Advisory Committee and in advising and presenting for new drug application sponsors. He has been involved with both the American Heart Association and the American Diabetes Association. Dr. Plutzky has been recognized with the Eugene Braunwald Teaching Award, the University of Cologne's Klenk Lecture, Vanderbilt University's Rabin Lecture, Northwestern University's DeStevens Lecture, and Harvard Medical School's Tucker Collins Lecture. Dr. Plutzky holds a B.A. from the University of Virginia, where he was an Echols Scholar and a member of Phi Beta Kappa, and an M.D. from the University of North Carolina, Chapel Hill. He completed research fellowships at the National Institutes of Health and the Massachusetts Institute of Technology.
Dr. Plutzky's clinical background, medical knowledge, and basic science expertise in the prevention and treatment of cardiometabolic disease brings valuable and unique insight to the Board of Directors as evaluation, development and commercialization of our current and potential future products proceed.
Linda M. Dairiki Shortliffe, M.D.Herman Rosenman has served as a director of the Company since July 19, 2013. Mr. Rosenman was Senior Vice President, Finance and Chief Financial Officer of Gen-Probe, Inc. (currently, Hologic, Inc.), a molecular diagnostic company, from June 1999. Since 1981, Dr. Shortliffe has2001 to October 2012. Prior to joining Gen-Probe in 2001, Mr. Rosenman was President and Chief Executive Officer of Ultra Acquisition Corp., a retail chain and consumer products manufacturer, from 1997 to 2000. In addition, he served as President and Chief Executive Officer of RadNet Management, Inc., a Professor of Urology at Stanford University School of Medicinelarge healthcare provider, from 1994 to 1997, and as an endowed Professor since 2005. From 1995 to 2011, she was the Chair of the Department of Urology at Stanford University School of Medicine. She was also the foundingExecutive Vice President and Chief of Pediatric Urology at Lucile Salter Packard Children's Hospital at Stanford in 1991. From 1981 to 1986, she served as the Chief of Urology at Palo Alto Veterans Administration Hospital. In these roles, Dr. Shortliffe was responsibleFinancial Officer for all departmental clinical and research development and administrative, financial, and personnel affairs. She is a Fellow of the American College of Surgeons and the American Academy of Pediatrics. In addition, she is a past Trustee and President of the American Board of Urology, past President of the Society for University Urologists, and past Chair of the American Academy of Pediatrics Section on Urology. She chaired the Bladder Research Program Review Group for the National Institute of Diabetes and Digestive and Kidney Diseases of the National Institutes of Health. She has had nationally funded basic and clinical research and published over 150 articles and chapters. Dr. Shortliffe holds an A.B. from Radcliffe/Harvard College and an M.D. from Stanford University and was a Fellow at the Radcliffe Institute for Advanced Study at Harvard University and the Clayman Institute at Stanford University.
Dr. Shortliffe's clinical and administrative medical background brings valuable insight to the Board of Directors needed to evaluate, develop and commercialize our current and future product candidates.
Robert N. Wilson has served as a director of the Company since April 2013. From 1964 to 2003, Mr. Wilson served in various roles at Johnson & Johnson, a public healthcare company, including the Executive Committee from 1983 through 2003 and Vice Chairman of the board from 1988 through 2003. Since 2007, Mr. Wilson has also been Chairman of Mevion Medical Systems, Inc. (formerly Still River Systems)Rexene Corp., a medical device company. Since 2003,Fortune 1000 company in the petrochemicals industry. Mr. Wilson hasRosenman was previously a partner at Coopers & Lybrand (currently, PricewaterhouseCoopers LLP) where he served as a member ofnumerous Fortune 1,000 clients, principally in the pharmaceuticals and telecommunications industries. Mr. Rosenman currently serves on the board of Synta Pharmaceuticals Corporation,directors of Oxford Immunotec Global PLC, a public biopharmaceutical company, and a member ofpublicly traded diagnostics company. Mr. Rosenman also served on the board of Charles Schwab Corporation,directors of Discovery Partners International, Inc., from 2003 until its reverse-merger into Infinity Pharmaceuticals, Inc. in 2006, and thereafter Infinity Pharmaceuticals, Inc., where he served until 2007, as well as on the boards of directors of ARYx Therapeutics, Inc., from which he resigned in 2011, and Emphasys Medical, Inc. Mr. Rosenman received a public brokerageB.B.A. in finance and banking company. Since 1996, he has been a memberaccounting from Pace University and an M.B.A. in finance from the Wharton School of the boardUniversity of Hess Corporation, a public oil and gas company. From 2004 to 2007, Mr. Wilson was also Chairman of Caxton Health Holdings, LLC, a healthcare-focused investment firm.Pennsylvania.
Mr. Wilson's knowledge and extensiveRosenman's qualifications as director include his experience in the pharmaceuticalbiotechnology and pharmaceuticals industries, his extensive leadership experience as both a Chief Executive Officer and a Chief Financial Officer, his diverse industry brings essential experiencebackground in companies ranging from large multinational corporations to the Boardstart-ups, and his broad base of Directors. In addition, Mr. Wilson's significant experience on other publicly traded company boards of directorsexpertise with initial public offerings, mergers & acquisitions, turn-arounds and board committees provides him with an understanding of current corporate governance practices and trends and compensation matters that provides value to our Board of Directors.high growth companies.
Directors are elected by a plurality of votes cast at the election. This means that the nineseven nominees who receive the highest number of votes will be selected as directors. The way to support our Board nominees is to vote"FOR ALL" the Board's nominees on theGOLD proxy card. Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum for the transaction of business, but they have no other legal effect under Delaware law.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED LELANDSAMUEL F. WILSON,PETERCOLIN, M.D., ALEXANDER J. DENNER, PH.D., SETH H. Z. FISCHER, JOHANNES J.P. KASTELEIN, M.D., Ph.D., DAVID Y. TAM, MARK B. LOGAN, J. MARTIN CARROLL, CHARLES J. CASAMENTO,ERNEST MARIO, PH.D.,NORTON, JORGE PLUTZKY, M.D., LINDA M. DAIRIKI SHORTLIFFE, M.D.
AND ROBERT N. WILSONHERMAN ROSENMAN AS ITS NOMINEES AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR ALL""FOR" ALL OF THESE NOMINEES AS DIRECTORS.
PROPOSAL NO. 2:
ADVISORY VOTE ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Our stockholders are afforded this advisory vote pursuant to the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and related federal securities laws set forth at Section 14A of the Securities Exchange Act of 1934, as amended. Although we describe this to be a solicitation of an advisory vote on compensation for our named executive officers, it is more commonly known as "say-on-pay." In accordance with the results of the say-on-pay frequency vote held inat our 2011 Annual Meeting of Stockholders, we currently hold say-on-pay votes every yearon an annual basis, and unless the Board
of Directors modifies its determination on the frequency of future advisory say-on-pay votes, the next advisory say-on-pay vote is expected to occurwill be held at next year'sour 2015 Annual Meeting of Stockholders.
By way of this solicitation, stockholders may submit a non-binding advisory vote to approve the compensation of our named executive officers as discussed in the Compensation Discussion and Analysis section beginning at page 3036 of this Proxy Statement and as summarized in the Summary Compensation Table on page 4250 of this Proxy Statement, which provides an annual snapshot of the compensation paid or granted to our named executive officers.
Although it is non-binding, the Board of Directors and the Compensation Committee will review and carefully consider the voting results when evaluating our executive compensation program. The Compensation Committee will receive a report on the outcome of the say-on-pay vote. Based in part on the results of this report, our Board of Directors or Compensation Committee will determine whether any changes to the compensation program should be considered for our named executive officers. We will disclose how many stockholders voted "FOR" or "AGAINST" the resolution, and how many stockholders abstained from voting.
As discussed in the Compensation Discussion and Analysis section, the Compensation Tables, and the related disclosures contained in this Proxy Statement, our compensation program is designed and implemented to attract, retain, reward and motivate our named executive officers while aligning their and our performance with the long-term interests of our stockholders. The Compensation Committee believes that our compensation program as designed and implemented through the use of a combination of base salary, cash bonus and equity compensation is effective to achieve these program goals for the following reasons:
We believe our executive compensation programs are designed in the best manner possible to support the Company and our short- and long-term business and financial objectives. Please review our Compensation Discussion and Analysis section as well as the accompanying Compensation Tables and the related disclosures on our 20122013 compensation, which describe in more detail how our executive compensation policies and procedures operate and are designed to drive stockholder value. We also urge you to read our Annual Report on Form 10-K for the year ended December 31, 2012,2013, as
supplemented by a Form 10-K/A, which follows this Proxy Statement and describes our business and our 20122013 financial results in more detail.
The affirmative vote of the holders of a majority of shares present and entitled to vote will be required to approve, on an advisory basis, the overall compensation of our named executive officers.
Our Board believes that the information provided above and within the "Executive Compensation" section of this Proxy Statement demonstrates that our executive compensation program was designed appropriately and is working to ensure that management's interests are aligned with our stockholders' interests to support long-term value creation.
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, as a matter of good corporate governance, we are asking our stockholders to approve, on an advisory basis, the following resolution relating to the overall compensation of our named executive officers as set forth in this Proxy Statement:
"RESOLVED, that the compensation paid to ourthe Company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED."
The affirmative vote of the holders of a majority of shares present and entitled to vote will be required to approve the overall compensation of our named executive officers.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVALADOPTION OF
THE OVERALLRESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.OFFICERS, AS DESCRIBED IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION AND THE RELATED TABULAR AND NARRATIVE DISCLOSURE SET FORTH IN THIS PROXY STATEMENT.
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors has selected OUM & Co. LLP, or OUM, to audit our financial statements for the fiscal year endedending December 31, 2013.2014. The decision of the Board of Directors to appoint OUM was based on the recommendation of the Audit Committee of the Board, of Directors, or the Audit Committee. Before making its recommendation to the Board, of Directors, the Audit Committee carefully considered OUM's qualifications as an independent registered public accounting firm and auditors. This included a review of the qualifications of the engagement team, the quality control procedures the firm has established, any issues raised by the most recent quality control review of the firm and its reputation for integrity and competence in auditing. The Audit Committee's review also included matters required to be considered under the SEC's Rules on Auditor Independence, including the nature and extent of non-audit services, to ensure that they will not impair the independence of the accountants. The Audit Committee expressed its satisfactionwas satisfied with OUM in all of these respects.
OUM audited our financial statements for the fiscal year endingended December 31, 2012.2013. OUM was first appointed by the Board of Directors in the fiscal year ended December 31, 2005. Representatives of OUM are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they so desire and be available to respond to appropriate questions.
Principal Accountant Fees and Services
The Audit Committee engaged OUM & Co. LLP, or OUM, as our independent registered public accounting firm beginning with the fiscal year endingended December 31, 2005. The following table presents fees for professional services rendered by OUM for the audit of our annual financial statements for fiscal years
2012fiscal years 2013 and 20112012 and fees billed for audit-related services, tax services and all other services rendered by OUM for these periods:
| 2012 | 2011 | 2013 | 2012 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit Fees(1) | $ | 389,937 | $ | 260,569 | $ | 391,051 | $ | 389,937 | ||||||
Audit Related Fees(2) | — | 10,407 | — | — | ||||||||||
Tax Fees(3) | — | — | — | — | ||||||||||
All Other Fees(4) | 43,893 | 13,426 | 62,963 | 43,893 | ||||||||||
| | | | | | |||||||||
Total Fees | $ | 433,830 | $ | 284,402 | $ | 454,014 | $ | 433,830 | ||||||
| | | | | | |||||||||
| | | | | | |||||||||
Pre-Approval Policy and Procedures
The Audit Committee reviews and pre-approves all audit and non-audit services that may be provided by the independent registered public accounting firm, or Independent Auditor, during a specified period without the need to obtain specific pre-approval from the Audit Committee. The Independent Auditor provides an annual engagement letter to the Audit Committee with a reasonably detailed description of class of services proposed to be provided by the Independent Auditor during the period covered by the engagement letter and related estimated fees, and the Audit Committee pre-approves such engagement letter as appropriate. By approval of the engagement letter, the services in that engagement letter will have specific pre-approval. The services may include audit, audit-related, tax and all other services, and such service or class of services is subject to the pre-approved limit. Pre-approval is generally provided for up to one year, and the Audit Committee may periodically revise the amount and/or list of services that have received class pre-approvalpre- approval as necessary. Once such services have been rendered by the Independent Auditor and approved by the Audit Committee, the pre-approved limits of the annual engagement letter are re-established. If it is anticipated that the service will exceed the annual pre-approved limits, prior to commencing the audit or other permitted non-audit service, the Audit Committee will pre-approve the particular service on a case-by-case basis. No service that is absent from the record of class-approved services in the annual engagement letter may be commenced without specific pre-approval. The Audit Committee has delegated the authority to grant pre-approvals to the Audit Committee Chairman when the full Audit Committee is unable to do so. Such pre-approvals are then reviewed by the full Audit Committee at its next regular meeting. The Independent Auditor and our senior management periodically report to the Audit Committee regarding the extent of services provided by the Independent Auditor and the related fees for the services performed, as needed. In 2012,2013, all audit and non-audit services were pre-approved and reviewed in accordance with our policy.
The affirmative vote of the holders of a majority of shares present and entitled to vote will be required to ratify the selection of OUM as our independent registered public accounting firm for fiscal year 2013.2014. Stockholder ratification is not required by our bylawsAmended and Restated Bylaws or other applicable legal requirement. However, as a matter of good corporate practice, the Board of Directors is seeking stockholder ratification of its appointment of OUM as our independent registered public accounting firm. In the event that the stockholders do not approve the selection of OUM, the appointment of the independent registered public accounting firm may be reconsidered by the Board of Directors.Board. Even if the selection is ratified, the Board, of Directors, at its discretion, and at the direction of the Audit Committee, may direct the appointment of a different independent registered accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF OUM & CO. LLP,
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2013.2014.
PROPOSAL NO. 4:STOCKHOLDER PROPOSALAPPROVAL OF AN AMENDMENT TO REPEAL BYLAW AMENDMENTS
ProposalTHE 2010 EQUITY INCENTIVE PLAN
The Company's Bylaws were initially adopted on May 16, 1996 and were amended and restated on April 18, 2012. On February 20, 2013, the Board adopted Amendment No. 1 to the Amended and Restated Bylaws, which clarified the quorum and election requirements. On April 26, 2013, the Board adopted Amendment No. 2 to the Amended and Restated Bylaws, which increased the size of the Board to seven directors. On May 9, 2013, the Board adopted Amendment No. 3 to the Amended and Restated Bylaws, which increased the sizeCompany is seeking stockholder approval of the Board to nine directors.
First Manhattan has indicated that it intends to present at the Annual Meeting a proposal to repeal any bylaw amendment in effect at the time of the Annual Meeting that is not included in our bylaws in effect as of April 18, 2012, as amended on February 20, 2013, and that is inconsistent with the election of the First Manhattan Nominees at the Annual Meeting, which we refer to in this Proxy Statement as the Bylaw Repeal Proposal. On May 1, 2013, First Manhattan filed a preliminary proxy statement with the SEC which states that First Manhattan is not aware of any such provision of the Bylaws that has become effective. On May 23, 2013, First Manhattan issued a press release announcing that it had increased its slate of director nominees to nine. On May 24, 2013, First Manhattan filed an amended preliminary proxy statement with the SEC which reaffirmed that First Manhattan is not aware of any such provision of the Bylaws that has become effective. In its amended preliminary proxy statement, First Manhattan also stated that it does not believe that the Bylaw Repeal Proposal will have any effect on the two amendments to the Bylaws adopted by the Board since February 20, 2013 (as described above).
As First Manhattan stated in its amended preliminary proxy statement, the Board has not adopted any amendment to the Bylaws that it believes is inconsistent with the election of the First Manhattan Nominees at the Annual Meeting. The Company does not believe the two amendmentsVIVUS, Inc. 2010 Equity Incentive Plan to the Bylaws adoptedincrease by the Board since February 20, 2013 are inconsistent with the election of the First Manhattan Nominees, especially since First Manhattan has increased5,950,000 the number of First Manhattan Nominees to nine, and therefore believes thatshares of our Common Stock reserved under the Bylaw Repeal Proposal will not have any effect on such amendments.
2010 Equity Incentive Plan. The Board does notand the Compensation Committee believe that equity awards are an important factor in attracting, motivating, and retaining qualified personnel who are essential to the success of the Company. The 2010 Equity Incentive Plan provides a significant incentive by allowing employees to receive or purchase shares of our Common Stock.
In determining the increase to the share reserve under the 2010 Equity Incentive Plan, the Board considered a number of factors, including the following:
was terminated in June 2010 and therefore, no additional equity awards have been granted since the Board's fiduciary duties requireplan's termination or will be granted under it in the future.
The Board has approved the amendment to the Bylaws that it believes is proper and in2010 Equity Incentive Plan, subject to the best interestapproval of the Company's stockholders. The automatic repeal of any duly adopted bylaw amendment, irrespective of its content, could have the unfortunate effect of repealing one or more properly adopted bylaw amendments that the Board determined to be in the best interests of the Company and itsour stockholders including in response to unforeseeable events occurring between now and the Annual Meeting.
The Board believes that the Bylaw Repeal Proposal is unnecessary, vague and overbroad. The Board has not amended, and does not currently intend to amend, the Bylaws in a manner that is inconsistent with the election of the First Manhattan Nominees at the Annual Meeting. Furthermore, the Board is fully empowered by its corporate documents and applicable law to alter, amend, repeal or add provisions to the Company's Bylaws in accordance with its fiduciary duties. We believe the Bylaw Repeal Proposal has no purpose other than to prevent or repeal Board actions otherwise permitted by the Company's governing documents and Delaware law if it is presented at the Annual Meeting by First Manhattan.
The affirmative vote of the holders of a majority of the shares of stock present in person or represented by Proxy and entitled to vote at the Annual Meeting will be required to adoptapprove this proposal.
If our stockholders do not approve the Bylaw Repeal Proposal,proposed amendment to the 2010 Equity Incentive Plan, the Company would soon be unable to continue making grants under the 2010 Equity Incentive Plan, jeopardizing our ability to attract and retain the talent necessary for us to continue and succeed in our business.
Summary of the 2010 Equity Incentive Plan
The following is a summary of the principal features of the 2010 Equity Incentive Plan and its operation, as amended to reflect the amendment proposed in this Proxy Statement. The amended 2010 Equity Incentive Plan is attached as Appendix A to this Proxy Statement. This summary does not contain all of the terms and conditions of the 2010 Equity Incentive Plan and is qualified in its entirety by reference to the 2010 Equity Incentive Plan as set forth in Appendix A.
General
The purposes of the 2010 Equity Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide incentives to individuals who perform services to the Company, and to promote the success of the Company's business. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares and performance units.
Authorized Shares
Upon stockholder approval of the amended 2010 Equity Incentive Plan, the total number of shares of our Common Stock that will be available for issuance under the 2010 Equity Incentive Plan will equal the sum of (i) 14,449,975 shares, which is the sum of (a) 8,400,000 shares previously approved by the stockholders, (b) an increase of 5,950,000 shares pursuant to this amendment to the 2010 Equity
Incentive Plan, and (c) 99,975 shares, which is the number of shares that had been reserved but not issued pursuant to any awards granted under the 2001 Stock Option Plan as of June 25, 2010, plus (ii) the number of shares subject to outstanding awards under the 2001 Stock Option Plan that expire or otherwise terminate without having been exercised in full, or are forfeited to or repurchased by the Company (up to a maximum of 8,183,199 shares pursuant to this subsection (ii)). If any award granted under the 2010 Equity Incentive Plan expires, lapses or becomes unexercisable without having been exercised in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by the Company due to failure to vest, any such shares that are reacquired or subject to such a terminated award will again become available for issuance under the 2010 Equity Incentive Plan.
Shares subject to awards of restricted stock, restricted stock units, performance shares and performance units, which are collectively referred to as Full Value Awards, will count against the 2010 Equity Incentive Plan's share reserve as 1.22 shares for each share subject to such award. If shares acquired pursuant to Full Value Awards are forfeited or repurchased by the Company and would otherwise return to the share reserve as described above, then 1.22 times the number of shares forfeited or repurchased will return to the share reserve.
If an award expires or becomes unexercisable without having been exercised in full or is terminated due to failure to vest, the unpurchased or unissued shares subject to such award will become available for future grant or sale under the 2010 Equity Incentive Plan. Upon the exercise of a stock appreciation right settled in shares, the gross number of shares covered by the portion of the award exercised will cease to be available under the 2010 Equity Incentive Plan. If shares issued pursuant to restricted stock, restricted stock units, performance shares or performance units are repurchased by or forfeited to the Company due to failure to vest, such shares will become available for future grant under the 2010 Equity Incentive Plan. Shares used to pay the exercise price or purchase price of an award and/or to satisfy the tax withholding obligations of an award will not remain available for issuance under the 2010 Equity Incentive Plan. Payment of cash rather than shares pursuant to an award will not result in reducing the number of shares available for issuance under the 2010 Equity Incentive Plan.
Adjustments to Shares Subject to the 2010 Equity Incentive Plan
In the event of any dividend or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, exchange of shares or other securities of the Company, or other change in the corporate structure affecting our Common Stock, the Administrator (as defined below), in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2010 Equity Incentive Plan, will adjust the number and class of shares that may be delivered under the 2010 Equity Incentive Plan, and/or the number, class and price of shares of stock subject to outstanding awards, and the award grant limitations.
Administration
The 2010 Equity Incentive Plan will be administered by the Board or a committee of individuals satisfying applicable laws appointed by the Board, or the Committee. To make grants to certain officers and key employees of the Company, the members of the Committee must qualify as "non-employee directors" under Rule 16b-3 of the Securities Exchange Act of 1934, as amended. In the case of awards intended to qualify for the performance-based compensation exemption under Section 162(m), administration must be by a compensation committee comprised solely of two or more "outside directors" within the meaning of Section 162(m). For purposes of this summary of the 2010 Equity Incentive Plan, the term "Administrator" will refer to either the Committee or the Board.
Subject to the terms of the 2010 Equity Incentive Plan, the Administrator has the sole discretion to select the employees, consultants, and directors who will receive awards, to determine the terms and
conditions of awards, to modify or amend each award (subject to the restrictions of the 2010 Equity Incentive Plan), including to accelerate vesting or waive forfeiture restrictions, and to interpret the provisions of the 2010 Equity Incentive Plan and outstanding awards. The Administrator cannot (x) modify or amend an option or a stock appreciation right to reduce the exercise price of such option or stock appreciation right after it has been granted (other than pursuant to certain changes in the Company's capitalization), or (y) cancel any outstanding option or stock appreciation right and immediately replace it with a new option or stock appreciation right with a lower exercise price, unless such action is presentedapproved by the Company's stockholders before such action is taken. The Administrator may allow a participant to defer the receipt of payment of cash or delivery of shares that otherwise would be due to such participant. The Administrator may make rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or qualifying for favorable tax treatment under applicable foreign laws and may make all other determinations deemed necessary or advisable for administering the 2010 Equity Incentive Plan.
Eligibility
Awards may be granted to employees, directors and consultants of the Company and employees and consultants of any affiliate of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of July 31, 2014, the Company had approximately 103 employees, including 5 named executive officers, 20 consultants and 9 non-employee directors, who would be eligible to participate in the 2010 Equity Incentive Plan.
Stock Options
Each option granted under the 2010 Equity Incentive Plan will be evidenced by a written or electronic agreement between the Company and a participant specifying the number of shares subject to the option and the other terms and conditions of the option, consistent with the requirements of the 2010 Equity Incentive Plan.
The exercise price per share of each option may not be less than the fair market value of a share of our Common Stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company, or a Ten Percent Stockholder, must have an exercise price per share equal to at least 110% of the fair market value of a share on the date of grant. The aggregate fair market value of the shares (determined on the grant date) covered by incentive stock options that first become exercisable by any participant during any calendar year also may not exceed $100,000. Generally, the fair market value of the Common Stock is the closing price per share on the date of grant as quoted on the NASDAQ Stock Market. On July 31, 2014, the closing price of a share of our Common Stock on the NASDAQ Stock Market was $4.82 per share.
The 2010 Equity Incentive Plan provides that the option exercise price may be paid, as determined by the Administrator, in cash, by check, by tender of shares having a fair market value equal to the aggregate exercise price of the exercised shares, by a net exercise, by a cashless exercise program that the Company implements, by a reduction in any Company liability to the participant, by any combination of the foregoing, or by such other consideration and method of payment for the issuance of shares to the extent permitted by applicable laws. An option will be deemed exercised when the Company receives the notice of exercise and full payment for the shares to be exercised, together with applicable tax withholdings.
Options will be exercisable at such times or under such conditions as determined by the Administrator and set forth in the award agreement. The maximum term of an option will be specified in the award agreement, provided that options will have a maximum term of 10 years, and provided further that an incentive stock option granted to a Ten Percent Stockholder must have a term not exceeding 5 years.
The Administrator will determine and specify in each award agreement, and solely in its discretion, the period of post-termination exercise applicable to each option. In the absence of such a determination by the Administrator, the participant generally will be able to exercise his or her option for (i) three months following his or her termination for reasons other than death or disability, and (ii) 12 months following his or her termination due to disability or following his or her death while holding the option. An award agreement may also provide that if exercising an option following termination of a participant's service (other than upon death or disability) would result in liability under Section 16(b) of the Securities Exchange Act of 1934, as amended, or Section 16(b), then the option will terminate 10 days after the last date on which exercise would result in liability under Section 16(b). An award agreement may also provide that if exercising an option following termination of a participant's service (other than upon death or disability) would be prohibited solely due to a violation of registration requirements under the Securities Act of 1933, as amended, then the option will terminate three months after termination of the participant's service during which exercising the option would not violate such registration requirements. However, in no event can an option be exercised after the expiration of the term of the option.
Stock Appreciation Rights
A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of our Common Stock between the date of grant of the award and the date of its exercise. Each stock appreciation right granted under the 2010 Equity Incentive Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying the exercise price and the other terms and conditions of the award, consistent with the requirements of the 2010 Equity Incentive Plan.
The exercise price per share of each stock appreciation right may not be less than the fair market value of a share on the date of grant. Upon exercise of a stock appreciation right, the holder of the award will be entitled to receive an amount determined by multiplying (i) the difference between the fair market value of a share on the date of exercise over the exercise price by (ii) the number of exercised shares. The Company may pay the appreciation in cash, in shares, or in some combination thereof. The term of a stock appreciation right will be no more than 10 years from the date of grant. The terms and conditions relating to the period of post-termination exercise with respect to options described above also apply to stock appreciation rights.
Restricted Stock Awards
Awards of restricted stock are rights to acquire or purchase shares, which vest in accordance with the terms and conditions established by the Administrator in its sole discretion. Each restricted stock award granted will be evidenced by a written or electronic agreement between the Company and the participant specifying the number of shares subject to the award and the other terms and conditions of the award, consistent with the requirements of the 2010 Equity Incentive Plan. Restricted stock awards may be subject to vesting conditions as the Administrator specifies, and the shares acquired may not be transferred by the participant until vested. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see "Performance Goals" below for more information).
Unless otherwise provided by the Administrator, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed prior to the participant's termination of service. Unless the Administrator provides otherwise, participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions on transferability and forfeitability as the original award.
The Administrator, in its sole discretion, generally may reduce or waive any restrictions and may accelerate the time at which any restrictions will lapse or be removed.
Restricted Stock Units
The Administrator may grant restricted stock units, which represent a right to receive shares at a future date as set forth in the participant's award agreement. Each restricted stock unit granted under the 2010 Equity Incentive Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying the number of shares subject to the award and other terms and conditions of the award, consistent with the requirements of the 2010 Equity Incentive Plan.
Restricted stock units will result in a payment to a participant only if the performance goals or other vesting criteria the Administrator may establish are achieved or the awards otherwise vest. Earned restricted stock units will be paid, in the sole discretion of the Administrator, in the form of cash, shares, or in a combination thereof. The Administrator may establish vesting criteria in its discretion, which may be based on company-wide, business unit or individual goals, or any other basis that, depending on the extent to which they are met, will determine the number of restricted stock units to be paid out to participants. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see "Performance Goals" below for more information).
After the grant of a restricted stock unit award, the Administrator, in its sole discretion, generally may reduce or waive any vesting criteria that must be met to receive a payout and may accelerate the time at which any restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units as of the date set forth in the award agreement. The Administrator in its sole discretion may pay earned restricted stock units in cash, shares of our Common Stock, or a combination of cash and shares.
Performance Units and Performance Shares
Performance units and performance shares may also be granted under the 2010 Equity Incentive Plan. Each award of performance shares or units granted under the 2010 Equity Incentive Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying the performance period and other terms and conditions of the award, consistent with the requirements of the 2010 Equity Incentive Plan. Performance units and performance shares will result in a payment to a participant only if the performance goals or other vesting criteria the Administrator may establish are achieved or the awards otherwise vest. Earned performance units and performance shares will be paid, in the sole discretion of the Administrator, in the form of cash, shares (which will have an aggregate fair market value equal to the earned performance units or shares at the close of the applicable performance period), or in a combination thereof. The Administrator may establish performance objectives in its discretion, which may be based on company-wide, divisional or individual goals, applicable federal or state securities laws, or any other basis, and which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see "Performance Goals" below for more information).
After the grant of a performance unit or performance share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or shares and accelerate the time at which any restrictions will lapse or be removed. Performance units will have an initial value established by the Administrator on or before the date of
grant. Each performance share will have an initial value equal to the fair market value of a share on the grant date. A participant will forfeit any performance shares or units that are unearned or unvested as of the date set forth in the award agreement.
Performance Goals
Awards of restricted stock, restricted stock units, performance shares, performance units and other incentives under the 2010 Equity Incentive Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Code Section 162(m) and may provide for a targeted level or levels of achievement including: attainment of research and development milestones, bookings, business divestitures and acquisitions, cash flow, cash position, contract awards or backlog, customer renewals, customer retention rates from an acquired company, business unit or division, earnings (which may include earnings before interest and taxes, earnings before taxes and net earnings), earnings per share, expenses, gross margin, growth in stockholder value relative to the moving average of the S&P 500 Index or another index, internal rate of return, market share, net income, net profit, net sales, new product development, new product invention or innovation, number of customers, operating cash flow, operating expenses, operating income, operating margin, overhead or other expense reduction, product defect measures, product release timelines, productivity, profit, return on assets, return on capital, return on equity, return on investment, return on sales, revenue, revenue growth, sales results, sales growth, stock price, time to market, total stockholder return, and working capital. The performance goals may differ from participant to participant and from award to award, may be used to measure the performance of the Company as a whole or a business unit or other segment of the Company, or one or more product lines or specific markets and may be measured relative to a peer group or index. Any criteria used may be measured in absolute terms or in terms of growth, compared to other companies, measured against the market as a whole and/or according to applicable market indices, measured against the Company as a whole or a segment of the Company, and/or measured on a pre-tax or post-tax basis, if applicable. In all other respects, performance goals will be calculated in accordance with the Company's financial statements, generally accepted accounting principles, or under a methodology established by the Administrator prior to issuance of an award and applied consistently with respect to the performance goal for the relevant performance period.
To the extent necessary to comply with the performance-based compensation provisions of Code Section 162(m), with respect to any award granted subject to performance goals, within the first 25% of the performance period, but in no event more than 90 days following the commencement of any performance period (or such other time as may be required or permitted by Code Section 162(m)), the Administrator will, in writing: (i) designate one or more participants to whom an award will be made, (ii) select the performance goals applicable to the performance period, (iii) establish the performance goals, and amounts of such awards, as applicable, which may be earned for such performance period, and (iv) specify the relationship between performance goals and the amounts of such awards, as applicable, to be earned by each participant for such performance period. Following the completion of each performance period, the Administrator will certify in writing whether the applicable performance goals have been achieved for such performance period. In determining the amounts earned by a participant, the Administrator may reduce or eliminate (but not increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the performance period and determine what actual award (if any) will be paid in the event of the participant's termination of employment, death or disability, or a change in control of the Company prior to the end of the performance period, or otherwise. A participant will be eligible to receive payment pursuant to an award for a performance period only if the performance goals for such period are achieved.
Individual Award Limitations
The 2010 Equity Incentive Plan contains annual grant limits intended to satisfy Code Section 162(m). Specifically, the maximum number of shares which could be issued to any one individual in any fiscal year (i) pursuant to options is 1,000,000 shares, (ii) pursuant to stock appreciation rights is 1,000,000 shares, (iii) pursuant to restricted stock is 300,000 shares, (iv) pursuant to restricted stock units is 300,000 shares, and (iv) pursuant to performance shares is 300,000 shares, and (v) the maximum dollar value which could be issued to any one individual in any fiscal year pursuant to the grant of performance units is $1,000,000. In addition, in connection with his or her initial hiring with the Company, an individual may be granted additional awards of up to a maximum of (a) 1,000,000 shares covering options, (b) 1,000,000 shares covering stock appreciation rights, (c) 300,000 shares covering restricted stock, (d) 300,000 shares covering restricted stock units, (e) 300,000 shares covering performance shares, and (f) that number of units having an initial value of up to $1,000,000 covering performance units.
The Administrator will adjust the share limitations set forth in the above paragraph in the event of any adjustment to the Company's shares discussed above (under "Adjustments to Shares Subject to the 2010 Equity Incentive Plan").
Transferability of Awards
Awards granted under the 2010 Equity Incentive Plan generally are not transferable other than by will or by the laws of descent or distribution, and may be exercised during a participant's lifetime only by the participant.
Dissolution or Liquidation
In the event of the Company's proposed dissolution or liquidation, the Administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. An award will terminate immediately prior to consummation of such proposed action to the extent the award has not been previously exercised.
Change in Control
The 2010 Equity Incentive Plan provides that, in the event of a merger or our "change in control" (as defined in the 2010 Equity Incentive Plan), the Administrator will have authority to determine the treatment of outstanding awards, including, without limitation, that
If the successor corporation does not assume or substitute outstanding awards, the options and stock appreciation rights will become fully vested and exercisable, all restrictions on restricted stock, restricted stock units, performance shares and performance units will lapse, and, with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met. The Administrator will not be required to treat all outstanding awards the same in the transaction. In addition, if an option or stock appreciation right is not assumed or substituted for in the event of a change in control, the Administrator will notify the participant in writing or electronically that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period.
Termination or Amendment
The 2010 Equity Incentive Plan will automatically terminate 10 years from the date of its adoption by the Board, unless terminated at an earlier time by the Administrator. The Administrator may terminate or amend the 2010 Equity Incentive Plan at any time, provided that no amendment may be made without stockholder approval to the extent approval is necessary or desirable to comply with any applicable laws. No termination or amendment may impair the rights of any participant unless mutually agreed otherwise between the participant and the Administrator.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the 2010 Equity Incentive Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant's death, or the provisions of the income tax laws of any municipality, state or non-U.S. jurisdiction in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances.
Incentive Stock Options
No taxable income is reportable when an incentive stock option is granted or exercised, although the exercise may subject the optionee to the alternative minimum tax. If the participant exercises the option and then later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two or one year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.
Nonstatutory Stock Options
No taxable income is reportable when a nonstatutory stock option with a per share exercise price at least equal to the fair market value of a share of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares purchased over the exercise price of the exercised shares subject to the option. Any taxable income recognized in connection with an option exercise by an employee of the Company is subject to tax withholding by us. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
Stock Appreciation Rights
No taxable income is reportable when a stock appreciation right with a per share exercise price equal to the fair market value of a share of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares
A participant generally will not have taxable income at the time an award of restricted stock, restricted stock units, performance units or performance shares, are granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. However, the recipient of a restricted stock award may elect to recognize income at the time he or she receives the award in an amount equal to the fair market value of the shares underlying the award (less any cash paid for the shares) on the date the award is granted.
Medicare Surtax
Beginning in 2013, a participant's annual "net investment income," as defined in Section 1411 of the Internal Revenue Code, may be subject to a 3.8% federal surtax (generally referred to as the "Medicare Surtax"). Net investment income may include capital gain and/or loss arising from the disposition of shares subject to a participant's awards under the 2010 Equity Incentive Plan. Whether a participant's net investment income will be subject to the Medicare Surtax will depend on the participant's level of annual income and other factors.
Section 409A
Section 409A of the Code provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual's deferral and distribution elections and permissible distribution events. Awards granted under the 2010 Equity Incentive Plan with a deferral feature will be subject to the requirements of Section 409A of the Code. Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual's separation from service, a predetermined date, or the individual's death). For certain individuals who are officers, subject to certain exceptions, Section 409A requires that such individual's distribution commence no earlier than six months after such officer's separation from service.
If an award granted under the 2010 Equity Incentive Plan is subject to and fails to satisfy the requirements of Section 409A of the Code, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A's provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. Certain states, such as California, have enacted laws similar to Section 409A which impose additional taxes, interest and penalties on non-qualified deferred compensation arrangements. The Company will also have withholding and reporting requirements with respect to such amounts.
Tax Effect for the Company
We generally will be entitled to a tax deduction in connection with an award under the 2010 Equity Incentive Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of compensation paid to our chief executive officer and to "covered
employees" within the meaning of Code Section 162(m). Under Code Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Code Section 162(m) are met. These conditions include stockholder approval of the 2010 Equity Incentive Plan, setting limits on the number of awards that any individual may receive and for awards other than certain stock options, and establishing performance criteria that must be met before the award actually will vest or be paid. The 2010 Equity Incentive Plan has been designed to permit the Administrator to grant awards that qualify as performance-based for purposes of satisfying the conditions of Code Section 162(m), thereby permitting us to continue to receive a federal income tax deduction in connection with such awards.
Number of Awards Granted to Employees and Directors
The number of awards that an employee, director or consultant may receive under the 2010 Equity Incentive Plan is in the discretion of the Administrator and therefore cannot be determined in advance. The following table sets forth, as of December 31, 2013, (i) the aggregate number of shares of Common Stock subject to options and restricted stock unit awards granted under the 2010 Equity
Incentive Plan during the last fiscal year and (ii) the average per share exercise price of such options and the dollar value of such restricted stock units granted.
Name of Individual or Group | Number of Shares Subject to Options Granted | Average Per Share Exercise Price | Number of Shares of Restricted Stock Units Granted | Dollar Value of Restricted Stock Units Granted | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Seth H. Z. Fischer | 1,000,000 | $ | 12.90 | — | — | ||||||||
Svai S. Sanford | 15,000 | $ | 12.39 | — | — | ||||||||
John L. Slebir | 70,000 | $ | 12.39 | — | — | ||||||||
Wesley W. Day, Ph.D. | 50,000 | $ | 12.39 | — | — | ||||||||
Guy P. Marsh | 110,000 | $ | 12.39 | — | — | ||||||||
Michael P. Miller(1) | 90,000 | $ | 12.39 | — | — | ||||||||
Timothy E. Morris(2) | 110,000 | $ | 12.39 | — | — | ||||||||
Lee B. Perry(3) | 70,000 | $ | 12.39 | — | — | ||||||||
Peter Y. Tam(4) | 140,000 | $ | 12.39 | — | — | ||||||||
Leland F. Wilson(5) | 200,000 | $ | 12.39 | — | — | ||||||||
Anthony P. Zook(6) | 1,000,000 | $ | 13.70 | — | — | ||||||||
All current executive officers, as a group | 1,245,000 | $ | 12.80 | — | — | ||||||||
All current directors who are not executive officers, as a group | 250,000 | $ | 12.84 | 81,125 | $ | 1,040,039 | |||||||
All current employees who are not executive officers, as a group | 736,831 | $ | 12.42 | — | — |
Approval of the amendment to the 2010 Equity Incentive Plan requires the affirmative "FOR" vote of a majority of the shares present in person or represented by Proxy entitled to vote at the Annual MeetingMeeting. If stockholders do not approve the amendment to the 2010 Equity Incentive Plan, no shares will be added to the total number of shares reserved for issuance under the 2010 Equity Incentive Plan, and the 2010 Equity Incentive Plan will continue under its existing terms without the increase in share reserves provided by First Manhattan.the amendment.
We believe strongly that the approval of the amendment to the 2010 Equity Incentive Plan is essential to our continued success. Our employees are one of our most valuable assets. Stock options and other awards such as those provided under the 2010 Equity Incentive Plan are vital to our ability to attract and retain outstanding and highly skilled individuals. Such awards also are crucial to our ability to motivate employees to achieve the Company's goals. For the reasons stated above, the stockholders are being asked to approve the amendment to the 2010 Equity Incentive Plan.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST""FOR" THEBYLAW REPEAL PROPOSAL. APPROVAL OF AN AMENDMENT TO THE 2010 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES RESERVED FOR ISSUANCE UNDER THE 2010 EQUITY INCENTIVE PLAN BY 5,950,000 SHARES.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors met ten24 times during fiscal year 2012.2013. All directors attended at least 75% of the aggregate of all meetings of the Board of Directors and of the committees on which they served during the year ended December 31, 2012.2013, with the exception of Johannes J.P. Kastelein, M.D., Ph.D., Robert N. Wilson and Anthony P. Zook.
Although we do not have a formal policy regarding attendance by members of the Board of Directors at our annual meetings of stockholders, directors are encouraged to attend annual meetings of stockholders. Each
Table of our then serving directors attended our 2012 Annual Meeting of Stockholders.Contents
As required under the applicable listing standards of the NASDAQ Global Market, a listed company's board of directors must affirmatively determine that a majority of its directors are "independent," as defined by such listing standards. That definition includes a series of objective tests, including that the director is not an employee of the company and has not engaged in various types of business dealings with the company. Additionally, the board of directors must make a subjective determination as to each director that no relationship exists that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Consistent with these requirements, our Board of Directors has determined that seven9 of our nine10 directors each satisfy the director independence standards of the NASDAQ Global Market. Our Board of Directors has also determined that Leland F. Wilson,Seth H. Z. Fischer, our Chief Executive Officer, and Peter Y. Tam, our President, areis not independent by virtue of theirhis employment with the Company. Messrs. Wilson and Tam areMr. Fischer is not membersa member of the committees of our Board, of Directors, and our Board committees are comprised of only independent directors.
The Company maintains separate positions of the Chairman of the Board of Directors and Chief Executive Officer. Having these positions separate allows our Chief Executive Officer to focus on the daily operations, while allowing the Chairman of the Board to lead the Board of Directors in its fundamental role of providing advice to and independent oversight of management. While our charter documents do not require that our Chairman of the Board and Chief Executive Officer positions be separate, the Board of Directors believes that having separate positions is the appropriate leadership structure to assure good and efficient corporate governance. The Board of Directors has charged the Chairman of the Board with responsibility for presiding over meetings of the Board, of Directors, developing meeting agendas in consultation with management, facilitating communication between management and the Board, of Directors, representing director views to management and improving meeting effectiveness, among other things. Our Chairman of the Board is elected annually at the first Board meeting following the annual meeting of stockholders and is currently Mark B. Logan.Michael J. Astrue.
Our Board of Directors as a whole is responsible for overseeing our risk management function. Members of our senior management team are responsible for implementation of our day-to-day risk management processes, while the Board, of Directors, as a whole and through its Audit Committee, Compensation Committee and Nominating and Governance Committee, has responsibility for the oversight of overall risk management. As risk is inherent in every business and is rarely static, the Board of Directors and senior management routinely discuss and analyze any significant strategic, operational, financial, legal and compliance risks facing the Company as well as our general risk management strategy and actions taken by senior management in compliance with this strategy. At meetings of the Board, of Directors, senior management provides updates to the Board of Directors on any specific risk-related issues as they evolve, which allows the Board of Directors to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
In addition, each of the committees of our Board of Directors considers any risks that may be within its area of responsibilities and directors periodically engage in discussions with members of the senior management team as appropriate. Specifically, the Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. The Compensation Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The Nominating and Governance Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks associated with
board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.
The Board of Directors has Audit, Compensation, and Nominating and Governance Committees. The written charter for each of these committees can be found on our website atwww.vivus.com. All members of the committees are appointed by the Board, of Directors, and are independent non-employee directors. The following describes each committee, its current membership, the number of meetings held during fiscal year 2012,2013, and its function:
Audit Committee
The Audit Committee currently consists of directors Casamento,Carroll, Logan and Mario,Rosenman, none of whom is an employee of the Company and each of whom is independent within the meaning of the NASDAQ
director independence standards and the SEC requirements, in each case as currently in effect. Messrs. Carroll and Logan will not stand for re-election at the 2014 Annual Meeting and will continue to serve on the Audit Committee until the effective time of their resignation immediately preceding the Annual Meeting. During fiscal year 2013, Charles J. Casamento, Mark B. Logan and Ernest Mario, Ph.D. also served as members of the Audit Committee, prior to Mr. Casamento and Dr. Mario's resignation effective July 19, 2013 and Mr. Logan's resignation effective July 25, 2013. The Board of Directors has determined that Dr. MarioMr. Rosenman is an "audit committee financial expert" as defined in SEC rules. Dr. MarioMr. Rosenman currently serves as Chairman of the Audit Committee. The Audit Committee held fivefour meetings during fiscal year 2012.2013.
The Audit Committee's main function is to oversee our accounting and financial reporting processes, internal system of control, independent registered public accounting firm relationships and the audits of our financial statements. The Audit Committee's responsibilities include, among other things:
Both our Independent Auditors and internal financial personnel meet privately with the Audit Committee and have unrestricted access to the Audit Committee.
The Audit Committee Report is included herein on page 29.35.
Compensation Committee
The Compensation Committee currently consists of directors Carroll, Colin, Norton and Rosenman. Mr. Carroll will not stand for re-election at the 2014 Annual Meeting and will continue to serve on the Compensation Committee until the effective time of his resignation immediately preceding the Annual Meeting. During fiscal year 2013, Charles J. Casamento, Ernest Mario, Ph.D. and Linda M. Dairiki Shortliffe, noneM.D. also served as members of whomthe Compensation Committee, prior to their resignations effective July 19, 2013. In addition, during fiscal year 2013, Robert N. Wilson also served as a member of the Compensation Committee, prior to his resignation effective June 20, 2014. None of the foregoing individuals is currently or has during fiscal year 2013 served as an employee of the Company, and each of whom is independent within the meaning of the NASDAQ director independence standards as currently in effect. The Compensation Committee held five12 meetings during fiscal year 2012.2013. No member of the Compensation Committee serves as a member of the board of directors or compensation committee of any entity that has one or more officers serving as a member of our Board of Directors or Compensation Committee. Mr. CasamentoDr. Colin currently serves as Chairman of the Compensation Committee.
The Compensation Committee's responsibilities include, among other things:
The Compensation Committee reviews and approves the salaries and incentive compensation of our officers, directors and the remainder of our personnel, including all new hire stock option grants.
In addition, the Compensation Committee approves stock option grants for all employees as part of our annual performance review process.
The agenda for meetings of the Compensation Committee is prepared by the Compensation Committee Chair in consultation with management. The Compensation Committee may request that any directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Compensation Committee, attend any meeting to provide such information as the Compensation Committee requests. In rendering its decisions, the Compensation Committee also considers the information regarding comparably sized companies in the biotechnology and pharmaceutical industries in the United States and its collective experience with other companies. The Chief Executive Officer and any other officers cannot be present during the portion of any meeting relating to their own compensation or performance.
The Compensation Committee is entitled to delegate any or all of its responsibilities to a subcommittee of the Compensation Committee, but only to the extent consistent with the Company's certificate of incorporation, bylaws, sectionAmended and Restated Bylaws, Section 162(m) of the Internal Revenue Code of 1986, as amended, NASDAQ rules and other applicable law. The Board of Directors retains the authority to review and approve cash and equity compensation for our officers and directors, which it exercises from time to time.
The Compensation Committee is committed to ensuring that compensation programs are designed to encourage high performance, promote accountability and assure that employee interests are aligned with the interests of the Company's stockholders. To this end, the Compensation Committee has directly selected and retained the services of Radford, Inc., or Radford, to assist it in evaluating executive and non-employee director compensation matters. During 2013, Radford only provided
services to the Compensation Committee and such services were related exclusively to executive or non-employee director compensation. In 2013, the Compensation Committee engaged Radford to conduct a peer group analysis, an analysis of the Chief Executive Officer's compensation and an analysis of non-employee directors' compensation. The Compensation Committee has the sole discretion to retain or obtain the advice of compensation consultants, legal counsel and other compensation advisers, direct responsibility for the appointment, compensation and oversight of the work of any compensation adviser, the right to receive from the Company appropriate funding, as determined by the Compensation Committee, for the payment of reasonable compensation to compensation advisers retained by the Compensation Committee and responsibility to consider certain independence factors before selecting such compensation advisers, other than in-house legal counsel. The compensation consultant reports directly and exclusively to the Compensation Committee with respect to executive and non-employee director compensation matters.
After review and consultation with Radford, the Compensation Committee has determined that Radford is independent and there is no conflict of interest resulting from retaining Radford currently or during the year ended December 31, 2013. In reaching these conclusions, the Compensation Committee considered the factors set forth in Rule 10C-1 of the Securities Exchange Act of 1934, as amended, and applicable NASDAQ listing standards.
The Compensation Committee Report is included herein on page 41.49.
Nominating and Governance Committee
The Nominating and Governance Committee currently consists of directors Casamento, LoganAstrue, Colin, Denner, Norton and Shortliffe,Plutzky, none of whom is an employee of the Company and each of whom is independent within the meaning of the NASDAQ director independence standards as currently in effect. Mr. Astrue will not stand for re-election at the 2014 Annual Meeting and will continue to serve on the Nominating and Governance Committee until the effective time of his resignation immediately preceding the Annual Meeting. During fiscal year 2013, Charles J. Casamento, Mark B. Logan and Linda M. Dairiki Shortliffe, M.D. also served as members of the Nominating and Governance Committee, prior to Mr. Casamento and Dr. Shortliffe's resignation effective July 19, 2013 and Mr. Logan's resignation effective July 25, 2013. The Nominating and Governance Committee held one meetingfive meetings during fiscal year 2012. Dr. Shortliffe2013. Mr. Norton currently serves as Chairman of the Nominating and Governance Committee.
The Nominating and Governance Committee is responsible for:
The Nominating and Governance Committee will consider properly submitted stockholder recommendations for candidates for membership on the Board of Directors as described below. Any stockholder recommendations proposed for consideration by the Nominating and Governance Committee should include the candidate's name and qualifications for membership on the Board of Directors and should be addressed to our Corporate Secretary at VIVUS, Inc., 1172 Castro Street,351 East Evelyn Avenue, Mountain View, CA 94040.94041. In addition, procedures for stockholder direct nomination of directors are discussed in detail in our bylaws,Amended and Restated Bylaws, which can be provided to you upon written request. The Nominating
and Governance Committee will consider a director candidate recommended by our stockholders in the same manner as a nominee recommended by a member of the Board, of Directors, management or other sources.
The Nominating and Governance Committee will utilize a variety of methods for identifying and evaluating nominees for director. The Nominating and Governance Committee intends to regularly
assess the appropriate size of the Board, of Directors, and whether any vacancies on the Board of Directors are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Governance Committee plans to consider various potential candidates for director. Candidates may come to the attention of the Nominating and Governance Committee through current members of the Board, of Directors, professional search firms, stockholders or other persons. These candidates will be evaluated at regular or special meetings of the Nominating and Governance Committee, and may be considered at any point during the year. In evaluating such recommendations, the Nominating and Governance Committee uses the qualifications standards discussed below and seeks to achieve a balance of knowledge, experience and skill on the Board of Directors.Board.
The Nominating and Governance Committee will use a variety of criteria to evaluate the qualifications and skills necessary for members of our Board of Directors.Board. The Nominating and Governance Committee has also specified the following minimum qualifications that it believes must be met by a nominee for a position on the Board of Directors as follows:
While the Company does not have a formal policy on director diversity, the Board of Directors and the Nominating and Governance Committee also consider diversity when reviewing the composition of the Board of Directors and considering the slate of nominees for annual election to the Board of Directors and the appointment of individual directors to the Board of Directors.Board. In this context, diversity factors include without limitation experience, specialized expertise, geographic location, cultural background and gender. Diversity factors are then considered with other factors by our Nominating and Governance Committee in the context of an assessment of the perceived needs of our Board of Directors on an annual basis or at a particular point in time.
After completing its evaluation, the Nominating and Governance Committee makes a recommendation to the full Board of Directors as to the persons who should be nominated to the Board, of Directors, and the Board of Directors determines the nominees after considering the recommendation and report of the Nominating and Governance Committee.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of directors Casamento, MarioCarroll, Colin, Norton and Shortliffe.Rosenman. None of the members of our Compensation Committee during 20122013 is currently or has been, at any time since our formation, one of our officers or employees. During 2012,2013, no executive officer served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or our Compensation Committee. NoneCommittee
On July 18, 2013, we entered into a Settlement Agreement with First Manhattan Co., or First Manhattan, terminating First Manhattan's proxy contest with respect to the election of directors at our 2013 Annual Meeting. In connection with the Settlement Agreement, we reimbursed approximately $2.9 million in expenses incurred by First Manhattan. Dr. Colin, a member of the Compensation Committee who was appointed to our Board in connection with the Settlement Agreement, is Senior Managing Director at First Manhattan. Please see "Certain Relationships and Related Transactions—Review, Approval or Ratification of Transactions with Related Parties" for a description of the Settlement Agreement. Other than Dr. Colin, none of the members of our Compensation Committee during 20122013 currently has or has had any relationship or transaction with a related person requiring disclosure pursuant to Item 404 of Regulation S-K.
Stockholder Communications to Directors
Stockholders may communicate directly with our Board of Directors by sending a letter addressed to:
Chief Financial OfficerGeneral Counsel
VIVUS, Inc.1172 Castro Street351 East Evelyn Avenue
Mountain View, CA 9404094041
Our Chief Financial OfficerGeneral Counsel will ensure that a summary of all communications received is provided to the Board of Directors at its regularly scheduled meetings. Stockholders who would like their submission directed to a member of the Board of Directors may so specify, and the communication will be forwarded, as appropriate. Where the nature of a communication warrants, the Chief Financial OfficerGeneral Counsel may decide to obtain the more immediate attention of the appropriate committee of the Board of Directors or a non-management director, management or independent advisors, as the Chief Financial OfficerGeneral Counsel considers appropriate. The Chief Financial OfficerGeneral Counsel may decide, in the exercise of his judgment, whether a response to any stockholder communication is necessary.
Code of Business Conduct and Ethics
The Board of Directors has adopted a Code of Business Conduct and Ethics, which is applicable to all of our employees, officers and directors. The Code of Business Conduct and Ethics may be found on our website atwww.vivus.com. The Company will disclose any amendment to the Code of Business Conduct and Ethics or waiver of a provision of the Code of Business Conduct and Ethics, including the name of the person to whom the waiver was granted, on our website on the Investor Relations page. The Company intends to disclose future amendments to, or waivers from, certain provisions of its Code of Business Conduct and Ethics on the above website within five business days following the date of such amendment or waiver.
Corporate Governance Guidelines
The Board of Directors has adopted Corporate Governance Guidelines, which setsset forth amongst other things the principles that guide the Board of Director'sBoard's exercise of its responsibility to oversee corporate governance, maintain its independence and evaluate its own performance. Our Corporate Governance Guidelines provide that the Board of Directors shall elect its Chairman and appoint the Company's Chief Executive Officer in accordance with the best interests of the Company. Our Corporate Governance Guidelines also provide that directors should not serve on boards of public companies in addition to the Company's Board of Directors where such service is likely to interfere with the performance of the director's duties to the Company, taking into account the individual, the nature of his or her activities and such other factors or considerations as the Board of Directors deems relevant. The Corporate Governance Guidelines may be found on our website atwww.vivus.com.
The following table and the biographical information that follows it set forth information as of May 13, 2013July 31, 2014 regarding our executive officers:
Name | Age | Position | |||
---|---|---|---|---|---|
| Chief Executive Officer and Director | ||||
| 44 | Interim Chief Financial Officer and Chief Accounting Officer | |||
John L. Slebir | 49 | ||||
| Senior Vice President, | ||||
| |||||
| |||||
Wesley W. Day, Ph.D. | Vice President, Clinical Development | ||||
| Vice President, | ||||
|
The biographical information of Messrs. Wilson and TamMr. Fischer is set forth above under Proposal No. 1, "Election of Directors."
Timothy E. MorrisSvai S. Sanford has served as our interim Chief Financial Officer since November 2013 and as our Chief Accounting Officer since December 2013. From July 2012 until November 2013, he served as our Corporate Controller. Prior to this, Mr. Sanford was the Corporate Controller at Glam Media, Inc., a digital content provider, from November 2010 to June 2012, and in addition to other senior management roles within the company, he was the Senior Director, Technical Accounting, Reporting and Compliance at Elan Pharmaceuticals, Inc., a biopharmaceutical company, from March 2004 to November 2010. Mr. Sanford began his career with KPMG LLP, where he earned his license as a certified public accountant. Mr. Sanford holds a B.S. in Accounting from Kansas State University.
John L. Slebir joined VIVUS in November 2004.September 2009. Since February 2012,January 2014, Mr. MorrisSlebir has served as our Senior Vice President, Finance and Global CorporateBusiness Development and Chief Financial Officer. FromGeneral Counsel, and, since June 2010 to February 2012, he also has served as our Senior Vice President Finance and Chief Financial Officer.Secretary. From November 2004June 2011 until June 2010,January 2014, Mr. MorrisSlebir served as our Vice President, FinanceBusiness Development and Chief Financial Officer. From September 2001 to November 2004, Mr. Morris served as Chief Financial Officer and Senior Vice President of Finance & Administration at Questcor Pharmaceuticals, Inc., a public specialty pharmaceutical company. Mr. Morris holds a B.S. degree in Business with an emphasis in AccountingGeneral Counsel, from California State University, Chico and is a certified public accountant.
Michael P. Miller has served as our Senior Vice President and Chief Commercial Officer since April 2010. From February 1995 to January 1997,2011 until June 2011, he served as our Director of Marketing. From February 2006 to April 2010, Mr. Miller served as a Vice President & Oncology Franchise Head of Genentech, Inc., a public biotechnology company and wholly owned subsidiary of the Roche Group. From March 2003 to December 2005, Mr. Miller served as the Senior Vice President, Chief Commercial Officer of Connetics Corporation, a specialty pharmaceutical company. From February 1997 to February 2002, he was Vice President of the Urology Franchise at ALZA Corporation, a pharmaceutical and drug delivery company acquired by Johnson & Johnson. From December 1981 to February 1995, he held progressively responsible positions in marketing and sales at Syntex Corporation, a pharmaceutical company acquired by the Roche Group. Mr. Miller holds a B.S. in Business Administration and Finance from the University of San Francisco and an M.B.A. in Information and Computer Systems from San Francisco State University.
Guy P. Marsh has served as our Vice President, of U.S. OperationsGeneral Counsel, and, General Manager since July 2000. From 2001from September 2009 until the sale of our MUSE product in 2010, Mr. Marsh was responsible for U.S. Sales and Marketing of MUSE. From April 1999 to July 2000, Mr. MarshJanuary 2011, he served as our General Manager, Operations.Counsel on a part-time basis. From May 1998 to March 1999 heto January 2011, Mr. Slebir served as our Senior Director, U.S. Operations. From April 1994an attorney at Wilson Sonsini Goodrich & Rosati, P.C., specializing in corporate securities and corporate governance. Prior to April 1998,joining Wilson Sonsini Goodrich & Rosati, P.C., Mr. Marsh served as Vice President Technical Operations for Copley Pharmaceutical, Inc., a pharmaceutical company acquired by Teva Pharmaceutical Industries, Ltd. From September 1993 to April 1994,Slebir was an attorney at two prominent Bay Area law firms specialized in insurance defense litigation. Mr. Marsh served as a liaison between Copley Pharmaceutical, Inc. and Copley's majority stockholder, Hoechst-Celanese Corporation. From
November 1987 to April 1994, Mr. Marsh served in various manufacturing, sales and business management roles for Hoechst-Roussel Pharmaceuticals, Inc., a pharmaceutical company. Mr. MarshSlebir holds a B.S.B.A. in EngineeringCommunications from New Jersey Institute of Technology, an M.B.A. from Seton HallSan Diego State University and a New Jersey State Professional Engineering License.J.D. from Santa Clara University School of Law.
Wesley W. Day, Ph.D. has served as our Vice President, Clinical Development since November 2005. From September 2003 until October 2005, Dr. Day served as Senior Director, Safety and Risk Management at Pfizer Inc., a research-based global pharmaceutical company. Since 1995, Dr. Day has served as an Adjunct Associate Professor for the School of Pharmacy at the University of Maryland at Baltimore. From 2002 until 2003, he also served as an Adjunct Assistant Professor for Temple University in Philadelphia, Pennsylvania. Dr. Day holds a B.S. from the University of Texas Pan American and a Ph.D. in Pharmacology and Toxicology from the University of Maryland at Baltimore.
Lee B. PerryGuy P. Marsh has served as our Vice President, U.S. Operations and Chief Accounting OfficerGeneral Manager since February 2007July 2000. From 2001 until the sale of our MUSE product in 2010, Mr. Marsh was responsible for U.S. Sales and hasMarketing of MUSE. From April 1999 to July 2000, Mr. Marsh served as Assistant Secretary since June 2012.our General Manager, Operations. From May 1998 to March 2005 to February 2007, Mr. Perry1999, he served as our Senior Director, Finance.U.S. Operations. From May 2002April 1994 to March 2005,April 1998, Mr. PerryMarsh served as Senior DirectorVice President Technical Operations for Copley Pharmaceutical, Inc., a pharmaceutical company acquired by Teva Pharmaceutical Industries, Ltd. From September 1993 to April 1994, Mr. Marsh served as a liaison between Copley
Table of Finance at QuestcorContents
Pharmaceutical, Inc. and Copley's majority stockholder, Hoechst-Celanese Corporation. From November 1987 to April 1994, Mr. Marsh served in various manufacturing, sales and business management roles for Hoechst-Roussel Pharmaceuticals, Inc., a public specialty pharmaceutical company. Mr. PerryMarsh holds a B.A.B.S. in EconomicsEngineering from San Diego State University and is a certified public accountant.
John L. Slebir, Esq. joined VIVUS in September 2009. Since June 2011, Mr. Slebir has served as our Vice President, Business Development and General Counsel and, since June 2012, he also has served as our Secretary. From January 2011 until June 2011, Mr. Slebir served as our Vice President, General Counsel and,New Jersey Institute of Technology, an M.B.A. from September 2009 until January 2011, he served as our General Counsel on a part-time basis. From March 1999 to January 2011, Mr. Slebir served as an attorney at Wilson Sonsini Goodrich & Rosati, P.C., specializing in corporate securities and corporate governance. Prior to joining Wilson Sonsini Goodrich & Rosati, P.C., Mr. Slebir was an attorney at two prominent Bay Area law firms specialized in insurance defense litigation. Mr. Slebir holds a B.A. in Communications from San Diego StateSeton Hall University and a J.D. from Santa Clara University School of Law.New Jersey State Professional Engineering License.
Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, this report of the Audit Committee of our Board of Directors shall not be deemed "filed" with the SEC or "soliciting material" under the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any such filings.
The following is the report of the Audit Committee of the Board of Directors. The Audit Committee has reviewed and discussed our audited financial statements for the fiscal year ended December 31, 20122013 with our management. In addition, the Audit Committee has discussed with OUM & Co. LLP, our independent registered public accounting firm, or the "Auditors," and auditors,Auditors, the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board, or PCAOB, in Rule 3200T.
The Audit Committee also has received the written disclosures and the letter from the Auditors required by applicable requirements of the PCAOB regarding the Auditors' communications with the Audit Committee concerning independence, and has discussed with the Auditors the Auditors' independence.
Based on the Audit Committee's review of the matters noted above and its discussions with our independent auditors and our management, the Audit Committee recommended to the Board of Directors that the financial statements be included in our Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2013.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS | ||
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis discusses:
We refer to the following individuals as "named executive officers" for 2012:2013:
Name | Title | |
---|---|---|
Chief Executive Officer | ||
Senior Vice President, | ||
Guy P. Marsh | Vice President, U.S. Operations and General Manager | |
Former Senior Vice President | ||
Former Senior Vice President | ||
Lee B. Perry | Former Vice President and | |
Peter Y. Tam | Former President | |
Leland F. Wilson | Former Chief Executive Officer | |
Anthony P. Zook | Former Chief Executive Officer |
General Philosophy
We compensate our named executive officers through a combination of base salary, cash bonus and equity compensation designed to be competitive with comparable companies. Our core objective is to attract, retain, reward and motivate our named executive officers and to align our performance with the long-term interests of our stockholders.
Our compensation programs are designed to:
In determining the compensation for our named executive officers, we, in connection with consulting with our compensation consultant, Radford, Inc., or Radford, consider a number of factors, including information regarding comparably sized companies in the biotechnology and pharmaceutical industries in the United States. We also consider the seniority level of the employee, the geographical region in which the employee resides and the employee's overall performance and contribution to the Company. Especially with respect to the compensation of our Chief Executive Officer, and our Chief Financial Officer, we also consider our performance and the anticipated difficulty of replacing the executive officerChief Executive Officer with someone of comparable experience and skills.
Executive Compensation Program Objectives
Executive Compensation Programs
Our Compensation Committee relies on experience with other companies in our industry and, with respect to our named executive officers, third party industry compensation surveys, including those compiled and provided to the Compensation Committee by Radford, and internally generated comparisons of the various elements of total compensation to peer group companies, or the Peer Group, to determine base salary, performance-based cash bonuses and performance-based equity awards and the portion of total compensation each element should comprise. We believe that a larger portion of our named executive officers' compensation should be based on performance than our lower level personnel. Consistent with our compensation philosophy, we have structured each element of our compensation program as described below.
We design our base pay to provide the essential reward for an employee's work. Once base pay levels are determined, increases in base pay are provided to recognize an employee's specific performance achievements and contributions.
We also utilize cash bonuses to compensate employees for the achievement of corporate objectives as well as an employee's outstanding results while allowing us to remain competitive with other companies.
We utilize equity-based compensation primarily time-based stock options, to ensure that we have the ability to retain employees over a longer period of time and to provide employees with a form of reward that aligns their interests with those of our stockholders. Our employeeIn 2013, we primarily utilized stock options, which typically vest over a period of four years which provides a long-term incentive to our personnel as they work on multi-year commercialization and drug development programs. Employees whose skills and results we deem to be critical to our long-term success are eligible to receive higher levels of equity-based compensation. Beginning in 2014, our annual equity-based compensation includes a mix of stock options and restricted stock units, due to our stock price volatility, our current share reserves under our 2010 Equity Incentive Plan and our goal to further incentivize our personnel. These annual restricted stock units generally vest over a period of four years, providing a long-term incentive to our personnel. The special restricted stock unit grants to Messrs. Sanford, Slebir and Marsh and Dr. Day in January 2014 vest pursuant to the following 18 month schedule commencing on January 1, 2014, or the Vesting Commencement Date: 20% on the six month anniversary of the Vesting Commencement Date, 20% on the 12 month anniversary of the Vesting Commencement Date and 60% on the 18 month anniversary of the Vesting Commencement Date, subject to continued full time employment with the Company on each such date.
Core benefits, such as our basic health benefits, 401(k) program, disability and life insurance plans, are designed to provide support to employees and their families and to be competitive with other companies in our industry.
Our Peer Group
ForIn 2012, our Compensation Committee chose a group of 16 companies to include in the Peer Group based on their similarity to us in terms of industry focus, stage of development, pharmaceutical assets, business strategy, and the geographical location of the talent pool with which we compete. The market data for the Peer Group was drawn from publicallypublicly available documents. Additional compensation data for each named executive officer was obtained from the Radford Global Life Sciences Survey. The Compensation Committee also included in the Peer Group companies with which we compete for talent and that more closely resemble the group of companies that we would use for measuring relative financial performance for annual incentive bonuses. For 2012,2013, the Peer Group
remained unchanged from 2012 and consisted of the following companies:companies, which was determined by the Compensation Committee:
Affymax, Inc. | MannKind Corporation | |
Arena Pharmaceuticals, Inc. | Medivation, Inc. | |
Amylin Pharmaceuticals, Inc. | Onyx Pharmaceuticals, Inc. | |
Biomarin Pharmaceutical Inc. | Orexigen Therapeutics, Inc. | |
Dendreon Corporation | Questcor Pharmaceuticals, Inc. | |
Exelixis, Inc. | Rigel Pharmaceuticals, Inc. | |
ISIS Pharmaceuticals, Inc. | Seattle Genetics, Inc. | |
Jazz Pharmaceuticals, Inc. | Theravance, Inc. |
Table For 2014, our Compensation Committee, after consulting with Radford, chose a group of Contents20 companies to include in the Peer Group based on their similarity to us in terms of industry focus, stage of development in transitioning from a development stage company to a commercial company, market capitalization size, entity size, pharmaceutical assets, business strategy, and the geographical location of the talent pool with which we compete. The market data for the Peer Group was drawn from publicly available documents. Additional compensation data for our Chief Executive Officer was obtained from the Radford Global Life Sciences Survey, which was provided to the Compensation Committee by Radford. For 2014, the Peer Group consisted of the following companies, which was determined by the Compensation Committee, after consulting with Radford:
ACADIA Pharmaceuticals Inc. | Idenix Pharmaceuticals, Inc. | |
Aegerion Pharmaceuticals, Inc. | ImmunoGen, Inc. | |
AMAG Pharmaceuticals, Inc. | InterMune, Inc. | |
Arena Pharmaceuticals, Inc. | MannKind Corporation | |
Avanir Pharmaceuticals, Inc. | Nektar Therapeutics | |
Cadence Pharmaceuticals, Inc. | Neurocrine Biosciences, Inc. | |
Depomed, Inc. | Omeros Corporation | |
Dyax Corp. | Orexigen Therapeutics, Inc. | |
Exelixis, Inc. | Pacira Pharmaceuticals, Inc. | |
Horizon Pharma, Inc. | Xenoport, Inc. |
The data on the compensation practices of the Peer Group is gathered by our searches of publicly available information. Due to the variations between companies reporting the individual and roles for which compensation is disclosed, directly comparable information is not available from each peer company with respect to each of our named executive officers. In considering the Peer Group compensation data, the Compensation Committee recognizes that executives at different companies can play significantly different roles, with different responsibilities and scope of work, even though they may hold similar titles or positions. Moreover, it is not always possible to determine the respective qualitative factors that may influence compensation from the publicallypublicly reported compensation data, such as scope of each named executive officer's responsibilities, their performance during the period under consideration or their perceived importance to their companies' business, strategy and objectives. Accordingly, the Compensation Committee looked to information about the Peer Group as one of a number of considerations in establishing executive compensation levels (as described in more detail below). In determining compensation for our named executive officers, the Compensation Committee reviewed both Peer Group information and the collective experience of the members of our Compensation Committee and executive management to establish our compensation practices.
Stockholder Say-on-Pay Votes
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we held a non-binding stockholder vote in June 2012August 2013 on our 20112012 executive compensation practices. The Compensation Committee, while not bound to act on a negative vote, carefully considers the opinion of its stockholders in making compensation decisions. The 20122013 say-on-pay vote to approve our 20112012 executive compensation passed with 48,778,30552,044,190 votes for, 723,1971,194,339 votes against, 116,822246,360 abstaining, and 35,402,25030,885,278 broker non-votes. In alignment with our philosophy on stockholder say-on-pay, and with the results of the say-on-pay frequency vote held in 2011, we intend to continue to hold non-binding stockholder say-on-pay votes annually.
Executive Compensation Components
We have structured each element of our compensation package as follows:
Base Salary
We determine our named executive officers' salaries based on job responsibilities and individual experience, and we benchmark the amounts we pay against comparable competitive market compensation for similar positions within our Peer Group and industry as well as geographical area. Specifically, we utilize information obtained from our comparison of Peer Group compensation data and the annual Radford Global Life Sciences Survey, or the Comparison Data. Our Compensation Committee reviews the salaries of our named executive officers annually, and our Compensation Committee grants increases in salaries based on a review of the Comparison Data and of individual performance during the prior calendar year provided that any increases are within the guidelines determined by the Compensation Committee for each position. Guidelines are adjusted and modified on an annual basis based on information obtained from our review of the Comparison Data, as well as from our Compensation Committee's and management's experience and general employment market conditions for our industry and geographic area. Increases in base salary are based on individual performance as merit increases and on the Comparison Data as market increases; such increases are not automatic or guaranteed.
In January 2012,2013, our Compensation Committee reviewed base salaries for our named executive officers. The Compensation Committee considered a number of factors in setting the 20122013 base salaries for our named executive officers, including the status and results of our New Drug Applications, or NDAs, to the U.S. Food and Drug Administration, or FDA, for Qsymia® for the treatment of obesity and for STENDRA™ for the treatment of erectile dysfunction and the preparation for the commercial
launch of QsymiaQsymia® as a treatment for obesity, includingestablishing a partnership in the manufacture of QsymiaUnited States, the European Union and certain developing countries to launch product, the hiring of key personnel for the Qsymia salesSTENDRA™ and marketing team, and securingraising adequate capital to fundsupport our drug development and commercialization plan.business. For STENDRA, we use the trade name SPEDRA™ in the EU and certain other territories outside the U.S., and for Qsymia, we use the trade name Qsiva™ in the EU;; throughout this Proxy Statement, we refer to STENDRA and SPEDRA as STENDRA, and we refer to Qsymia and Qsiva as Qsymia.STENDRA. In addition, the Compensation Committee reviewed the Comparison Data and the individual performance of our named executive officers during the prior calendar year. Following the Compensation Committee's review, all of our named executive officers, with the exception of Messrs. Fischer, Wilson and Zook, received merit increases to their base salaries based on individual performance, and Messrs. Tam, Miller and Slebir and Dr. DayMarsh received market increases to their base salaries based on a review of the Comparison Data.
The table below provides the base salary for each named executive officer:
Name | 2012 Increase to Base Salary | 2012 Base Salary ($) | |||||
---|---|---|---|---|---|---|---|
Leland F. Wilson | 3.9 | % | 738,000 | ||||
Peter Y. Tam(1) | 8.8 | % | 545,012 | ||||
Timothy E. Morris | 5.5 | % | 433,563 | ||||
Michael P. Miller(2) | 12.6 | % | 394,076 | ||||
Guy P. Marsh | 4.3 | % | 340,419 | ||||
Wesley W. Day, Ph.D.(3) | 14.1 | % | 404,495 | ||||
John L. Slebir(4) | 14.5 | % | 360,750 |
Name | 2013 Increase to Base Salary | 2013 Base Salary ($) | |||||
---|---|---|---|---|---|---|---|
Seth H. Z. Fischer(1) | — | % | 650,000 | ||||
Svai S. Sanford(2) | 34.3 | % | 350,000 | ||||
John L. Slebir(3) | 10.5 | % | 398,788 | ||||
Wesley W. Day, Ph.D. | 3.8 | % | 419,664 | ||||
Guy P. Marsh(4) | 8.7 | % | 369,887 | ||||
Michael P. Miller(5) | 3.5 | % | 407,869 | ||||
Timothy E. Morris(6) | 5.0 | % | 455,241 | ||||
Lee B. Perry(7) | 4.3 | % | 300,010 | ||||
Peter Y. Tam(8) | 6.0 | % | 577,713 | ||||
Leland F. Wilson(9) | — | % | 738,000 | ||||
Anthony P. Zook(10) | — | % | 650,000 |
Cash Bonus PlansPlan
Annual Bonus Plan. We awardawarded cash bonuses under the Annual Bonus Plan to our named executive officers based on our overall corporate performance and achievement of general corporate performance objectives established by our Board of DirectorsCompensation Committee in April 2012.February 2013. The cash bonuses are discretionary and are based on an end-of-year assessment by our Compensation Committee. The corporate performance and the achievement of corporate objectives determine the percent of the eligible cash bonus to be paid to each named executive officer. Each named executive officer's individual performance is reviewed to determine how such named executive officer's performance contributed to our overall corporate performance and achievement of corporate performance objectives. The Compensation Committee uses this information to determine the named executive officer's cash bonus award, such that the percent of the eligible bonus to be paid to a named executive officer may be decreased or eliminated based on the individual performance review. Cash bonuses under the Annual Bonus Plan are awarded on a discretionary basis, and the Compensation Committee may modify, eliminate or adjust corporate objectives at any time, thereby ensuring that employees are compensated for performance.
For 2012,2013, our corporate performance objectives as approved by our Board of DirectorsCompensation Committee in April 2012,February 2013, were as follows:
In the Compensation Committee's opinion, the Company succeeded in meeting approximately halfthe following corporate objectives: obtaining approval from the U.S. Food and Drug Administration of its corporate objectives,the modification to the Qsymia Risk Evaluation and Mitigation Strategy to allow expanded dispensing through certified retail pharmacies, including initiating the post-marketing studies foravailability of Qsymia in at least 10,000 certified retail pharmacies by August 1, 2013; raising adequate capital to support the Company's business; establishing a partnership in the United States, the European Union and STENDRA, submitting our Marketing Authorization Applicationcertain developing countries to launch STENDRA; and obtaining marketing approval from the European Medicines Agency to obtain marketing approval in the European Union for STENDRA as a treatment for erectile dysfunction, expanding the current Qsymia manufacturing capacity to ensure adequate supply, raising adequate capital to support our business, and in part preparing for and launching of Qsymia.dysfunction. Based on the achievements in 2012,2013, the Compensation Committee determined that bonuses under the Annual Bonus Plan equal to 45%60% of the eligible cash bonus potential would be paid for 20122013 to our eligible employees under the plan, including our eligible named executive officers, other than Mr. Wilson, who did not receive a cash bonus for 2012 under the Annual Bonus Plan.officers.
The table below provides the target bonus for each named executive officer who participated in the Annual Bonus Plan for 20122013 and the executive's actual bonus amount:amount (if any):
Name(1) | 2013 Target Bonus as a Percentage of Base Salary | 2013 Target Bonus ($) | 2013 Maximum Bonus as a Percentage of Base Salary | 2013 Maximum Bonus ($) | 2013 Actual Bonus as a Percentage of Base Salary | 2013 Actual Bonus ($) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Seth H. Z. Fischer(2) | 80 | % | 520,000 | 100 | % | 650,000 | 16 | % | 104,000 | ||||||||||
Svai S. Sanford(3) | 30 | % | 105,000 | 38 | % | 131,250 | 16 | % | 57,000 | ||||||||||
John L. Slebir | 40 | % | 159,515 | 50 | % | 199,394 | 24 | % | 95,700 | ||||||||||
Wesley W. Day, Ph.D. | 40 | % | 167,866 | 50 | % | 209,832 | 24 | % | 100,000 | ||||||||||
Guy P. Marsh | 50 | % | 184,944 | 63 | % | 231,179 | 22 | % | 81,000 | ||||||||||
Michael P. Miller | 50 | % | 203,935 | 63 | % | 254,918 | — | % | — |
Name | 2012 Target Bonus as a Percentage of Base Salary | 2012 Target Bonus ($) | 2012 Actual Bonus as a Percentage of Base Salary | 2012 Actual Bonus ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson | 55 | % | 405,900 | — | — | ||||||||
Peter Y. Tam | 50 | % | 272,506 | 23 | % | 122,628 | |||||||
Timothy E. Morris | 40 | % | 173,425 | 18 | % | 78,041 | |||||||
Michael P. Miller | 40 | % | 157,630 | 18 | % | 70,934 | |||||||
Guy P. Marsh | 40 | % | 136,168 | 18 | % | 61,275 | |||||||
Wesley W. Day, Ph.D. | 35 | % | 141,573 | 16 | % | 63,708 | |||||||
John L. Slebir | 35 | % | 126,263 | 16 | % | 56,818 |
For 2013,2014, under the Annual Bonus Plan, the Compensation Committee determined that our Chief Executive Officer, President,interim Chief Financial Officer, and Senior Vice Presidents (or equivalent pay grade),the functional equivalent) and Vice Presidents would be eligible to receive target cash bonuses of up to 60%, 55%, 50% and 40% of their base salaries, respectively, and maximum cash bonuses of up to 75%80%, 69%40%, 63%,50% and
50% 40% of their base salaries, respectively. The table below provides the target and maximum bonuses for each named executive officer who is participating in the Annual Bonus Plan for 2013:2014:
Name | 2014 Target Bonus as a Percentage of Base Salary | 2014 Target Bonus ($) | 2014 Maximum Bonus as a Percentage of Base Salary | 2014 Maximum Bonus ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Seth H. Z. Fischer(1) | 80 | % | 520,000 | 80 | % | 520,000 | |||||||
Svai S. Sanford | 40 | % | 140,000 | 40 | % | 140,000 | |||||||
John L. Slebir | 50 | % | 212,500 | 50 | % | 212,500 | |||||||
Wesley W. Day, Ph.D. | 40 | % | 172,920 | 40 | % | 172,920 | |||||||
Guy P. Marsh | 50 | % | 188,650 | 50 | % | 188,650 |
Name | 2013 Target Bonus as a Percentage of Base Salary | 2013 Target Bonus ($) | 2013 Maximum Bonus as a Percentage of Base Salary | 2013 Maximum Bonus ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson | 60 | % | 442,800 | 75 | % | 553,500 | |||||||
Peter Y. Tam | 55 | % | 317,742 | 69 | % | 397,178 | |||||||
Timothy E. Morris | 50 | % | 227,621 | 63 | % | 284,526 | |||||||
Michael P. Miller | 50 | % | 203,935 | 63 | % | 254,918 | |||||||
Guy P. Marsh | 50 | % | 184,944 | 63 | % | 231,179 | |||||||
Wesley W. Day, Ph.D. | 40 | % | 167,866 | 50 | % | 209,832 | |||||||
John L. Slebir | 40 | % | 159,515 | 50 | % | 199,394 |
Incentive Bonus Plan.January 27, 2012, ourJune 9, 2014, the Compensation Committee adopted a special performance incentive plan, orof the Incentive Bonus Plan, pursuantBoard approved goals and objectives to which allbe considered by the Compensation Committee in connection with determining the discretionary cash bonus of Seth H. Z. Fischer, our employees, including our named executive officers, wereChief Executive Officer, for fiscal year 2014. Mr. Fischer will be eligible to receive a cash bonus payment upon each of up to 80% of his base salary based on a number of factors, including the following goals ifCompany's achieving target net revenue and a target number of Qsymia prescriptions dispensed for the goals were achieved in 2012:
In order to continued expense optimization. Mr. Fischer also will be eligible under the plan, an employee had to be a full-time active employee as of January 27, 2012 and on the date during 2012 on which one of the foregoing qualifying events occurred. Bonus payments under the Incentive Bonus Plan were in addition to any bonus payments otherwise available to employees at the discretion of the Compensation Committee. Under the Incentive Bonus Plan, each eligible employee was eligible to receive a cashan additional bonus payment at a rate equal to a percentage of the employee's bonus potential under the Annual Bonus Plan for 2012, or the 2012 Bonus Potential, for each qualifying event as follows:
The corporate goals of the Qsymia U.S. Approval and the STENDRA U.S. Approval were achieved in 2012. The corporate goal of the Qsymia EU Approval was not achieved. Accordingly, bonus payments were made to eligible employees, including our named executive officers, equal to 60% of the eligible employee's 2012 Bonus Potential upon the Qsymia U.S. Approval and equal to 40% of the eligible employee's 2012 Bonus Potential upon the STENDRA U.S. Approval.
The table below provides the target bonus for each named executive officer who participated in the Incentive Bonus Plan for 2012 and the executive's actual bonus amount:
Name | 2012 Target Incentive Bonus as a Percentage of Base Salary | 2012 Target Incentive Bonus ($) | 2012 Actual Incentive Bonus as a Percentage of Base Salary | 2012 Actual Incentive Bonus ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson | |||||||||||||
Bonus Potential upon Qsymia U.S. Approval | 33 | % | 243,540 | 33 | % | 243,540 | |||||||
Bonus Potential upon Qsymia EU Approval | 22 | % | 162,360 | — | — | ||||||||
Bonus Potential upon STENDRA U.S. Approval | 22 | % | 162,360 | 22 | % | 162,360 | |||||||
Total Bonus Received | 55 | % | 405,900 | ||||||||||
Peter Y. Tam | |||||||||||||
Bonus Potential upon Qsymia U.S. Approval | 30 | % | 163,504 | 30 | % | 163,504 | |||||||
Bonus Potential upon Qsymia EU Approval | 20 | % | 109,002 | — | — | ||||||||
Bonus Potential upon STENDRA U.S. Approval | 20 | % | 109,002 | 20 | % | 109,002 | |||||||
Total Bonus Received | 50 | % | 272,506 | ||||||||||
Timothy E. Morris | |||||||||||||
Bonus Potential upon Qsymia U.S. Approval | 24 | % | 104,055 | 24 | % | 104,055 | |||||||
Bonus Potential upon Qsymia EU Approval | 16 | % | 69,370 | — | — | ||||||||
Bonus Potential upon STENDRA U.S. Approval | 16 | % | 69,370 | 16 | % | 69,370 | |||||||
Total Bonus Received | 40 | % | 173,425 | ||||||||||
Michael P. Miller | |||||||||||||
Bonus Potential upon Qsymia U.S. Approval | 24 | % | 94,578 | 24 | % | 94,578 | |||||||
Bonus Potential upon Qsymia EU Approval | 16 | % | 63,052 | — | — | ||||||||
Bonus Potential upon STENDRA U.S. Approval | 16 | % | 63,052 | 16 | % | 63,052 | |||||||
Total Bonus Received | 40 | % | 157,630 | ||||||||||
Guy P. Marsh | |||||||||||||
Bonus Potential upon Qsymia U.S. Approval | 24 | % | 81,701 | 24 | % | 81,701 | |||||||
Bonus Potential upon Qsymia EU Approval | 16 | % | 54,467 | — | — | ||||||||
Bonus Potential upon STENDRA U.S. Approval | 16 | % | 54,467 | 16 | % | 54,467 | |||||||
Total Bonus Received | 40 | % | 136,168 | ||||||||||
Wesley W. Day, Ph.D. | |||||||||||||
Bonus Potential upon Qsymia U.S. Approval | 21 | % | 84,944 | 21 | % | 84,944 | |||||||
Bonus Potential upon Qsymia EU Approval | 14 | % | 56,629 | — | — | ||||||||
Bonus Potential upon STENDRA U.S. Approval | 14 | % | 56,629 | 14 | % | 56,629 | |||||||
Total Bonus Received | 35 | % | 141,573 | ||||||||||
John L. Slebir | |||||||||||||
Bonus Potential upon Qsymia U.S. Approval | 21 | % | 75,758 | 21 | % | 75,758 | |||||||
Bonus Potential upon Qsymia EU Approval | 14 | % | 50,505 | — | — | ||||||||
Bonus Potential upon STENDRA U.S. Approval | 14 | % | 50,505 | 14 | % | 50,505 | |||||||
Total Bonus Received | 35 | % | 126,263 | ||||||||||
equal to 20% of his base salary based on the Company's achieving a target level of third-party coverage of Qsymia prescriptions as of the fourth quarter of fiscal year 2014.
Equity Compensation
We award equity compensation to our named executive officers based on the performance of the named executive officer and guidelines related to each named executive officer's position in the Company. We determine our stock option and restricted stock unit guidelines based on information derived from our Compensation Committee's and management's experience and, withexperience. With respect to our named executive officers, we also utilize an internally generated comparison of companies and third party survey of companies in our industry.industry, which was developed with information provided by Radford. Specifically, we utilize the Comparison Data to modify and adjust our stock option and restricted stock unit guidelines. We typically base awards to newly hired employees on these guidelines, and we base awards to continuing employees on these guidelines along with an employee's performance for the prior fiscal year. In determining the amount of awards, we generally do not consider an employee's current equity ownership in the Company or the prior awards that are fully vested. Rather, we evaluate each employee's awards based on the factors described above and competitive market factors in our industry.
Our stock option awards typically vest over a four-yearfour year period subject to the continued service of the employee to the Company. Twenty-five percent (25%) of the shares typically vest on the first anniversary of the option award, with the remaining shares vesting monthly in equal amounts over the remainder of the vesting period. Our restricted stock unit awards typically vest over a four year period subject to the continued service of the employee to the Company. Twenty-five percent of the shares typically vest on the annual anniversary of the restricted stock unit award. We believe this vesting arrangement encourages our employees to continue service to the Company for a longer period of time and remain focused on our multi-year long-term drug development and commercialization programs.
Timing of Equity Awards. Our Compensation Committee typically makes award decisions for employees at its first meeting in each fiscal year. We believe annual awards at this time allow the Compensation Committee to consider a number of factors related to the stock option award and restricted stock unit award decisions, including corporate performance for the prior fiscal year, employee performance for the prior fiscal year and expectations for the upcoming fiscal year. With respect to newly hired employees, our practice is typically to make stock option awards at the first meeting of the Compensation Committee following the employee's hire date. We do not plan or time our stock option awards in coordination with the release of material non-public information for the purpose of affecting the value of executive compensation.
Allocation of Equity Compensation. In 2012,2013, we granted stock options to purchase 2,850,1184,166,292 shares of our Common Stock, of which stock options to purchase a total of 867,0002,840,000 shares were awarded to executives, representing 30%approximately 68% of all awards in 2012.2013. Our Compensation Committee does not apply a formula for allocating stock options and restricted stock units to named executive officers. Instead, our Compensation Committee considers the role and responsibilities of the named executive officers, competitive factors, the non-equity compensation received by the named executive officers and the total number of options and restricted stock units to be granted in the fiscal year.
Type of Equity Awards. Under our 2010 Equity Incentive Plan, we may award incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to our employees, and we may award nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares to our employees, directors and consultants. TheIn 2013, the primary form of equity compensation that we award consistsawarded consisted of incentive
and nonstatutory stock options. In 2014, we began awarding restricted stock units, as well as stock options.
Equity Awards in 2012.2013. In January 2012,2013, our Compensation Committee reviewed equity compensation for our then-serving named executive officers. The Compensation Committee reviewed the Comparison Data and the individual performance of our namedsuch executive officers during the prior calendar year. Following the Compensation Committee's review, all of our then-serving named executive officers received stock options as reflected in the 20122013 Grants of Plan Based Awards Table on page 44 below.
Retirement Savings Plan
We maintain a 401(k) retirement savings plan for the benefit of our eligible employees. Employees may elect to contribute their compensation up to the statutorily prescribed limit. We currently match employee contributions up to a maximum of 4% of an employee's salary per pay period. In 2012,2013, the employer-match contribution limit was $9,800$10,200 per employee.
Employment AgreementAgreements
Seth H. Z. Fischer, our Chief Executive Officer, entered into an employment agreement with the Company on September 3, 2013, which we refer to herein as the Employment Agreement. Mr. Fischer's Employment Agreement has an initial term of four years, renewing annually thereafter unless either party provides notice of non-renewal. The Employment Agreement provides for:
Under Mr. Fischer's Employment Agreement, a "Change of Control" occurs when:
nomination is in connection with an actual or threatened proxy contest relating to the election of the Company's directors is not considered an Incumbent Director.
Leland F. Wilson, our former Chief Executive Officer, initially entered into an employment agreement with the Company on December 20, 2007. On January 25, 2013, our Compensation Committee approved the fourth amendment to Mr. Wilson's employment agreement, extending the term until June 1, 2014. Mr. Wilson's employment agreement, as amended, to date, providesprovided for:
retirement; (ii) a lump sum payment equal to 100% of the average annual incentive received by Mr. Wilson over the three year period prior to his retirement; (iii) up to 12 months of reimbursement for premiums paid for COBRA coverage; and (iv) full acceleration with respect to Mr. Wilson's outstanding unvested equity awards with an exercise period equal to the later of 12 months from termination of employment or 12 months from termination of service from the Board of Directors.Board. The Company's obligation to provide Mr. Wilson with benefits upon retirement is conditioned on an appropriate successor to Mr. Wilson having been identified and the Board's determination that the transition to the successor has been successfully accomplished. In the event a changeChange of controlControl occurs during the period commencing on the date that Mr. Wilson provides the Company with written notice of his retirement and ending on Mr. Wilson's termination date, then in lieu of the benefits provided upon retirement, Mr. Wilson will be entitled to receive the benefits to be received for a termination in connectionIn Connection with a changeChange of control;
Control;
Under Mr. Wilson's employment agreement, a "Change of Control" occurs when:
Mr. Wilson resigned as Chief Executive Officer, effective July 19, 2013, in connection with the Settlement Agreement. Please see "Executive Compensation—Potential Payments Upon Termination or Change of Control for each Named Executive Officer" for a description of the payments made to Mr. Wilson in connection with his resignation and "Certain Relationships and Related
Transactions—Review, Approval or Ratification of Transactions with Related Parties" for a description of the Settlement Agreement.
Anthony P. Zook, our former Chief Executive Officer, did not have an employment agreement providing for certain benefits in the event of a termination or change of control.
Change of Control Benefits
A description of the change of control benefits given to our named executed officers and a table showing potential payments upon termination or change of control of our named executive officers are set forth herein beginning on page 48.58 of this Proxy Statement.
Perquisites and Other Benefits
We annually review the perquisites that our named executive officers receive. In addition to the short-term and long-term disability insurance plans offered to all of our employees, including all of our named executive officers, we provideprovided an additional long-term disability insurance plan for our former Chief Executive Officer. WeOfficer, Leland F. Wilson. In 2013, we also offeroffered all of our named executive officers a supplemental medical reimbursement coverage plan which allowsallowed our named executive officers to receive reimbursement for eligible out of pocket medical expenses.
Table In 2014, we discontinued the use of Contentsthis supplemental medical reimbursement coverage plan.
Compensation Process
The Compensation Committee reviews and approves the salaries and incentive compensation of our named executive officers and non-employee directors and the remainder of our personnel, includingreviews and approves all new hire stock option awards to employees. In addition, the Compensation Committee approves stock option awards and restricted stock unit awards for all employees as part of our annual performance review process. The agendaCompensation Committee approves a pool of equity awards for employees who are not executive officers, and the Chief Executive Officer distributes this pool in his discretion and based on the performance of each individual. The agendas for meetings of the Compensation Committee are prepared by the Compensation Committee Chairman in consultation with management. Our Chief Executive Officer, interim Chief Financial Officer, and General Counsel typically attend the meetings of the Compensation Committee, but the Chief Executive Officer, the interim Chief Financial Officer and the General Counsel do not participate in deliberations relating to their own compensation. In rendering its decisions, the Compensation Committee considers the recommendations of the Chief Executive Officer, with input by the interim Chief Financial Officer and the General Counsel, the information regarding comparably sized companies in the biotechnology and pharmaceutical industries in the United States and its collective experience with other companies. Additionally, the Compensation Committee considers data and information provided by Radford. The Compensation Committee generally reviews the performance and compensation of the Chief Executive Officer and interim Chief Financial Officer annually.
Our Compensation Committee also works with our Chief Executive Officer and interim Chief Financial Officer in evaluating the financial, accounting, tax and retention implications of our various compensation programs.
Effect of Accounting and Tax Treatment on Compensation Decisions
We consider the anticipated accounting and tax implications to us and our named executive officers of our compensation programs. Prior to 2006, the primary form of equity compensation that we awarded consisted of incentive and nonstatutory stock options due to favorable accounting and tax treatment and the expectation among employees in our industry that they would be compensated through stock options. Beginning in 2006, the accounting treatment for stock options changed as a result of Financial Accounting Standards No. FAS 123R, or FAS 123(R),Share-Based Payment, as codified in FASB ASC topic 718,Compensation—Stock Compensation, or ASC 718, potentially making the accounting treatment of stock options less attractive. As a result, we assessed the desirability of various alternatives to stock options but determined to continue to grant stock options as the primary form of equity compensation.
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a limit on the amount of compensation that we may deduct in any one year with respect to our Chief Executive Officer and each of our next three most highly compensated executive officers, unless certain specific criteria are satisfied. From time to time,While we monitor whether it might be in our interests to structureconsider the deductibility of compensation when making our compensation programs to satisfy the requirements of Section 162(m). We seekdecisions, we believe that it is important to maintain the flexibility in compensatingto compensate our executives in a
manner designed towe believe will promote our corporate goals and therefore,be in the best interests of our stockholders. Our Compensation Committee therefore has not adopted a policy requiring all compensation to be deductible. Our Compensation Committee will continue to assess the impact of Section 162(m) on our compensation practices and determine what further action, if any, is appropriate.
Executive Time Off
All of our full-time employees, including our named executive officers, receive up to seven weeks of vacation each year, based upon the length of service. Mr. Wilson, our former Chief Executive Officer, was entitled to receive seven weeks of vacation each year, and Mr. Fischer, our Chief Executive Officer, is entitled to receive four weeks of vacation each year. Unused vacation carries over to the following year and may accumulate up to three weeks at any time. Upon termination, all employees are paid their accrued benefit that existed as of the date of such termination. Additionally, all employees receive two personal days and eight sick days each year. Personal days expire if unused as of the end of the calendar year, but all employees are paid their accrued benefit of any unused personal days as of the date of termination. Sick days expire if unused as of the date of termination or the end of the calendar year.
The information contained in this report shall not be deemed to be "soliciting material" or "filed" with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS | ||
Samuel F. Colin, M.D., Chairman |
20122013 Summary Compensation Table
The following table presents information for our fiscal year ended December 31, 20122013 concerning the total compensation paid to or accrued for our Chief Executive Officer, interim Chief Financial Officer, former Chief Executive Officers and Chief Financial Officer, and each of our fivesix other most highly compensated executive officers. We refer to these executive officers as our "named executive officers" below.
Name and Principal Position | Year | Salary($)(1) | Option Awards($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total($) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson | 2012 | 738,000 | 2,742,717 | 405,900 | 11,777 | 3,898,394 | |||||||||||||
Chief Executive Officer and | 2011 | 710,000 | 1,300,998 | 331,925 | 18,096 | 2,361,019 | |||||||||||||
Director | 2010 | 680,813 | 1,594,532 | 177,000 | 10,989 | 2,463,334 | |||||||||||||
Peter Y. Tam | 2012 | 545,012 | 894,053 | 395,134 | 12,189 | 1,846,388 | |||||||||||||
President and Director | 2011 | 501,012 | 603,052 | 212,930 | 16,261 | 1,333,255 | |||||||||||||
2010 | 477,154 | 566,233 | 95,430 | 16,116 | 1,154,933 | ||||||||||||||
Timothy E. Morris | 2012 | 433,563 | 759,101 | 251,466 | 23,297 | 1,467,427 | |||||||||||||
Senior Vice President | 2011 | 410,963 | 482,442 | 139,727 | 21,412 | 1,054,544 | |||||||||||||
Finance and Global | 2010 | 391,393 | 452,986 | 78,278 | 24,558 | 947,215 | |||||||||||||
Corporate Development | |||||||||||||||||||
and Chief Financial Officer | |||||||||||||||||||
Michael P. Miller | 2012 | 394,076 | 759,101 | 228,564 | 7,158 | 1,388,899 | |||||||||||||
Senior Vice President and | 2011 | 349,826 | 328,062 | 118,941 | 8,531 | 805,360 | |||||||||||||
Chief Commercial Officer | 2010 | 235,385 | 2,541,582 | 46,240 | 10,680 | 2,833,887 | |||||||||||||
Guy P. Marsh | 2012 | 340,419 | 759,101 | 197,443 | 17,126 | 1,314,089 | |||||||||||||
Vice President, U.S. | 2011 | 326,541 | 482,442 | 111,024 | 10,050 | 930,057 | |||||||||||||
Operations and General | 2010 | 310,991 | 339,740 | 62,198 | 11,799 | 724,728 | |||||||||||||
Manager | |||||||||||||||||||
Wesley W. Day, Ph.D. | 2012 | 404,495 | 421,724 | 205,281 | 17,566 | 1,049,066 | |||||||||||||
Vice President, Clinical | 2011 | 354,432 | 301,527 | 105,444 | 13,497 | 774,900 | |||||||||||||
Development | 2010 | 306,224 | 226,494 | 53,589 | 17,969 | 604,276 | |||||||||||||
John L. Slebir | 2012 | 360,750 | 421,724 | 183,081 | 16,810 | 982,365 | |||||||||||||
Vice President, Business | 2011 | 315,000 | 1,025,189 | 93,713 | 10,050 | 1,443,952 | |||||||||||||
Development and General | 2010 | 300,256 | — | 55,125 | 250 | 355,631 | |||||||||||||
Counsel and Secretary |
Name and Principal Position | Year | Salary($)(1) | Option Awards($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total($) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Seth H. Z. Fischer(5) | 2013 | 212,083 | 7,991,558 | 104,000 | 15,965 | 8,323,606 | |||||||||||||
Chief Executive Officer and Director | |||||||||||||||||||
Svai S. Sanford(6) | 2013 | 274,843 | 124,656 | 57,000 | 10,700 | 467,199 | |||||||||||||
Interim Chief Financial Officer and | |||||||||||||||||||
Chief Accounting Officer | |||||||||||||||||||
John L. Slebir | 2013 | 398,788 | 592,670 | 95,700 | 17,617 | 1,104,775 | |||||||||||||
Senior Vice President, Business | 2012 | 360,750 | 421,724 | 183,081 | 17,010 | 982,565 | |||||||||||||
Development and General Counsel | 2011 | 315,000 | 1,025,189 | 93,713 | 10,050 | 1,443,952 | |||||||||||||
and Secretary | |||||||||||||||||||
Wesley W. Day, Ph.D. | 2013 | 419,664 | 423,335 | 100,000 | 22,179 | 965,178 | |||||||||||||
Vice President, Clinical Development | 2012 | 404,495 | 421,724 | 205,281 | 17,766 | 1,049,266 | |||||||||||||
2011 | 354,432 | 301,527 | 105,444 | 13,497 | 774,900 | ||||||||||||||
Guy P. Marsh | 2013 | 369,887 | 931,337 | 81,000 | 12,854 | 1,395,078 | |||||||||||||
Vice President, U.S. Operations and | 2012 | 340,419 | 759,101 | 197,443 | 17,326 | 1,314,289 | |||||||||||||
General Manager | 2011 | 326,541 | 482,442 | 111,024 | 10,050 | 930,057 | |||||||||||||
Michael P. Miller(7) | 2013 | 407,964 | 762,003 | — | 7,553 | 1,177,520 | |||||||||||||
Former Senior Vice President and | 2012 | 394,076 | 759,101 | 228,564 | 7,158 | 1,388,899 | |||||||||||||
Chief Commercial Officer | 2011 | 349,826 | 328,062 | 118,941 | 8,531 | 805,360 | |||||||||||||
Timothy E. Morris(8) | 2013 | 485,006 | 931,337 | — | 1,685,127 | 3,101,470 | |||||||||||||
Former Senior Vice President Finance | 2012 | 433,563 | 759,101 | 251,466 | 23,497 | 1,467,627 | |||||||||||||
and Global Corporate Development and | 2011 | 410,963 | 482,442 | 139,727 | 21,412 | 1,054,544 | |||||||||||||
Chief Financial Officer | |||||||||||||||||||
Lee B. Perry(9) | 2013 | 284,560 | 592,670 | — | 1,038,507 | 1,915,737 | |||||||||||||
Former Vice President and Chief | |||||||||||||||||||
Accounting Officer | |||||||||||||||||||
Peter Y. Tam(10) | 2013 | 491,054 | 1,185,337 | — | 2,098,199 | 3,774,590 | |||||||||||||
Former President and Director | 2012 | 545,012 | 894,053 | 395,134 | 12,389 | 1,846,588 | |||||||||||||
2011 | 501,012 | 603,052 | 212,930 | 16,261 | 1,333,255 | ||||||||||||||
Leland F. Wilson(11) | 2013 | 459,355 | 1,662,907 | — | 2,453,637 | 4,575,899 | |||||||||||||
Former Chief Executive Officer and | 2012 | 738,000 | 2,742,717 | 405,900 | 11,977 | 3,898,594 | |||||||||||||
Director | 2011 | 710,000 | 1,300,998 | 331,925 | 18,096 | 2,361,019 | |||||||||||||
Anthony P. Zook(12) | 2013 | 111,359 | 8,625,680 | — | 2,958 | 8,739,997 | |||||||||||||
Former Chief Executive Officer and | |||||||||||||||||||
Director |
Compensation Committee in January 2012. The amount for fiscal year 2012 in this column for Mr. Wilson includes the cash bonus payment under the Incentive Bonus Plan only. The breakdown of the amounts for fiscal year 2012 for the Annual Bonus Plan and Incentive Bonus Plan for each named executive officer is as follows:
Name | 2012 Annual Bonus Plan ($) | 2012 Incentive Bonus Plan ($) | |||||
---|---|---|---|---|---|---|---|
Leland F. Wilson | — | 405,900 | |||||
Peter Y. Tam | 122,628 | 272,506 | |||||
Timothy E. Morris | 78,041 | 173,425 | |||||
Michael P. Miller | 70,934 | 157,630 | |||||
Guy P. Marsh | 61,275 | 136,168 | |||||
Wesley W. Day, Ph.D. | 63,708 | 141,573 | |||||
John L. Slebir | 56,818 | 126,263 |
2014. Please refer tosee "Compensation Discussion and Analysis" above for a description of the Annual Bonus Plan and Incentive Bonus Plan.
Name | Year | 401(k) Contributions ($) | Supplemental Medical Reimbursement Coverage Plan ($) | Long Term Disability Insurance Plan Premium ($) | Severance Payments ($) | Reimbursement for Lodging Expenses in Mountain View, CA ($) | Excess Medical Waiver Reimbursement ($) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Seth H. Z. Fischer | 2013 | 4,333 | — | — | — | 8,507 | 3,125 | |||||||||||||||
Svai S. Sanford | 2013 | 10,200 | — | — | — | — | 500 | |||||||||||||||
John L. Slebir | 2013 | 10,200 | 7,417 | — | — | — | — | |||||||||||||||
2012 | 10,000 | 7,010 | — | — | — | — | ||||||||||||||||
2011 | 9,800 | 250 | — | — | — | — | ||||||||||||||||
Wesley W. Day, Ph.D. | 2013 | 10,200 | 11,979 | — | — | — | — | |||||||||||||||
2012 | 10,000 | 7,766 | — | — | — | — | ||||||||||||||||
2011 | 9,800 | 3,697 | — | — | — | — | ||||||||||||||||
Guy P. Marsh | 2013 | 10,200 | 2,654 | — | — | — | — | |||||||||||||||
2012 | 10,000 | 7,326 | — | — | — | — | ||||||||||||||||
2011 | 9,800 | 250 | — | — | — | — | ||||||||||||||||
Michael P. Miller | 2013 | 7,303 | 250 | — | — | — | — | |||||||||||||||
2012 | 6,908 | 250 | — | — | — | — | ||||||||||||||||
2011 | 6,766 | 1,765 | — | — | — | — | ||||||||||||||||
Timothy E. Morris(a) | 2013 | 10,200 | 18,297 | — | 1,656,630 | — | — | |||||||||||||||
2012 | 10,000 | 13,497 | — | — | — | — | ||||||||||||||||
2011 | 9,800 | 11,612 | — | — | — | — | ||||||||||||||||
Lee B. Perry(b) | 2013 | 10,200 | 8,964 | — | 1,019,343 | — | — | |||||||||||||||
Peter Y. Tam(c) | 2013 | 10,200 | 5,872 | — | 2,082,127 | — | — | |||||||||||||||
2012 | 10,000 | 2,389 | — | — | — | — | ||||||||||||||||
2011 | 9,800 | 6,461 | — | — | — | — | ||||||||||||||||
Leland F. Wilson(d) | 2013 | 10,200 | 188 | 939 | 2,442,310 | — | — | |||||||||||||||
2012 | 10,000 | 1,038 | 939 | — | — | — | ||||||||||||||||
2011 | 9,800 | 7,357 | 939 | — | — | — | ||||||||||||||||
Anthony P. Zook | 2013 | — | — | — | — | 2,958 | — |
Name | Year | 401(k) Premiums and Contributions ($) | Supplemental Medical Reimbursement Coverage Plan ($) | Long Term Disability Plan Premium ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson | 2012 | 9,800 | 1,038 | 939 | |||||||||
2011 | 9,800 | 7,357 | 939 | ||||||||||
2010 | 9,800 | 250 | 939 | ||||||||||
Peter Y. Tam | 2012 | 9,800 | 2,389 | — | |||||||||
2011 | 9,800 | 6,461 | — | ||||||||||
2010 | 9,800 | 6,316 | — | ||||||||||
Timothy E. Morris | 2012 | 9,800 | 13,497 | — | |||||||||
2011 | 9,800 | 11,612 | — | ||||||||||
2010 | 9,800 | 14,758 | — | ||||||||||
Michael P. Miller | 2012 | 6,908 | 250 | — | |||||||||
2011 | 6,766 | 1,765 | — | ||||||||||
2010 | 6,800 | 3,880 | — | ||||||||||
Guy P. Marsh | 2012 | 9,800 | 7,326 | — | |||||||||
2011 | 9,800 | 250 | — | ||||||||||
2010 | 9,800 | 1,999 | — | ||||||||||
Wesley W. Day, Ph.D. | 2012 | 9,800 | 7,766 | — | |||||||||
2011 | 9,800 | 3,697 | — | ||||||||||
2010 | 9,800 | 8,169 | — | ||||||||||
John L. Slebir | 2012 | 9,800 | 7,010 | — | |||||||||
2011 | 9,800 | 250 | — | ||||||||||
2010 | — | 250 | — |
which include (i) $1,155,426, representing 24 months of base salary, as in effect at the time of termination; (ii) $635,484, representing an amount equal to 1/12th of Mr. Tam's target annual incentive cash bonus for the year in which termination occurred, multiplied by 24; (iii) $238,307, representing a lump sum cash payment equal to the prorated amount of Mr. Tam's target bonus; (iv) $32,910, representing the aggregate cost of premiums for 24 months of continued group health plan coverage under COBRA; and (v) outplacement services with a total value not to exceed $20,000.
20122013 Grants of Plan Based Awards
The following table provides information with regard to each grant of an award made to a named executive officer under any plan during the fiscal year ended December 31, 2012.2013.
| | | | | Exercise or Base Price of Option Awards ($/Sh)(2) | | ||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | Exercise or Base Price of Option Awards ($/Sh)(3) | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | |||||||||||||||||||||||||||||||||
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | | Number of Securities Underlying Options(#) | Exercise or Base Price of Option Awards ($/Sh)(2) | |||||||||||||||||||||||||||||||||||||
| | Number of Securities Underlying Options(#)(2) | Exercise or Base Price of Option Awards ($/Sh)(3) | Grant Date | ||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold($) | Target($) | Maximum($) | Threshold($) | Target($) | Maximum($) | |||||||||||||||||||||||||||||||||||||
Leland F. Wilson | ||||||||||||||||||||||||||||||||||||||||||||
Seth H. Z. Fischer | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/27/12 | — | — | — | 341,000 | 12.04 | 2,742,717 | 9/3/13 | — | — | — | 1,000,000 | 12.90 | 7,991,558 | ||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 405,900 | 405,900 | — | — | — | — | 0 | 520,000 | 650,000 | — | — | — | ||||||||||||||||||||||||||||||
Incentive Bonus Plan | — | 0 | 568,260 | 568,260 | — | — | — | |||||||||||||||||||||||||||||||||||||
Peter Y. Tam | ||||||||||||||||||||||||||||||||||||||||||||
Svai S. Sanford | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/27/12 | — | — | — | 106,000 | 12.04 | 894,053 | 1/25/13 | — | — | — | 15,000 | 12.39 | 124,657 | ||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 272,506 | 272,506 | — | — | — | — | 0 | 105,000 | 131,250 | — | — | — | ||||||||||||||||||||||||||||||
Incentive Bonus Plan | — | 0 | 381,508 | 381,508 | — | — | — | |||||||||||||||||||||||||||||||||||||
Timothy E. Morris | ||||||||||||||||||||||||||||||||||||||||||||
John L. Slebir | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/27/12 | — | — | — | 90,000 | 12.04 | 759,101 | 1/25/13 | — | — | — | 70,000 | 12.39 | 592,670 | ||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 173,425 | 173,425 | — | — | — | — | 0 | 159,515 | 199,394 | — | — | — | ||||||||||||||||||||||||||||||
Incentive Bonus Plan | — | 0 | 242,795 | 242,795 | — | — | — | |||||||||||||||||||||||||||||||||||||
Michael P. Miller | ||||||||||||||||||||||||||||||||||||||||||||
Wesley W. Day, Ph.D. | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/27/12 | — | — | — | 90,000 | 12.04 | 759,101 | 1/25/13 | — | — | — | 50,000 | 12.39 | 423,335 | ||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 157,630 | 157,630 | — | — | — | — | 0 | 167,866 | 209,832 | — | — | — | ||||||||||||||||||||||||||||||
Incentive Bonus Plan | — | 0 | 220,683 | 220,683 | — | — | — | |||||||||||||||||||||||||||||||||||||
Guy P. Marsh | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/27/12 | — | — | — | 90,000 | 12.04 | 759,101 | 1/25/13 | — | — | — | 110,000 | 12.39 | 931,337 | ||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 136,168 | 136,168 | — | — | — | — | 0 | 184,944 | 231,179 | — | — | — | ||||||||||||||||||||||||||||||
Incentive Bonus Plan | — | 0 | 190,635 | 190,635 | — | — | — | |||||||||||||||||||||||||||||||||||||
Wesley W. Day, Ph.D. | ||||||||||||||||||||||||||||||||||||||||||||
Michael P. Miller(3) | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/27/12 | — | — | — | 50,000 | 12.04 | 421,724 | 1/25/13 | — | — | — | 90,000 | 12.39 | 762,003 | ||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 141,573 | 141,573 | — | — | — | — | 0 | 203,935 | 254,918 | — | — | — | ||||||||||||||||||||||||||||||
Incentive Bonus Plan | — | 0 | 198,203 | 198,203 | — | — | — | |||||||||||||||||||||||||||||||||||||
John L. Slebir | ||||||||||||||||||||||||||||||||||||||||||||
Timothy E. Morris(4) | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/27/12 | — | — | — | 50,000 | 12.04 | 421,724 | 1/25/13 | — | — | — | 110,000 | 12.39 | 931,337 | ||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 126,263 | 126,263 | — | — | — | — | 0 | 227,621 | 284,526 | — | — | — | ||||||||||||||||||||||||||||||
Incentive Bonus Plan | — | 0 | 176,768 | 176,768 | — | — | — | |||||||||||||||||||||||||||||||||||||
Lee B. Perry(5) | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/25/13 | — | — | — | 70,000 | 12.39 | 592,670 | |||||||||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 120,004 | 150,005 | — | — | — | |||||||||||||||||||||||||||||||||||||
Peter Y. Tam(6) | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/25/13 | — | — | — | 140,000 | 12.39 | 1,185,337 | |||||||||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 317,742 | 397,178 | — | — | — | |||||||||||||||||||||||||||||||||||||
Leland F. Wilson(7) | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 1/25/13 | — | — | — | 200,000 | 12.39 | 1,662,907 | |||||||||||||||||||||||||||||||||||||
Annual Bonus Plan | — | 0 | 442,800 | 553,500 | — | — | — | |||||||||||||||||||||||||||||||||||||
Anthony P. Zook(8) | ||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 7/25/13 | — | — | — | 1,000,000 | 13.70 | 8,625,680 | |||||||||||||||||||||||||||||||||||||
Annual Bonus Plan | — | — | — | — | — | — | — |
approved by the Compensation Committee in January 2013, and the row entitled "Incentive Bonus Plan" for each respective named executive officer in the table above reflects the minimum, target and maximum value of a cash bonus award to each respective named executive officer in 2012 under the Incentive Bonus Plan approved by the Compensation Committee in January 2012.2014. The cash bonus award amounts actually paid under the Annual Bonus Plan and Incentive Bonus Plan to the named executive officers in 20122013 are shown in the Summary Compensation Table for 20122013 under the heading "Non-Equity Incentive Plan Compensation" and under the heading "All Other Compensation" and the accompanying footnote.footnotes. Please refer to
"Compensationsee "Compensation Discussion and Analysis" above for a description of the Annual Bonus Plan and Incentive Bonus Plan.
Outstanding Equity Awards at Fiscal Year-End
The following table presents certain information concerning the outstanding equity awards held as of December 31, 20122013 by each named executive officer.
| Option Awards | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Securities Underlying Unexercised Options(#)(1) | | | ||||||||||
| Option Exercise Price($)(2) | Option Expiration Date(3) | |||||||||||
Name | Exercisable | Unexercisable | |||||||||||
Leland F. Wilson | 200,315 | — | 3.73 | 8/23/2015 | |||||||||
70,000 | — | 3.13 | 1/30/2016 | ||||||||||
500,000 | — | 4.25 | 1/29/2017 | ||||||||||
300,000 | — | 6.05 | 1/25/2018 | ||||||||||
489,583 | 10,417 | 4.23 | 1/23/2019 | ||||||||||
218,750 | 81,250 | 8.91 | 1/22/2020 | ||||||||||
107,813 | 117,187 | 8.74 | 1/21/2021 | ||||||||||
— | 341,000 | 12.04 | 1/27/2022 | ||||||||||
Peter Y. Tam | 75,000 | — | 4.25 | 1/29/2017 | |||||||||
150,000 | — | 6.05 | 1/25/2018 | ||||||||||
244,791 | 5,209 | 4.23 | 1/23/2019 | ||||||||||
158,333 | 41,667 | 7.90 | 10/30/2019 | ||||||||||
72,916 | 27,084 | 8.91 | 1/22/2020 | ||||||||||
47,917 | 52,083 | 8.74 | 1/21/2021 | ||||||||||
— | 106,000 | 12.04 | 1/27/2022 | ||||||||||
Timothy E. Morris | 150,000 | — | 6.05 | 1/25/2018 | |||||||||
145,833 | 4,167 | 4.23 | 1/23/2019 | ||||||||||
58,333 | 21,667 | 8.91 | 1/22/2020 | ||||||||||
38,334 | 41,666 | 8.74 | 1/21/2021 | ||||||||||
— | 90,000 | 12.04 | 1/27/2022 | ||||||||||
Michael P. Miller | 191,666 | 133,334 | 10.19 | 4/30/2020 | |||||||||
26,066 | 28,334 | 8.74 | 1/21/2021 | ||||||||||
— | 90,000 | 12.04 | 1/27/2022 | ||||||||||
Guy P. Marsh | 15,893 | — | 6.05 | 1/25/2018 | |||||||||
20,834 | 2,084 | 4.23 | 1/23/2019 | ||||||||||
28,750 | 16,250 | 8.91 | 1/22/2020 | ||||||||||
38,334 | 41,666 | 8.74 | 1/21/2021 | ||||||||||
— | 90,000 | 12.04 | 1/27/2022 | ||||||||||
Wesley W. Day, Ph. D. | 100,000 | — | 6.05 | 1/25/2018 | |||||||||
97,916 | 2,084 | 4.23 | 1/23/2019 | ||||||||||
29,166 | 10,834 | 8.91 | 1/22/2020 | ||||||||||
23,959 | 26,041 | 8.74 | 1/21/2021 | ||||||||||
— | 50,000 | 12.04 | 1/27/2022 | ||||||||||
John L. Slebir | 1,875 | 1,875 | 6.39 | 9/4/2019 | |||||||||
77,708 | 88,542 | 8.74 | 1/21/2021 | ||||||||||
— | 50,000 | 12.04 | 1/27/2022 |
| Option Awards | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Securities Underlying Unexercised Options(#)(1) | | | ||||||||
| Option Exercise Price($)(2) | Option Expiration Date(3) | |||||||||
Name | Exercisable | Unexercisable | |||||||||
Seth H. Z. Fischer | 83,333 | 916,667 | 12.90 | 9/3/2020 | |||||||
Svai S. Sanford | 12,395 | 22,605 | 22.63 | 9/7/2022 | |||||||
— | 15,000 | 12.39 | 1/25/2023 | ||||||||
John L. Slebir | 3,750 | — | 6.39 | 9/4/2019 | |||||||
166,250 | — | 8.74 | 1/21/2021 | ||||||||
50,000 | — | 12.04 | 1/27/2022 | ||||||||
70,000 | — | 12.39 | 1/25/2023 | ||||||||
Wesley W. Day, Ph. D. | 100,000 | — | 6.05 | 1/25/2018 | |||||||
100,000 | — | 4.23 | 1/23/2019 | ||||||||
40,000 | — | 8.91 | 1/22/2020 | ||||||||
50,000 | — | 8.74 | 1/21/2021 | ||||||||
50,000 | — | 12.04 | 1/27/2022 | ||||||||
50,000 | — | 12.39 | 1/25/2023 | ||||||||
Guy P. Marsh | 15,893 | — | 6.05 | 1/25/2018 | |||||||
22,918 | — | 4.23 | 1/23/2019 | ||||||||
45,000 | — | 8.91 | 1/22/2020 | ||||||||
80,000 | — | 8.74 | 1/21/2021 | ||||||||
90,000 | — | 12.04 | 1/27/2022 | ||||||||
110,000 | — | 12.39 | 1/25/2023 | ||||||||
Michael P. Miller(4) | 325,000 | — | 10.19 | 4/30/2020 | |||||||
54,400 | — | 8.74 | 1/21/2021 | ||||||||
90,000 | — | 12.04 | 1/27/2022 | ||||||||
90,000 | — | 12.39 | 1/25/2023 | ||||||||
Timothy E. Morris(5) | 150,000 | — | 6.05 | 1/25/2018 | |||||||
139,346 | — | 4.23 | 1/23/2019 | ||||||||
80,000 | — | 8.91 | 1/22/2020 | ||||||||
80,000 | — | 8.74 | 1/21/2021 | ||||||||
90,000 | — | 12.04 | 1/27/2022 | ||||||||
110,000 | — | 12.39 | 1/25/2023 | ||||||||
Lee B. Perry(6) | 22,918 | — | 4.23 | 1/23/2019 | |||||||
19,168 | — | 8.91 | 1/22/2020 | ||||||||
36,459 | — | 8.74 | 1/21/2021 | ||||||||
50,000 | — | 12.04 | 1/27/2022 | ||||||||
70,000 | — | 12.39 | 1/25/2023 |
forty-eighth
| Option Awards | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Securities Underlying Unexercised Options(#)(1) | | | ||||||||
| Option Exercise Price($)(2) | Option Expiration Date(3) | |||||||||
Name | Exercisable | Unexercisable | |||||||||
Peter Y. Tam(7) | 41,256 | — | 4.25 | 1/29/2017 | |||||||
150,000 | — | 6.05 | 1/25/2018 | ||||||||
250,000 | — | 4.23 | 1/23/2019 | ||||||||
200,000 | — | 7.90 | 10/30/2019 | ||||||||
100,000 | — | 8.91 | 1/22/2020 | ||||||||
100,000 | — | 8.74 | 1/21/2021 | ||||||||
106,000 | — | 12.04 | 1/27/2022 | ||||||||
140,000 | — | 12.39 | 1/25/2023 | ||||||||
Leland F. Wilson(8) | 341,000 | — | 12.04 | 1/27/2022 | |||||||
200,000 | — | 12.39 | 1/25/2023 | ||||||||
Anthony P. Zook(9) | — | 1,000,000 | 13.70 | 7/25/2020 |
20122013 Stock Option Exercises
The following table shows the number of shares acquired pursuant to the exercise of stock options by each named executive officer during the fiscal year ended December 31, 20122013 and the aggregate dollar amount realized by the named executive officer upon exercise of the stock option.
Name | Number of Shares Acquired on Exercise(#) | Value Realized on Exercise($)(1) | Number of Shares Acquired on Exercise(#) | Value Realized on Exercise($)(1) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Timothy E. Morris | 10,654 | 82,217 | ||||||||||||
Peter Y. Tam | 33,744 | 192,119 | ||||||||||||
Leland F. Wilson | 400,000 | 8,325,226 | 2,095,315 | 8,990,522 | ||||||||||
Peter Y. Tam | 301,250 | 6,575,447 | ||||||||||||
Timothy E. Morris | 354,358 | 5,832,522 | ||||||||||||
Michael P. Miller | 75,000 | 1,321,650 | ||||||||||||
Guy P. Marsh | 170,046 | 3,041,357 | ||||||||||||
Wesley W. Day, Ph.D. | 109,958 | 1,532,082 | ||||||||||||
John L. Slebir | 10,000 | 217,288 |
Potential Payments Upon Termination or Change of Control for each Named Executive Officer
Based upon a hypothetical triggering date of December 31, 2012,2013, the quantifiable benefits for each named executive officer upon the occurrence of certain specified events are set forth in the table below.
Executive benefits and payments upon termination: | Involuntary termination not for cause or by constructive termination not following a change of control($) | Benefits following a change of control($) | Involuntary termination not for cause or by constructive termination following a change of control($) | Death or Disability($) | Voluntary termination due to retirement($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson(1) | ||||||||||||||||
Base salary | 922,500 | — | 1,476,000 | — | 1,291,500 | |||||||||||
Bonus | 405,900 | — | 1,217,700 | 405,900 | 304,942 | |||||||||||
Medical continuation | 40,000 | — | 80,000 | 40,000 | 40,000 | |||||||||||
Outplacement services(2) | — | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(3) | 1,481,185 | — | 1,481,185 | 1,481,185 | 1,481,185 | |||||||||||
Peter Y. Tam | ||||||||||||||||
Base salary | 136,253 | — | 1,090,024 | — | — | |||||||||||
Bonus | 340,633 | — | 817,518 | — | — | |||||||||||
Medical continuation | 7,500 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(3) | — | 790,050 | — | — | — | |||||||||||
Timothy E. Morris | ||||||||||||||||
Base salary | 108,391 | — | 867,126 | — | — | |||||||||||
Bonus | 216,782 | — | 520,276 | — | — | |||||||||||
Medical continuation | 7,500 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(3) | — | 455,210 | — | — | — | |||||||||||
Michael P. Miller | ||||||||||||||||
Base salary | 98,519 | — | 788,152 | — | — | |||||||||||
Bonus | 197,038 | — | 472,891 | — | — | |||||||||||
Medical continuation | 7,500 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(3) | — | 687,472 | — | — | — | |||||||||||
Guy P. Marsh | ||||||||||||||||
Base salary | 85,105 | — | 680,838 | — | — | |||||||||||
Bonus | 170,210 | — | 408,503 | — | — | |||||||||||
Medical continuation | 7,500 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(3) | — | 411,636 | — | — | — | |||||||||||
Wesley W. Day, Ph.D. | — | |||||||||||||||
Base salary | 101,124 | — | 808,990 | — | — | |||||||||||
Bonus | 176,967 | — | 424,720 | — | — | |||||||||||
Medical continuation | 7,500 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(3) | — | 258,885 | — | — | — | |||||||||||
John L. Slebir | ||||||||||||||||
Base salary | 90,188 | — | 721,500 | — | — | |||||||||||
Bonus | 157,828 | — | 378,788 | — | — | |||||||||||
Medical continuation | 7,500 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(3) | — | 496,558 | — | — | — |
Executive benefits and payments upon termination: | Involuntary termination not for cause or by constructive termination not following a change of control($) | Benefits following a change of control($) | Involuntary termination not for cause or by constructive termination following a change of control($) | Written Notice of Non-Renewal of Employment Agreement($) | Death or Disability($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Seth H. Z. Fischer(1) | ||||||||||||||||
Base salary | 325,000 | — | 325,000 | 325,000 | — | |||||||||||
Bonus | 433,333 | — | 433,333 | 433,333 | 173,333 | |||||||||||
Medical continuation | — | — | — | — | — | |||||||||||
Outplacement services(2) | — | — | — | — | — | |||||||||||
Value of accelerated stock options(3) | — | — | — | — | — | |||||||||||
Svai S. Sanford | ||||||||||||||||
Base salary | 201,923 | — | 201,923 | — | — | |||||||||||
Bonus | 140,000 | — | 140,000 | — | — | |||||||||||
Medical continuation | 45,000 | — | 45,000 | — | — | |||||||||||
Outplacement services(2) | 10,000 | — | 10,000 | — | — | |||||||||||
Value of accelerated stock options(3) | — | — | — | — | — | |||||||||||
John L. Slebir | ||||||||||||||||
Base salary | 199,394 | — | 797,576 | — | — | |||||||||||
Bonus | 239,273 | — | 478,546 | — | — | |||||||||||
Medical continuation | 60,000 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 477,021 | — | — | — |
Executive benefits and payments upon termination: | Involuntary termination not for cause or by constructive termination not following a change of control($) | Benefits following a change of control($) | Involuntary termination not for cause or by constructive termination following a change of control($) | Written Notice of Non-Renewal of Employment Agreement($) | Death or Disability($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Wesley W. Day, Ph.D. | — | |||||||||||||||
Base salary | 209,832 | — | 839,328 | — | — | |||||||||||
Bonus | 251,798 | — | 503,597 | — | — | |||||||||||
Medical continuation | 60,000 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 241,980 | — | — | — | |||||||||||
Guy P. Marsh | ||||||||||||||||
Base salary | 184,944 | — | 739,774 | — | — | |||||||||||
Bonus | 277,415 | — | 554,831 | — | — | |||||||||||
Medical continuation | 60,000 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 433,312 | — | — | — | |||||||||||
Michael P. Miller(5) | ||||||||||||||||
Base salary | 203,935 | — | 815,738 | — | — | |||||||||||
Bonus | 305,902 | — | 611,804 | — | — | |||||||||||
Medical continuation | 60,000 | — | 60,000 | — | — | |||||||||||
Outplacement services(2) | 20,000 | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 606,114 | — | — | — | |||||||||||
Timothy E. Morris(6) | ||||||||||||||||
Base salary | — | — | 910,482 | — | — | |||||||||||
Bonus | — | — | 682,862 | — | — | |||||||||||
Medical continuation | — | — | 43,286 | — | — | |||||||||||
Outplacement services(2) | — | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 447,197 | — | — | — | |||||||||||
Lee B. Perry(7) | ||||||||||||||||
Base salary | — | — | 600,020 | — | — | |||||||||||
Bonus | — | — | 360,012 | — | — | |||||||||||
Medical continuation | — | — | 39,311 | — | — | |||||||||||
Outplacement services(2) | — | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 267,571 | — | — | — | |||||||||||
Peter Y. Tam(8) | ||||||||||||||||
Base salary | — | — | 1,155,426 | — | — | |||||||||||
Bonus | — | — | 873,791 | — | — | |||||||||||
Medical continuation | — | — | 32,910 | — | — | |||||||||||
Outplacement services(2) | — | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 651,527 | — | — | — | |||||||||||
Leland F. Wilson(1)(9) | ||||||||||||||||
Base salary | — | — | 1,476,000 | — | — | |||||||||||
Bonus | — | — | 885,600 | — | — | |||||||||||
Medical continuation | — | — | 60,710 | — | — | |||||||||||
Outplacement services(2) | — | — | 20,000 | — | — | |||||||||||
Value of accelerated stock options(4) | — | 1,264,447 | — | — | — |
Executive benefits and payments upon termination: | Involuntary termination not for cause or by constructive termination not following a change of control($) | Benefits following a change of control($) | Involuntary termination not for cause or by constructive termination following a change of control($) | Written Notice of Non-Renewal of Employment Agreement($) | Death or Disability($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Anthony P. Zook(1) | ||||||||||||||||
Base salary | — | — | — | — | — | |||||||||||
Bonus | — | — | — | — | — | |||||||||||
Medical continuation | — | — | — | — | — | |||||||||||
Outplacement services(2) | — | — | — | — | — | |||||||||||
Value of accelerated stock options(3) | — | — | — | — | — |
Our named executive officers have agreements that provide for certain benefits in
and Severance Agreement by and between the Company and Mr. Miller, effective as of July 1, 2013. Actual severance payments triggered by Mr. Miller's termination include (i) $815,738, representing monthly severance payments during the period from the date of Mr. Miller's termination until the date 24 months after the effective date of the termination (the "Severance Period") equal to the monthly salary that Mr. Miller was receiving immediately prior to the Change of Control; (ii) $203,935, representing monthly severance payments during the Severance Period equal to 1/12th of Mr. Miller's target bonus for the other named executive officers or (ii) elected, or nominatedfiscal year in which the termination occurred for election,each month in which severance payments are made to Mr. Miller pursuant to (i) above; (iii) $43,286, representing potential amounts to be reimbursed to Mr. Miller of the total applicable premium cost for continued group health plan coverage under for a period of up to 24 months following Mr. Miller's termination of employment; and (iv) outplacement services with a total value not to exceed $20,000.
the termination (the "Severance Period") equal to the monthly salary that Mr. Tam was receiving immediately prior to the Change of Control; (ii) $635,484, representing monthly severance payments during the Severance Period equal to 1/12th of Mr. Tam's target bonus for the fiscal year in which the termination occurs for each month in which severance payments are made to Mr. Tam pursuant to (i) above; (iii) $238,307, representing a majoritylump sum cash payment equal to the prorated amount of Mr. Tam's target bonus for the fiscal year in which the termination occurs, calculated based on the number of months during such fiscal year in which Mr. Tam was employed by the Company; (iv) $32,910, representing potential amounts to be reimbursed to Mr. Tam of the Incumbent Directorstotal applicable premium cost for continued group health plan coverage under COBRA for a period of up to 24 months following Mr. Tam's termination of employment; and (v) outplacement services with a total value not to exceed $20,000. Please see "Certain Relationships and Related Transactions—Review, Approval or Ratification of Transactions with Related Parties" for a description of the Settlement Agreement.
The Compensation Committee believes that providing the Company's named executive officers protection against a termination of employment by the Company without cause or by a named executive officer for good reason is consistent with competitive practices and will help retain the Company's named executive officers and maintain leadership stability.
The Compensation Committee also believes that providing our named executive officers with benefits upon a change of control is in the best interests of our stockholders because change of control benefits help reduce the potential reluctance of our named executive officers to pursue certain change of control transactions that create employment uncertainty. The change of control benefits are designed to help retain the Company's named executive officers and maintain a stable work environment by automatically vesting stock optionsall equity awards held by the named executive officers immediately upon a change of control and providing certain other benefits in the event their employment is terminated without cause or constructively terminated in connection with a change of control for Mr. Wilson or within 24 months following a change of control for the other named executive officers. Benefits upon a change of control, other than automatic vesting of outstanding stock options,all equity awards, are provided only upon a "double-trigger" basis, which means that there must be both a change of control of the Company and a termination of the named executive officer's employment.
Because of the so-called "parachute" tax imposed by the Internal Revenue Code Section 280G, we limit the change of control benefits of our named executive officers such that no taxes will be imposed under Section 280G. For our named executive officers, we have agreed that their severance benefits will be either (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by the named executive officer on an after-tax basis of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code.
Termination and Change of Control Benefits for our Chief Executive Officer and Former Chief Executive Officers
A description of our Chief Executive Officer'sthe termination and change of control benefits for our Chief Executive Officer and former Chief Executive Officers is set forth in the section entitled "Compensation Discussion and Analysis—Employment Agreement.Agreements."
Termination and Change in Control Benefits for our Interim Chief Financial Officer
In July 2013, we entered into Participation Agreements to the VIVUS, Inc. Change in Control Severance Plan and Summary Plan Description, or the Change in Control Plan, with our employees, excluding employees who were also executive officers. On July 10, 2013, Svai S. Sanford entered into a Participation Agreement with respect to the Change in Control Plan, as Mr. Sanford was not an executive officer at that time. Mr. Sanford remains eligible for termination and change in control benefits under the Change in Control Plan.
Pursuant to the Change in Control Plan, in the event the Company terminates Mr. Sanford's employment other than for Cause (as defined in the Change in Control Plan), or if Mr. Sanford terminates his employment for Good Reason (as defined in the Change in Control Plan), within 12 months following a Change in Control (as defined in the Change in Control Plan), Mr. Sanford will be entitled to the sum of (i) six months base salary, (ii) four weeks of his base salary multiplied by the numbers of years of employment with the Company and (iii) a prorated target bonus; provided that the aggregate severance payment cannot exceed 24 months of Mr. Sanford's base salary. Mr. Sanford will also be entitled to (i) 18 months of reimbursement for the expenses of continued COBRA coverage, (ii) outplacement assistance in an amount not to exceed $10,000 and (iii) all of the outstanding equity awards held by Mr. Sanford will automatically vest. Additionally, in the event Mr. Sanford is terminated by the Company without Cause in the absence of a Change in Control, Mr. Sanford will receive the benefits listed above, but in lieu of (iii) of the preceding sentence, Mr. Sanford's outstanding options will vest through his termination date as if such awards had vested on a monthly schedule through the date of termination.
For purposes of the Change in Control Plan, a "Change in Control" occurs when:
Termination and Change of Control Benefits for our Other Named Executive Officers
On July 5, 2013, we entered into an Amended and Restated Change of Control and Severance Agreement, effective July 1, 2013, with each of our executive officers, other than Messrs. Fischer, Sanford, Wilson and Zook, that provide for certain benefits in the event of a termination or change of control. A description of the termination and change of control benefits for ourthese named executive officers, other than our Chief Executive Officer, to whom we refer toin this section as executive officers, is provided below.
The Amended and Restated Change of Control and Severance Agreements provide that if an executive officer's employment with the Company is terminated without causeCause or by the executive officer for good reasonGood Reason and the termination does not occur within 24 months after a changeChange of controlControl (as such term isterms are defined in the Amended and Restated Change of Control and Severance Agreements) of the Company, the executive officer will receive, subject to signing a release of claims in favor of the Company, (i) monthly severance payments during the period from the date of the executive officer's termination until the date that is threesix months after the effective date of termination or, for purposes of this paragraph only, the 3Six Month Severance Period, equal to the monthly salary the executive officer was receiving immediately prior to the termination date; (ii) monthly severance payments during the 3Six Month Severance Period equal to one-twelfth1/12th of the executive officer's target bonus for the fiscal year in which the termination occurs for each month in which severance payments are made to the executive officer pursuant to (i) above; (iii) an additional pro-rated portion of the executive officer's target bonus; (iv) up to three24 months of reimbursement for premiums paid for COBRA coverage; (v) accelerated vesting of the executive officer's then-outstanding and unvested equity awards, to the extent that any of the then-unvested and outstanding shares of the Company's Common Stock subject to such equity awards otherwise would have vested through the date of the executive officer's termination of employment with the Company, had each such equity award been subject to a monthly vesting schedule; and (v) outplacement services with a total value not to exceed $20,000, to be provided during the 3Six Month Severance Period.
The Amended and Restated Change of Control and Severance Agreements also provide that if an executive officer's employment with the Company is terminated by the Company without causeCause or by the executive officer for good reasonGood Reason within 24 months after a changeChange of controlControl of the Company, the executive officer will receive, subject to signing a release of claims in favor of the Company, (i) monthly severance payments during the period from the date of the executive officer's termination until the date 24 months after the effective date of the termination, or for purposes of this paragraph only, the 24 Month Severance Period, equal to the monthly salary the executive officer was receiving immediately prior to the change of control; (ii) monthly severance payments during the 24 Month Severance Period equal to one-twelfth1/12th of the executive officer's target bonus (as such term is defined in the Amended and Restated Change of Control and Severance Agreements) for the fiscal year in which the termination occurs for each month in which severance payments are made to the executive officer pursuant to (i) above; (iii) an additional pro-rated portion of the executive officer's target bonus; (iv) up to 24 months of reimbursement for premiums paid for COBRA coverage; and (v) outplacement services with a total value not to exceed $20,000.
The Amended and Restated Change of Control and Severance Agreements for our executive officers also provide for the automatic vesting in full of all outstanding stock options held by the executive officers upon the close of a changeChange of control.Control.
Under such agreements, a "Change of Control" occurs when:
represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or
The following table sets forth the compensation paid by us during the fiscal year ended December 31, 20122013 to our non-employee directors:
Name | Year | Fees Earned or Paid in Cash($)(1) | Stock Awards($)(2)(3) | Option Awards($)(4)(5) | Total($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mark B. Logan*(6) | 2012 | 129,400 | 128,700 | 211,488 | 469,588 | |||||||||||
Charles J. Casamento**(7) | 2012 | 118,400 | 128,700 | 211,488 | 458,588 | |||||||||||
Ernest Mario, Ph.D.***(8) | 2012 | 87,050 | 484,600 | — | 571,650 | |||||||||||
Linda M. Dairiki Shortliffe, M.D. | 2012 | 101,400 | 128,700 | 211,488 | 441,588 |
Name | Year | Fees Earned or Paid in Cash($)(1) | Stock Awards($)(2)(3) | Option Awards($)(4)(5) | Total($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Michael J. Astrue(6)(7) | 2013 | 32,500 | — | 197,628 | 230,128 | |||||||||||
J. Martin Carroll(6)(7) | 2013 | 50,351 | 260,900 | — | 311,251 | |||||||||||
Samuel F. Colin, M.D.(6)(7) | 2013 | 26,000 | — | 197,628 | 223,628 | |||||||||||
Alexander J. Denner, Ph.D.(6)(7) | 2013 | 20,000 | — | 197,628 | 217,628 | |||||||||||
Johannes J.P. Kastelein, M.D., Ph.D.(6)(7) | 2013 | 20,000 | — | 197,628 | 217,628 | |||||||||||
Mark B. Logan(6)(7) | 2013 | 85,039 | 261,739 | 48,092 | 394,870 | |||||||||||
David Y. Norton(6)(7) | 2013 | 23,750 | — | 197,628 | 221,378 | |||||||||||
Jorge Plutzky, M.D.(6)(7) | 2013 | 50,351 | 259,200 | — | 309,551 | |||||||||||
Herman Rosenman(6)(7) | 2013 | 27,500 | — | 197,628 | 225,128 | |||||||||||
Robert N. Wilson(6) | 2013 | 50,351 | 258,200 | — | 308,551 | |||||||||||
Charles J. Casamento(6)(7) | 2013 | 88,800 | 261,739 | — | 350,539 | |||||||||||
Ernest Mario, Ph.D.(6)(7) | 2013 | 92,550 | 261,739 | — | 354,289 | |||||||||||
Linda M. Dairiki Shortliffe, M.D.(6)(7) | 2013 | 76,050 | 261,739 | — | 337,789 |
original RSU grants. As of December 31, 2013, the aggregate number of stock options outstanding for each non-employee director was as follows:
Name | Stock options outstanding at 12/31/13 | |||
---|---|---|---|---|
Michael J. Astrue | 25,000 | |||
J. Martin Carroll | 25,000 | |||
Samuel F. Colin, M.D. | 25,000 | |||
Alexander J. Denner, Ph.D. | 25,000 | |||
Johannes J.P. Kastelein, M.D., Ph.D. | 25,000 | |||
Mark B. Logan | 149,000 | |||
David Y. Norton | 25,000 | |||
Jorge Plutzky, M.D. | 25,000 | |||
Herman Rosenman | 25,000 | |||
Robert N. Wilson | 25,000 | |||
Charles J. Casamento | 25,000 | |||
Ernest Mario, Ph.D. | — | |||
Linda M. Dairiki Shortliffe, M.D. | 106,000 |
On August 14, 2013, the Board approved significant changes to the previous cash and equity compensation arrangement for the Company's non-employee directors. The new cash and equity compensation arrangement is effective as of July 19, 2013.
Under the new cash compensation arrangement, each non-employee director will receive an annual retainer of $40,000, versus the $101,400 annual retainer previously paid to each non-employee director, with the Chairman of the Board receiving an additional $25,000 per year, the Chairman of the Audit Committee receiving an additional $15,000 per year, the Chairman of the Compensation Committee
receiving an additional $12,000 per year and the Chairman of the Nominating and Governance Committee receiving an additional $7,500 per year. The annual retainers are paid in equal quarterly installments.
Under the new equity compensation arrangement, following the initial appointment or election to the Board, each non-employee director will be granted a non-qualified stock option to purchase 25,000 shares of Common Stock with an exercise price equal to the fair market value of the Company's Common Stock as of the date of grant, or the Initial Option. Initial Options (i) vest monthly over three years on each monthly anniversary date commencing on the date service as a non-employee director began and will continue to vest so long as the non-employee director continued service to the Company on such dates; (ii) have a seven year term; and (iii) have a six month post-termination exercise period.
Thereafter, provided that the non-employee director is re-elected to the Board and has served as a director for at least six months as of such election date, each such non-employee director will be granted on the date of the Annual Meeting of Stockholders a non-qualified stock option to purchase a number of shares of Common Stock to be determined by the Board with an exercise price equal to the fair market value of the Company's Common Stock as of the date of grant, or the Subsequent Option. Subsequent Options (i) vest monthly over one year following the date of grant so long as the non-employee director continuescontinued service to the Company on such dates. Ernest Mario, Ph.D. was not eligibledates; (ii) have a seven year term; and (iii) have a six month post-termination exercise period.
Prior to receive this stock option grant, as he was appointed as a director ofJuly 19, 2013, beginning on January 1, 2013, the Company on April 18, 2012. At fiscal year end, the aggregate number of stock options outstandingcash compensation arrangement for each non-employee director
directors was as follows: Mark B. Logan: 124,000; Charles J. Casamento: 50,000; Ernest Mario, Ph.D.: none; and Linda M. Dairiki Shortliffe, M.D.: 129,000.
For the fiscal year 2012, our(i) non-employee directors received $101,400 per annum, paid in equal quarterly installments, as well as reimbursement for expenses incurred in connection with attending board and committee meetings. The non-employee director serving asannum; (ii) the Chairman of the Audit Committee received an additional $22,000 per annum; and (iii) each of the Chairman of the Board of Directors and the Chairman of the Compensation Committee received an additional $17,000 for the performance of these dutiesper annum. All annual retainers were paid in fiscal 2012.
On April 25, 2012, the Compensation Committee approved a new equity compensation arrangement for non-employee directors, with the cash compensation arrangement remaining unchanged. The new equity arrangement went into effect as of April 25, 2012. Under this new arrangement,equal quarterly installments. Additionally, on or before December 1st of each fiscal year, each non-employee director willwould elect to receive either a stock option or RSUs as equity compensation for the next fiscal year. New members would make an initial election upon appointment or election to the Board of Directors.Board. The non-employee directors made the election for the remainder of fiscal year 2012 on the date the new arrangement was approved oron April 25, 2012.
Following the initial appointment or election to the Board, of Directors, each non-employee director willwould be granted either (i) a nonstatutory stock option to purchase 32,000 shares of Common Stock with an exercise price equal to the fair market value of our Common Stock as of the date of grant, or the Initial Option, or (ii) 20,000 RSUs, or the Initial RSUs. Initial Options vestvested as to one-fourth of the shares on each anniversary date of grant over a period of four years so long as the non-employee director continuescontinued service to the Company on such dates. Initial RSUs vestvested as to one-fourth1/4th of the units on each anniversary date of grant over a period of four years so long as the non-employee director continuescontinued service to the Company on such dates. Thereafter, provided that the non-employee director iswas re-elected to the Board of Directors and hashad served as a director for at least six (6) months as of such election date, each non-employee director would be granted, on the date of the Annual Meeting of Stockholders, either (i) a nonstatutory stock option to purchase 8,000 shares of Common Stock with an exercise price equal to the fair market value of our Common Stock as of the date of grant, or the Subsequent Option, or (ii) 5,000 RSUs, or the Subsequent RSUs. Subsequent Options begin to vestvested at the rate of 12.5% per month following the date of grant so long as the non-employee director continuescontinued service to the Company on such dates. Subsequent RSUs vestvested 100% on the one year anniversary of the date of grant so long as the non-employee director continuescontinued service to the Company on such date.
In addition, at the first meeting of the Compensation Committee during each fiscal year including 2012,during 2013, each non-employee director iswas also eligible to receive either (i) a nonstatutory stock option to purchase up to 25,00035,000 shares of Common Stock with an exercise price equal to the fair market value of our Common Stock as of the date of grant, or the Discretionary Option, or (ii) 15,00021,125 RSUs, or the
Discretionary RSUs. Discretionary Options vestvested at a rate of 12.5% per month on the first day of each month following the date of grant so long as the non-employee director continuescontinued service to the Company on such dates. Discretionary RSUs vestvested 100% on the one year anniversary of the date of grant so long as the non-employee director continuescontinued service to the Company on such date.
On January 25,Prior to July 19, 2013, the Compensation Committee approved the following additional changes to the equity compensation arrangement for non-employee directors, with the cash compensation arrangement remaining unchanged: (i) the number of shares to beoptions granted under the Discretionary Option was increased from up2010 Equity Incentive Plan to 25,000 sharesnon-employee directors had a term of Common Stock to up to 35,000 shares10 years unless terminated sooner upon termination of Common Stock; and (ii) the number of RSUs to be granted under the Discretionary RSUs was increased from up to 15,000 RSUs to up to 21,125 RSUs. The changesstatus as a director or otherwise pursuant to the equity compensation arrangement went into effect2010 Equity Incentive Plan. Effective as of January 25, 2013.
OptionsJuly 19, 2013, options granted under the 2010 Equity Incentive Plan to non-employee directors have a term of tenseven years unless terminated sooner upon termination of status as a director or otherwise pursuant to the 2010 Equity Incentive Plan. Such options are transferable by the non-employee director only in certain limited circumstances, and each option is exercisable during the lifetime of the non-employee director only by such non-employee director or a permitted transferee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us with respect to beneficial ownership of our Common Stock as of May 10, 2013July 31, 2014 by (i) each person or entity who is known by us to own beneficially more than 5% of our Common Stock; (ii) each of our directors; (iii) each of our named executive officers;officers, as specified in the "Compensation Discussion and Analysis" section of this Proxy Statement; and (iv) all directors and executive officers as a group. Except asUnless otherwise noted, the stockholders namedaddress of the persons or entities shown in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to applicable community property laws.is 351 East Evelyn Avenue, Mountain View, California, 94041.
Five Percent Stockholders, Directors and Executive Officers | Beneficially Owned Stock(1) Number of Shares | Percent | |||||
---|---|---|---|---|---|---|---|
Passport Capital, LLC(2) | 9,938,268 | 9.9 | % | ||||
First Manhattan Co.(3) | 9,716,604 | 9.7 | % | ||||
QVT Financial LP(4) | 8,346,697 | 8.3 | % | ||||
BlackRock, Inc.(5) | 6,328,216 | 6.3 | % | ||||
The Vanguard Group(6) | 5,527,661 | 5.5 | % | ||||
Mark B. Logan(7) | 177,000 | * | |||||
J. Martin Carroll | 0 | * | |||||
Charles J. Casamento(8) | 55,000 | * | |||||
Ernest Mario, Ph.D. | 30,000 | * | |||||
Linda M. Dairiki Shortliffe, M.D.(9) | 134,000 | * | |||||
Robert N. Wilson | 5,650 | * | |||||
Jorge Plutzky, M.D. | 0 | * | |||||
Leland F. Wilson(10) | 2,203,196 | 2.2 | % | ||||
Peter Y. Tam(11) | 879,782 | * | |||||
Timothy E. Morris(12) | 448,541 | * | |||||
Michael P. Miller(13) | 314,461 | * | |||||
Guy P. Marsh(14) | 158,280 | * | |||||
Wesley W. Day, Ph.D.(15) | 283,134 | * | |||||
John L. Slebir(16) | 124,659 | * | |||||
All directors and executive officers as a group (15 persons)(17) | 4,884,332 | 4.9 | % |
| Beneficially Owned Stock(1) | ||||||
---|---|---|---|---|---|---|---|
Name | Number of Shares | Percent | |||||
5% Holders | |||||||
Aspen Investment Fund LLC(2) | 9,967,245 | 9.6 | % | ||||
First Manhattan Co.(3) | 9,953,844 | 9.6 | % | ||||
BlackRock, Inc.(4) | 7,560,931 | 7.3 | % | ||||
QVT Financial LP(5) | 6,517,748 | 6.3 | % | ||||
North Tide Capital, LLC(6) | 6,500,000 | 6.3 | % | ||||
Passport Capital, LLC(7) | 6,194,216 | 6.0 | % | ||||
The Vanguard Group(8) | 5,509,408 | 5.3 | % | ||||
Non-Employee Directors | |||||||
Michael J. Astrue(9) | 19,722 | * | |||||
J. Martin Carroll(10) | 10,708 | * | |||||
Samuel F. Colin, M.D.(11) | 3,258,522 | 3.1 | % | ||||
Alexander J. Denner, Ph.D.(12) | 2,583,665 | 2.5 | % | ||||
Johannes J.P. Kastelein, M.D., Ph.D.(13) | 9,722 | * | |||||
Mark B. Logan(14) | 196,908 | * | |||||
David Y. Norton(15) | 11,222 | * | |||||
Jorge Plutzky, M.D.(16) | 10,695 | * | |||||
Herman Rosenman(17) | 14,722 | * | |||||
Named Executive Officers | |||||||
(Current Executive Officers) | |||||||
Seth H. Z. Fischer(18) | 336,412 | * | |||||
Svai S. Sanford(19) | 37,737 | * | |||||
John L. Slebir(20) | 303,928 | * | |||||
Wesley W. Day, Ph.D.(21) | 394,771 | * | |||||
Guy P. Marsh(22) | 372,680 | * | |||||
Named Executive Officers | |||||||
(Former Executive Officers) | |||||||
Michael P. Miller(23) | 559,400 | * | |||||
Timothy E. Morris(24) | 649,346 | * | |||||
Lee B. Perry(25) | 198,545 | * | |||||
Peter Y. Tam(26) | 1,054,556 | 1.0 | % | ||||
Leland F. Wilson(27) | 197,076 | * | |||||
Anthony P. Zook | — | * | |||||
All directors and executive officers as a group (20 persons)(28) | 10,220,337 | 9.9 | % |
computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of Common Stock subject to options and restricted stock units held by that person that will be exercisable/vested and exercisable within 60 days of May 10, 2013July 31, 2014 are deemed outstanding. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. The persons named in this table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws, where applicable, and except as indicated in the other footnotes to this table.
and its affiliates is c/o Passport Capital, LLC, One Market Street, Steuart Tower, Suite 2200, San Francisco, California 94105.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file certain reports of ownership with the SEC. Such officers, directors and stockholders are also required by SEC rules to provide us with copies of all Section 16(a) forms that they file. Based solely on itsour review of copies of such forms received by us or on written representations from certain reporting persons submitted to us during the year ended December 31, 2012,2013, we believe that during the period from January 1, 20122013 to December 31, 2012,2013, all of our executive officers, directors and 10% stockholders complied with all Section 16(a) requirements except as follows: one late Form 43/A for Mr. WilsonSanford was filed on July 2, 2012,March 17, 2014, reporting the exerciseomission of atwo stock option grant and subsequent sale of the underlying shares under a Rule 10b5-1 trading plangrants from Mr. Sanford's original Form 3 and one late Form 4 for Mr. Casamento was filed on April 22, 2013 for the gift of 61,000 shares of VIVUS Common Stock to a blind trust managed by a third-party trustee over which Mr. Casamento has no control over transactions in the shares held by the trust and no right to control voting of the shares or the disposition of proceeds upon sale.
Table of Contentsafter his original Form 3.
Equity Compensation Plan Information
We currently maintain three equity-basedInformation about our equity compensation plans at December 31, 2013, that have beenwere approved by the stockholders—the 1994 Employee Stock Purchase Plan, theour stockholders was as follows:
Plan Category | Number of Shares to be issued Upon Exercise of Outstanding Options and Rights(a) | Weighted Average Exercise Price of Outstanding Options | Number of Shares Remaining Available for Future Issuance(c) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by stockholders | 8,581,451 | $ | 12.14 | 2,474,918 | ||||||
Equity compensation plans not approved by stockholders(b) | 325,000 | $ | 10.19 | — | ||||||
| | | | | | | | | | |
Total | 8,906,451 | $ | 12.07 | 2,474,918 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
Plan Category | Number of Shares of Common Stock to be Issued Upon Exercise of Outstanding Options and Rights(1) | Weighted-Average Exercise Price of Outstanding Options and Rights | Number of Shares of Common Stock Remaining Available for Future Issuance Under Equity Compensation Plans (excluding shares reflected in the first column)(3) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | 8,220,917 | $ | 10.33 | 5,347,493 | ||||||
Equity compensation plans not approved by security holders(2) | 325,000 | $ | 10.19 | — | ||||||
Total | 8,545,917 | $ | 10.32 | 5,347,493 | ||||||
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Change of Control and Severance Agreements with Executive Officers
Our current executive officers, excluding our Chief Executive Officer and interim Chief Financial Officer, have Amended and Restated Change of Control and Severance Agreements that provide for certain benefits in the event of a changeChange of control.Control. In addition, our Chief Executive Officer's employment agreement (see "Compensation and Discussion Analysis—Employment Agreement"Agreements") also provides for certain benefits in the event of a changeChange of control.
TheControl, and our interim Chief Financial Officer's Participation Agreement to the Change of Control Plan provides for certain benefits in the event of a Change in Control (see "Executive Compensation—Potential Payments Upon Change of Control for Each Named Executive Officer—Termination and Change in Control Benefits for our Interim Chief Financial Officer). Our former executive officers, excluding our former Chief Executive Officers, entered into Amended and Restated Change of Control and Severance Agreements, which provided for certain benefits in the event of a Change of Control (see "Potential Payments Upon Termination or Change of Control for each Named Executive Officer"). Leland F. Wilson, our former Chief Executive Officer, had an employment agreement (see "Compensation and Discussion Analysis—Employment Agreements"), which provided for certain benefits in the event of a Change of Control (see "Potential Payments Upon Termination or Change of Control for each Named Executive Officer"), and Anthony P. Zook, our former Chief Executive Officer, did not have an employment agreement providing for certain benefits in the event of a termination or change of control.
The above referenced agreements recognized that there may be periods where another company, entity or another entityindividual considers the possibility of acquiring the Company or that a change in our managementBoard may otherwise occur (collectively known as a Change of Control), with or without the approval of our Board of Directors. The Change of Control and Severance AgreementsBoard. These agreements recognized that such an event may cause a distraction to employees, which may in turn cause employees to consider alternative employment opportunities. The Board of Directors determined that it was in the best interest of the Company to give such employees an incentive to continue their employment during periods where the threat or occurrence of a Change of Control may exist. The Change of Control and Severance AgreementsThese agreements are discussed in more detail in the section under "Compensation and Discussion Analysis—Employment Agreements" on page 36 of this Proxy Statement and "Potential Payments Upon Termination or Change of Control for each Named Executive Officer" on page 4858 of this Proxy Statement.
We have entered into indemnification agreements with each of our directors and executive officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.
Review, Approval or Ratification of Transactions with Related Parties
We, or one of our subsidiaries, may occasionally enter into transactions with certain "related parties." Related parties include our executive officers, directors, nominees for directors, or 5% or more beneficial owners of our Common Stock and immediate family members of these persons. We refer to transactions in which the related party has a direct or indirect material interest as "related party transactions." Each related party transaction must follow the procedures set forth in the Company's Code of Business Conduct and Ethics and be reviewed and approved by the Audit Committee prior to the entering into of such transaction.
The Audit Committee considers all relevant factors when determining whether to approve a related party transaction including, without limitation, the following:
Settlement with First Manhattan Co.
On July 18, 2013, we entered into a settlement agreement, or the Settlement Agreement, with First Manhattan Co., or First Manhattan, terminating First Manhattan's proxy contest with respect to the election of directors at our 2013 annual meeting of stockholders (the "2013 Annual Meeting").
Pursuant to the Settlement Agreement, we agreed, among other things, (i) to amend our Amended and Restated Bylaws to increase the size of our Board to comprise a total of eleven members, (ii) to reconstitute the Board, with the following individuals: Michael J. Astrue, J. Martin Carroll, Samuel F. Colin, M.D., Alexander J. Denner, Ph.D., Johannes J.P. Kastelein, M.D, Ph.D., Mark B. Logan, David Y. Norton, Jorge Plutzky, M.D., Herman Rosenman and Robert N. Wilson, and (iii) to amend the Amended and Restated Bylaws to authorize the Board to adjourn the 2013 Annual Meeting. In connection with the Settlement Agreement, each of Charles J. Casamento, Ernest Mario, Ph.D., Linda M. Dairiki Shortliffe, M.D., Peter Y. Tam and Leland F. Wilson resigned from our Board, effective July 19, 2013.
Also in connection with the Settlement Agreement, Mr. Wilson resigned as our Chief Executive Officer, effective July 19, 2013. In his place, the reconstituted Board appointed Anthony P. Zook to serve as Chief Executive Officer and as a new director to our Board. Mr. Zook resigned from the position of Chief Executive Officer and as a director effective as of September 3, 2013. In connection with the Settlement Agreement, we reimbursed approximately $2.9 million in expenses incurred by First Manhattan. Dr. Colin, one of our current directors, was appointed to our Board in connection with the Settlement Agreement and is Senior Managing Director at First Manhattan.
STOCKHOLDER PROPOSALS FOR 20142015 ANNUAL MEETING
Under the rules of the SEC, eligible stockholders may submit proposals for inclusion in the proxy statementProxy Statement for our 20142015 annual meeting. In order for a proposal to be included in our proxy materialsProxy Materials for a particular meeting, the person submitting the proposal must own, beneficially or of record, at least 1% or $2,000 in market value, whichever is less, of shares of our common stockCommon Stock entitled to be voted on that proposal at the meeting, and must have held those shares for a period of at least one year and continue to hold them through the date of the meeting. Also, the proposal and the stockholder submitting it must comply with certain other eligibility and procedural requirements contained in rules of the SEC.
StockholderPursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, stockholders may present proper proposals mustfor inclusion in the Proxy Statement and for consideration at our next annual meeting of stockholders. To be submittedeligible for inclusion in writing andthe 2015 Proxy Statement, your proposal must be received by us no later than April 23, 2015, based on an anticipated Proxy Statement date of August 21, 2014, and must otherwise comply with Rule 14a-8. While our Board will consider stockholder proposals, we reserve the Company's Corporate Secretary on or before February 3, 2014 for themright to be considered for inclusion inomit from the 2014 proxy statement.Proxy Statement stockholder proposals
that we are not required to include under the Securities Exchange Act of 1934, as amended, including Rule 14a-8.
If you wishUnder our Amended and Restated Bylaws, in order to nominate a director or submit a proposalbring any other business before the stockholders at the 2015 Annual Meeting that iswill not to be included in the 2014 proxy statement,our Proxy Statement, the proposal must be received by the Company's Corporate Secretary on or between March 17, 2014May 15, 2015 and April 16, 2014.June 14, 2015.
In accordance with our bylaws,Amended and Restated Bylaws, the required notice of a nomination for director must include, among other things, (1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of such nominee, (3) the class and number of VIVUS shares that are beneficially owned by such nominee, (4) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (5) any other information relating to such nominee that is required to be disclosed in the solicitations for proxiesProxies for
elections of directors or is otherwise required pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statementProxy Statement as a nominee and to serving as a director if elected). Only persons who are nominated in the manner described in our bylawsAmended and Restated Bylaws are eligible to be elected as directors at meetings of our stockholders, and the Chairman of a meeting of our stockholders may refuse to acknowledge a nomination that is not made in compliance with the required notice procedure.
All proposals for inclusion in the 2014 proxy statement2015 Proxy Statement or consideration at the 20142015 annual meeting must set forth the information required by our bylaws,Amended and Restated Bylaws, a copy of which is available upon written request to VIVUS, Inc., 1172 Castro Street,351 East Evelyn Avenue, Mountain View, CA 94040,94041, Attention: Corporate Secretary. Proposals should be addressed to:
Corporate Secretary
VIVUS, Inc.1172 Castro Street351 East Evelyn Avenue
Mountain View, CA 9404094041
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statementsProxy Statements and annual reportsAnnual Reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual reportset of Proxy Materials addressed to those stockholders. This process, which is commonly referred to as "householding," potentially means extra convenience for stockholders and cost savings for companies.
A single set of Proxy StatementMaterials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. If you share an address with another stockholder and have received only one set of this year's proxy materialsProxy Materials and you wish to receive a separate copy, please notify us in writing to our Corporate Secretary at VIVUS, Inc., 1172 Castro Street,351 East Evelyn Avenue, Mountain View, CA 94040,94041, or via phone at 650-934-5200 and we will deliver a separate copy to you promptly.
Once you have received notice from your broker that it will be "householding" communications to your address, "householding" will continue until you are notified otherwise or until you revoke your consent thereto. If, at any time, you no longer wish to participate in "householding" and would prefer to receive a separate proxy statement,set of printed Proxy Materials, please notify your broker. You may also call (800) 662-5200 or (203) 658-9400 or direct your written request to Morrow & Co., LLC, 470 West Avenue, Stamford, CT 06902, and include your name, the name of your broker or other nominee, and your account number(s). Stockholders who received multiple copies of the Proxy StatementMaterials at their address and would like to request "householding" of their communications should contact their broker.
Other than matters and proposals described in this Proxy Statement, we have not received valid notice of any other business to be acted upon at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosedGOLD proxy cardProxy Card or Voting Instruction Form to vote the shares they represent as the Board of Directors may recommend.
It is important that your stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to execute and return the accompanyingGOLD proxy card in the enclosed envelopeProxy Card or Voting Instruction Form at your earliest convenience.
The Board of Directors | ||
Mountain View, California August 15, 2014 |
The Board of Directors
APPENDIX A
Mountain View, California VIVUS, INC. , 20132010 EQUITY INCENTIVE PLAN
ANNEX AVIVUS, INC.VIVUS's2010 EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Plan are:
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares.
2. Definitions. As used herein, the following definitions will apply:
(a) "Administrator" means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Affiliate" means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.
(c) "Applicable Laws" means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
(d) "Award" means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares.
(e) "Award Agreement" means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(f) "Board" means the Board of Directors and Certain Executive Officers
of the Company.
The following sections ("Directors and Nominees" and "Officers and Employees") set forth (g) "Change in Control" means the name, principal business address and the present principal occupation or employment, and the name, principal business and addressoccurrence of any of the following events:
(i) Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group ("Person"), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change in Control; or
(ii) Change in Effective Control of the Company. If the Company has a class of securities registered pursuant to Section 12 of the Exchange Act, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii) Change in Ownership of a Substantial Portion of the Company's Assets. A change in the ownership of a substantial portion of the Company's assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company's assets: (A) a transfer to an entity that is controlled by the Company's stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company's stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this Section 2(g), persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction shall not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
Further and for the avoidance of doubt, a transaction shall not constitute a Change in Control if: (i) its sole purpose is to change the state of the Company's incorporation, or (ii) its sole purpose is to create a holding company that shall be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction.
(h) "Code" means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or Treasury Regulation thereunder will include such section or regulation, any valid regulation or other official applicable guidance promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
(i) "Committee" means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means VIVUS, Inc., a Delaware corporation, or any successor thereto.
(l) "Consultant" means any consultant, independent contractor, advisor, or other organization in which their employmentnatural person who provides services to the Company or its Affiliates, but who is carried on,neither an Employee nor a Director; provided, further, that a Consultant will include only those persons to whom the issuance of our directors, nominees, officers and employees who,Shares may be registered under Form S-8 under the rulesSecurities Act of 1933, as amended.
(m) "Determination Date" means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as "performance-based compensation" under Section 162(m) of the SEC, are "participants" in our solicitation of proxies from our stockholders in connection with our 2013 Annual Meeting.
The principal occupations of our directors and nominees who are "participants" in our solicitation are set forth under the section above entitled "Proposal No. 1: Election of Directors" of this Proxy Statement. The name, principal occupation and business address of the organization of employment of our directors and nominees are as follows:
(n) "Director" means a member of the Board.
(o) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.
(p) "Employee" means any person, including Officers and Employees
Directors, employed by the Company or its Affiliates. Neither service as a Director nor payment of a director's fee by the Company will be sufficient to constitute "employment" by the Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(r) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Market, the Nasdaq Global Select Market or the Nasdaq Capital Market, its Fair Market Value shall be the closing sales price for such stock (or, the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported inThe Wall Street Journal or such other source as the Administrator deems reliable;
The principal occupations(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the day of our executive officersdetermination (or, if no bids and employees whoasks were reported on that date, as applicable, on the last trading date such bids and asks are "participants"reported); or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in our solicitationgood faith by the Administrator.
(s) "Fiscal Year" means the fiscal year of proxies are set forth below. The principal occupation refersthe Company.
(t) "Incentive Stock Option" means an Option that by its terms qualifies and is otherwise intended to such person's position with our Company,qualify as an incentive stock option within the meaning of Section 422 of the Code and the business address for eachregulations promulgated thereunder.
(u) "Nonstatutory Stock Option" means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
(v) "Officer" means a person who is VIVUS, Inc., 1172 Castro Street, Mountain View, CA 94040.
Information Regarding Ownershipan officer of the Company's Securities by Participants
Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
The shares (w) "Option" means a stock option granted pursuant to the Plan.
(x) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of our Common Stock beneficially owned or held asthe Code.
(y) "Participant" means the holder of May 10, 2013 byan outstanding Award.
(z) "Performance Goals" will have the persons listed above under "Directors and Nominees" and "Officers and Employees" aremeaning set forth in Section 11 of the section entitled "Security OwnershipPlan.
(aa) "Performance Period" means any Fiscal Year of Certain Beneficial Ownersthe Company or such longer or shorter period as determined by the Administrator in its sole discretion.
(bb) "Performance Share" means an Award denominated in Shares which may be earned in whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 10.
(cc) "Performance Unit" means an Award which may be earned in whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine and Management" on page 54which may be settled for cash, Shares or other securities or a combination of this Proxy Statement.
No participant owns any VIVUS securities of record that such participant does not own beneficially.the foregoing pursuant to Section 10.
(dd) "ANNEX BInformation Concerning Persons whoPeriod of Restriction" means the period during which the transfer of Shares of Restricted Stock are Participants in VIVUS's Solicitationsubject to restrictions and therefore, the Shares are subject to a substantial risk of Proxies
forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.
The following tables set forth information concerning persons who, (ee) "Plan" means this 2010 Equity Incentive Plan.
(ff) "Restricted Stock" means Shares issued pursuant to a Restricted Stock award under SEC rules, are "participants"Section 8 of the Plan, or issued pursuant to the early exercise of an Option.
(gg) "Restricted Stock Unit" means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(hh) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the solicitationPlan.
(ii) "Section 16(b)" means Section 16(b) of proxies by VIVUSthe Exchange Act.
(jj) "Service Provider" means an Employee, Director or Consultant.
(kk) "Share" means a share of the Common Stock, as adjusted in accordance with Section 15 of the Plan.
(ll) "Stock Appreciation Right" means an Award, granted alone or in connection with the Annual Meeting.an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.
(mm) "Information Regarding TransactionsSubsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in VIVUS's Securities by VIVUS Participants inSection 424(f) of the Past Two YearsCode.
Except set forth in 3. Stock Subject to the table below, no VIVUS participant has madePlan.
(a) Subject to the provisions of Section 15 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is equal to the sum of (i) 14,350,000 Shares, (ii) any purchasesShares which have been reserved but not issued pursuant to any awards granted under the Company's 2001 Stock Option Plan (the "2001 Plan") as of the date of stockholder approval of this Plan, plus (iii) any Shares subject to stock options or sales of VIVUS's Common Stock since , 2011. Unless otherwise indicated, all transactions were in the open market and neither the purchase price nor the market value of those shares is represented by funds borrowedsimilar awards granted under 2001 Plan that expire or otherwise obtainedterminate without having been exercised in full and Shares issued pursuant to awards granted under the 2001 Plan that are forfeited to or repurchased by the Company (up to a maximum of 8,183,199 Shares pursuant to this subsection (iii)). The Shares may be authorized, but unissued, or reacquired Common Stock.
(b) Full Value Awards. Any Shares subject to Awards of Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares will be counted against the numerical limits of this Section 3 as 1.22 Shares for every one Share subject thereto. Further, if Shares acquired pursuant to any such Award are forfeited or repurchased by the purposeCompany and would otherwise return to the Plan pursuant to Section 3(c), 1.22 times the number of acquiringShares so forfeited or holding such securities.repurchased will return to the Plan and will again become available for issuance.
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distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company due to failure to vest, such Shares will become available for future grant under the Plan. Shares used to pay the exercise or purchase price of an Award and/or to satisfy the tax withholding obligations related to an Award will not become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 15, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that become available for issuance under the Plan under this Section 3(c).
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(d) Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more "outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;
(vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws;
(viii) to modify or amend each Award (subject to Section 20(c) of the Plan), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards and to extend the maximum term of an Option (subject to Section 6(e) regarding Incentive Stock Options). Notwithstanding the previous sentence, the Administrator may not modify or amend an Option or Stock Appreciation Right to reduce the exercise price of such Option or Stock Appreciation Right after it has been granted (except for adjustments made pursuant to Section 15), and neither may the Administrator cancel any outstanding Option or Stock Appreciation Right and immediately replace it with a new Option or Stock Appreciation Right with a lower exercise price, unless such action is approved by stockholders prior to such action being taken; (ix) to allow Participants to satisfy withholding tax obligations in such manner as prescribed in Section 16; (x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; (xi) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine; and (xii) to make all other determinations deemed necessary or advisable for administering the Plan. (c) Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards. (d) No Liability. Under no circumstances shall the Company, its Affiliates, the Administrator, or the Board incur liability for any indirect, incidental, consequential or special damages (including lost profits) of any form incurred by any person, whether or not foreseeable and regardless of the form of the act in which such a claim may be brought, with respect to the Plan or the Company's, its Affiliates', the Administrator's or the Board's roles in connection with the Plan. 5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, and Performance Shares may be granted to Service Providers. Incentive Stock Options may be granted only to employees of the Company or any Parent or Subsidiary of the Company. 6. Stock Options. (a) Grant of Stock Options. Subject to the terms and conditions of the Plan, an Option may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand U.S. dollars ($100,000), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. |
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(b)Information Regarding Any Contracts, Arrangement Number of Shares. The Administrator will have complete discretion to determine the number of Shares subject to an Option granted to any Participant, provided that during any Fiscal Year, no Participant will be granted Options covering more than 1,000,000 Shares. Notwithstanding the limitation in the previous sentence, in connection with his or Understanding Involving VIVUS Commonher initial service as an Employee, an Employee may be granted Options covering up to an additional 1,000,000 Shares. The foregoing limitations will be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 15.
(c) Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Options granted under the Plan, provided, however, that the exercise price will not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an employee of the Company or any Parent or Subsidiary of the Company who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 6(c), Options may be granted with a per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code and the VIVUS ParticipantsTreasury Regulations thereunder.
(d) Option Agreement.
(i) Terms and Conditions. Each Option grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Option, the acceptable forms of consideration for exercise (which may include any form of consideration permitted by Section 6(d)(ii), the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(ii) Form of Consideration. The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment, to the extent permitted by Applicable Laws. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration to the extent permitted by Applicable Laws may include, but is not limited to:
(1) cash;
(2) check;
(3) other Shares which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised and provided that accepting such Shares, in the Past Yearsole discretion of the Administrator, will not result in any adverse accounting consequences to the Company;
Except as set forth(4) by net exercise;
(5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;
(6) a reduction in the tables below, since , 2012, no VIVUS participant has been a partyamount of any Company liability to the Participant, including any contract, arrangementsliability attributable to the Participant's participation in any Company-sponsored deferred compensation program or understandings witharrangement;
(7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or
(8) any person with respect to any of our securities, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies.
Options Granted to Participants in the Past Year
Name | Grant Date | Number of Shares Underlying Options | Exercise Price Per Share | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Leland F. Wilson | 1/25/2013 | 5,333 | $ | 12.39 | (1) | |||||
1/25/2013 | 194,667 | $ | 12.39 | (1) | ||||||
Peter Y. Tam | 1/25/2013 | 8,841 | $ | 12.39 | (1) | |||||
1/25/2013 | 131,159 | $ | 12.39 | (1) | ||||||
Timothy E. Morris | 1/25/2013 | 8,540 | $ | 12.39 | (1) | |||||
1/25/2013 | 101,460 | $ | 12.39 | (1) |
Restricted Stock Units Granted to Participants in the Past Year
payment.
Name | Grant Date | Number of Shares Underlying Restricted Stock Units | |||||
---|---|---|---|---|---|---|---|
Mark B. Logan | 6/15/2012 | 5,000 | (1) | ||||
1/25/2013 | 21,125 | (1) | |||||
J. Martin Carroll | 5/9/2013 | 20,000 | (2) | ||||
Charles J. Casamento | 6/15/2012 | 5,000 | (1) | ||||
1/25/2013 | 21,125 | (1) | |||||
Ernest Mario, Ph.D. | 1/25/2013 | 21,125 | (1) | ||||
Jorge Plutzky, M.D. | 5/10/2013 | 20,000 | (2) | ||||
Linda M. Dairiki Shortliffe, M.D. | 6/15/2012 | 5,000 | (1) | ||||
1/25/2013 | 21,125 | (1) | |||||
Robert N. Wilson | 4/26/2013 | 20,000 | (2) |
(e)Miscellaneous Information Regarding Participants
Term of Option. An Option granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(f) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
ExceptAn Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specifies from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable tax withholdings). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 15 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant's termination as the result of the Participant's death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant's termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant's Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant's termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested
as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant's death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the Option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant's designated beneficiary, provided such beneficiary has been designated prior to Participant's death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant's estate or by the person(s) to whom the Option is transferred pursuant to the Participant's will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant's death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(v) Other Termination. A Participant's Award Agreement also may provide that if the exercise of the Option following the termination of Participant's status as a Service Provider (other than upon the Participant's death or Disability) would result in liability under Section 16(b), then the Option will terminate on the earlier of (A) the expiration of the term of the Option set forth in the Award Agreement, or (B) the tenth (10th) day after the last date on which such exercise would result in such liability under Section 16(b). Finally, a Participant's Award Agreement may also provide that if the exercise of the Option following the termination of the Participant's status as a Service Provider (other than upon the Participant's death or Disability) would be prohibited at any time solely because the issuance of Shares would violate the registration requirements under the Securities Act, then the Option will terminate on the earlier of (A) the expiration of the term of the Option, or (B) the expiration of a period of three (3) months after the termination of the Participant's status as a Service Provider during which the exercise of the Option would not be in violation of such registration requirements.
7. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
(b) Number of Shares. The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Participant, provided that during any Fiscal Year, no Participant will be granted Stock Appreciation Rights covering more than 1,000,000 Shares. Notwithstanding the limitation in the previous sentence, in connection with his or her initial service as an Employee, an Employee may be granted Stock Appreciation Rights covering up to an additional 1,000,000 Shares. The foregoing limitations will be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 15.
(c) Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan, provided, however, that the exercise price will not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing provisions of this Annex BSection 7(c), Stock Appreciation Rights may be granted with a per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code and the Treasury Regulations thereunder.
(d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Notwithstanding the foregoing, the rules of Section 6(f) relating to exercise also will apply to Stock Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
8. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the Proxy Statement,terms and provisions of the Plan, the Administrator, at any time and from time to our knowledge:time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
No associate (b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed. Notwithstanding the foregoing sentence, for restricted stock intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, during any Fiscal Year no Participant will receive more than an aggregate of 300,000 Shares of Restricted Stock. Notwithstanding the foregoing limitation, in connection with his or her initial service as an Employee, for restricted stock intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, an Employee may be granted an aggregate of up to an additional 300,000 Shares of Restricted Stock. The foregoing limitations will be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 15.
(c) Transferability. Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction or at such other time as the Administrator may determine. The Administrator, in its sole discretion, may reduce or waive any restrictions for such Award and may accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g) Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator provides otherwise. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(h) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
(i) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock as "performance-based compensation" under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
9. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it will advise the Participant in an Award Agreement of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units. Notwithstanding anything to the contrary in this subsection (a), for Restricted Stock Units intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, during any Fiscal Year of the Company, no Participant will receive more than an aggregate of 300,000 Restricted Stock Units. Notwithstanding the limitation in the previous sentence, for Restricted Stock Units intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, in connection with his or her initial service as an Employee, an Employee may be granted an aggregate of up to an additional 300,000 Restricted Stock Units. The foregoing limitations will be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 15.
(b) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion.
(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout and may accelerate the time at which any restrictions will lapse or be removed.
(d) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement or as otherwise provided in the applicable Award Agreement or as required by Applicable Laws. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares
represented by Restricted Stock Units that are fully paid in cash again will not reduce the number of Shares available for grant under the Plan.
(e) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.
(f) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock Units as "performance-based compensation" under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
10. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant provided that during any Fiscal Year, for Performance Units or Performance Shares intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, (i) no Participant will receive Performance Units having an initial value greater than $1,000,000, and (ii) no Participant will receive more than 300,000 Performance Shares. Notwithstanding the foregoing limitation, for Performance Shares intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, in connection with his or her initial service, a Service Provider may be granted up to an additional 300,000 Performance Shares and additional Performance Units having an initial value up to $1,000,000. The foregoing limitations will be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 15.
(b) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.
(c) Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the Service Providers. The time period during which the performance objectives or other vesting provisions must be met will be called the "Performance Period." Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, or individual goals, applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion.
(d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share and may accelerate the time at which any restrictions will lapse or be removed.
(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period, or as otherwise provided in the applicable Award Agreement or as required by Applicable Laws. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.
(f) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
(g) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Units/Shares as "performance-based compensation" under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Performance Units/Shares which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
11. Performance-Based Compensation Under Code Section 162(m).
(a) General. If the Administrator, in its discretion, decides to grant an Award intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the provisions of this Section 11 will control over any contrary provision in the Plan; provided, however, that the Administrator may in its discretion grant Awards that are not intended to qualify as "performance-based compensation" under Section 162(m) of the Code to such Participants that are based on Performance Goals or other specific criteria or goals but that do not satisfy the requirements of this Section 11.
(b) Performance Goals. The granting and/or vesting of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Code and may provide for a targeted level or levels of achievement ("Performance Goals") including: (i) attainment of research and development milestones, (ii) bookings, (iii) business divestitures and acquisitions, (iv) cash flow, (v) cash position, (vi) contract awards or backlog, (vii) customer renewals, (viii) customer retention rates from an acquired company, business unit or division, (ix) earnings (which may include earnings before interest and taxes, earnings before taxes and net earnings), (x) earnings per Share, (xi) expenses, (xii) gross margin, (xiii) growth in stockholder value relative to the moving average of the S&P 500 Index or another index, (xiv) internal rate of return, (xv) market share, (xvi) net income, (xvii) net profit, (xviii) net sales, (xix) new product development, (xx) new product invention or innovation, (xxi) number of customers, (xxii) operating cash flow, (xxiii) operating expenses, (xxiv) operating income, (xxv) operating margin, (xxvi) overhead or other expense reduction, (xxvii) product defect measures, (xxviii) product release timelines, (xxix) productivity, (xxx) profit, (xxxi) return on assets, (xxxii) return on capital, (xxxiii) return on equity, (xxxiv) return on investment, (xxxv) return on sales, (xxxvi) revenue, (xxxvii) revenue growth, (xxxviii) sales results, (xxxix) sales growth, (xl) stock price, (xli) time to market, (xlii) total stockholder return, (xliii) working capital. Any criteria used may be (A) measured in absolute terms, (B) measured in terms of growth, (C) compared to another company or companies, (D) measured against the market as a whole and/or according to applicable market indices, (E) measured against the performance of the Company as a whole or a segment of the Company and/or (F) measured on a pre-tax or post-tax basis (if applicable). Further, any Performance Goals may be used to measure the performance of the
Company as a whole or a business unit or other segment of the Company, or one or more product lines or specific markets and may be measured relative to a peer group or index. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator will determine whether any significant element(s) will be included in or excluded from the calculation of any participant owns beneficially, directly or indirectly, any of our securities. No participant owns beneficially, directly or indirectly, any securities of any parent or subsidiary of VIVUS.
(c) Procedures. To the extent necessary to comply with the performance-based compensation provisions of Section 162(m) of the Code, with respect to any future transactionsAward granted subject to Performance Goals and intended to qualify as "performance-based compensation" under Section 162(m) of the Code, on or before the Determination Date (i.e., within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period or such other time as may be required or permitted by Section 162(m) of the Code), the Administrator will, in writing, (i) designate one or more Participants to whom an Award will be made, (ii) select the Performance Goals applicable to the Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (iv) specify the relationship between Performance Goals and the amounts of such Awards, as applicable, to be earned by each Participant for such Performance Period.
(d) Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance-based compensation under Section 162(m) of the Code will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m) of the Code, and the Plan will be deemed amended to the extent necessary to conform to such requirements.
(e) Determination of Amounts Earned. Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. A Participant will be eligible to receive payment pursuant to an Award intended to qualify as "performance-based compensation" under Section 162(m) of the Code for a Performance Period only if the Performance Goals for such period are achieved. In determining the amounts earned by a Participant pursuant to an Award intended to qualified as "performance-based compensation" under Section 162(m) of the Code, the Committee will have the right to (a) reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period, (b) determine what actual Award, if any, will be paid in the event of a termination of employment as the result of a Participant's death or disability or upon a Change in Control or in the event of a termination of employment following a Change in Control prior to the end of the Performance Period, and (c) determine what actual Award, if any, will be paid in the event of a termination of employment other than as the result of a Participant's death or disability prior to a Change of Control and prior to the end of the Performance Period to the extent an actual Award would have otherwise been achieved had the Participant remained employed through the end of the Performance Period. A Participant will be eligible to receive payment pursuant to an Award intended to qualify as "performance-based compensation" under Section 162(m) of the Code for a Performance Period only if the Performance Goals for such period are achieved.
12. Compliance With Code Section 409A. Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional
tax or interest applicable under Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.
13. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise and except as required by Applicable Laws, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
14. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant.
15. Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10 of the Plan.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
(c) Change in Control. In the event of a merger or Change in Control, each outstanding Award will be treated as the Administrator determines without a Participant's consent, including, without limitation, that (i) Awards will be assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; (ii) upon written notice to a Participant, that the Participant's Awards will terminate upon or immediately prior to the consummation of such merger or Change in Control; (iii) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such merger or Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of such merger of Change in Control; (iv) (A) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of
such Award or realization of the Participant's rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant's rights, then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under this subsection 15(c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
In the event that the successor corporation does not assume or substitute for the Award (or portion thereof), the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights that are not assumed or substituted for, including Shares as to which VIVUSsuch Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock, Restricted Stock Units, and Performance Shares/Units not assumed or substituted for will lapse, and, with respect to Awards with performance-based vesting not assumed or substituted for, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the merger or Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Restricted Stock Unit, Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award (or in the case of an Award settled in cash, the number of implied shares determined by dividing the value of the Award by the per share consideration received by holders of Common Stock in the merger or Change in Control), to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change in Control.
Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance objectives (including any Performance Goals) will not be considered assumed if the Company or its successor modifies any of such performance objectives without the Participant's consent; provided, however, a modification to such performance objectives only to reflect the successor corporation's post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.
Notwithstanding anything in this Section 15(c) to the contrary, if a payment under an Award Agreement is subject to Section 409A of the Code and if the change in control definition contained in the Award Agreement or other agreement related to the Award does not comply with the definition of "change in control" for purposes of a distribution under Section 409A of the Code, then any payment
of an amount that is otherwise accelerated under this Section will be delayed until the earliest time that such payment would be permissible under Section 409A of the Code without triggering any penalties applicable under Section 409A of the Code.
16. Tax Withholding.
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant's FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b) Withholding Arrangements. The Administrator, in its affiliatessole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the amount required to be withheld, (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld, provided the delivery of such Shares will not result in any adverse accounting consequences as the Administrator determines in its sole discretion, (d) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld, or (e) retaining from salary or other amounts payable to the Participant cash having a sufficient value to satisfy the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.
17. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a party.
18. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.
19. Term of Plan. Subject to Section 23 of the Plan, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years from the date adopted by the Board, unless terminated earlier under Section 20 of the Plan.
20. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise
between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
21. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
22. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.
23. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.
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