Exhibit (e)(21)
Excerpts from the Receptos, Inc. Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 17, 2015.
Board of Directors
The names of our directors, their ages and their positions with the Company as of April 2, 2015 are set forth below.
Name | Age | Position(s) | ||
William H. Rastetter, Ph.D. | 67 | Chairman of the Board of Directors | ||
Kristina Burow | 41 | Director | ||
Mary Lynne Hedley, Ph.D. | 52 | Director | ||
Richard A. Heyman, Ph.D. | 57 | Director | ||
Erle T. Mast | 52 | Director | ||
Mary Szela | 51 | Director | ||
S. Edward Torres | 52 | Director | ||
Faheem Hasnain | 56 | Director, President and Chief Executive Officer |
William H. Rastetter, Ph.D. has been a director and has served as Chairman of the Board since May 2009, and from May 2009 to November 2010 he was our Acting Chief Executive Officer. He is a Co-Founder of Receptos, Inc. Dr. Rastetter also serves as the Chairman of Illumina, Inc., Chairman of Neurocrine Biosciences, Inc., Chairman of Fate Therapeutics Inc., as lead outside director of Cerulean Pharma Inc., as a director of Regulus Therapeutics Inc., and as an advisor to Leerink Partners, a healthcare focused investment bank. Dr. Rastetter served as a Partner at the venture capital firm of Venrock Associates from 2006 to February 2013. Prior to his tenure with us and Venrock, Dr. Rastetter was Executive Chairman of Biogen Inc., a biotechnology company specializing in neurological disorders, autoimmune disorders and cancer, from the merger of the two companies (Biogen and Idec Pharmaceuticals) in 2003 through the end of 2005. He joined Idec Pharmaceuticals at its founding in 1986 and served as Chairman and Chief Executive Officer. Prior to Idec, he was Director of Corporate Ventures at Genentech, Inc. and served as well in a scientific capacity at Genentech. Dr. Rastetter held various faculty positions at the Massachusetts Institute of Technology and Harvard University and is an Alfred P. Sloan Fellow. Dr. Rastetter holds an S.B. in Chemistry from the Massachusetts Institute of Technology and received his M.A. and Ph.D. in Chemistry from Harvard University. Our Board of Directors believes that Dr. Rastetter is qualified to serve on our Board of Directors due to his extensive experience in the biotechnology industry, his broad leadership experience with Idec Pharmaceuticals and on several boards, and his experience with financial matters.
Kristina Burow has served as one of our directors since February 2010 and is one of our Co-Founders. She is also a Managing Director with ARCH Venture Partners, joining the firm in 2002. Ms. Burow is a director of Lycera Corp., AgBiome, LLC, BlackThorn Therapeutics, Cenexys, Inc., Kilimanjaro Energy, Trelys, Inc. and Scholar Rock, LLC. Prior to ARCH, Ms. Burow was an Associate with the Novartis BioVenture Fund in San Diego where she was involved in numerous investments in the life sciences sector. As an early employee at the Genomics Institute of the Novartis Research Foundation (GNF), she directed Chemistry Operations and was active in Business Development where she helped create numerous companies as spin outs from GNF. Ms. Burow holds a M.B.A. from the University of Chicago, a M.A. in Chemistry from Columbia University and a B.S. in Chemistry from the University of California, Berkeley. Our Board of Directors believes that Ms. Burow is qualified to serve on our Board of Directors due to her extensive experience in the biotechnology industry, and her financial expertise with life sciences companies.
Mary Lynne Hedley, Ph.D. has served as one of our directors since April 2014. Dr. Hedley has served as President of Tesaro, Inc. and as a member of its board of directors since co-founding Tesaro in March 2010. From July 2009 to February 2010, Dr. Hedley served as Executive Vice President of Operations and Chief Scientific Officer of Abraxis BioScience, Inc., a biotechnology company. Dr. Hedley served as Executive Vice President of Eisai Corporation of North America from January 2008 until July 2009, following Eisai Co. Ltd.’s acquisition of MGI Pharma, Inc. in January 2008. Dr. Hedley served in various positions at MGI Pharma from 2004 through its acquisition in January 2008, most recently as Executive Vice President and Chief Scientific Officer. Prior to that,
Dr. Hedley co-founded and served as the President and Chief Executive Officer of Zycos, Inc., a biotechnology company, which was acquired by MGI Pharma in 2004. Prior to co-founding Zycos, Dr. Hedley completed two consecutive postdoctoral fellowships at Harvard University and earned a B.S. in microbiology from Purdue University and a Ph.D. in Immunology from the University of Texas, Southwestern Medical Center. She also currently sits on the board of Youville Place. Our Board of Directors believes that Dr. Hedley has the qualifications and skills to serve on our Board of Directors due to her extensive operating and management experience with life sciences companies, as well as her educational background.
Richard A. Heyman, Ph.D. has served as one of our directors since July 2014. Dr. Heyman co-founded and served as Chief Executive Officer of Seragon Pharmaceuticals, Inc. from 2013 until its acquisition by Genentech, a member of the Roche Group, in August 2014. From 2009 to 2013, Dr. Heyman was the Chief Executive Officer and co-founder of Aragon Pharmaceuticals until its acquisition by Johnson & Johnson. Previously, Dr. Heyman co-founded and served as Chief Scientific Officer of X-Ceptor Therapeutics, a company that developed compounds targeting nuclear receptors for the treatment of metabolic diseases. X-Ceptor was acquired by Exelixis in 2004. Before X-Ceptor, he was Vice President of Research at Ligand Pharmaceuticals. Dr. Heyman is a member of the board of directors of Organovo Holdings, Inc. Dr. Heyman was an NIH postdoctoral fellow and staff scientist at the Salk Institute for Biological Studies and received a Ph.D. in pharmacology from the University of Minnesota and a B.S. in chemistry from the University of Connecticut. Our Board of Directors believes that Dr. Heyman is qualified to serve on our Board of Directors due to his successful operating and management track record with life sciences companies.
Erle T. Mast has served as one of our directors since July 2013. Mr. Mast is a co-founder of Clovis Oncology, Inc. and has served as its Executive Vice President and Chief Financial Officer since 2009. Previously, Mr. Mast served in the same role at Pharmion Corporation, beginning in 2002. From 1997 through 2002, Mr. Mast worked for Dura Pharmaceuticals, Inc. and its successor, Elan Corporation. From 2000 to 2002, he served as Chief Financial Officer for the Global Biopharmaceuticals business unit for Elan. From 1997 to 2000, Mr. Mast served as Vice President of Finance for Dura Pharmaceuticals. Prior to that, Mr. Mast was a partner with Deloitte & Touche, LLP. Mr. Mast also serves on the board of directors of Zogenix, Inc., and served as a director of Somaxon Pharmaceuticals, Inc. Mr. Mast received a B.Sc. in business administration from California State University Bakersfield. Our Board of Directors believes that Mr. Mast is qualified to serve on our Board of Directors due to his extensive financial expertise with life sciences companies.
Mary Szela has served as one of our directors since July 2014. Ms. Szela was appointed Chairperson of the Board of Melinta Therapeutics, Inc. in January 2013 and transitioned to Chief Executive Officer in April 2013. From 2010 to 2012, Ms. Szela was Senior Vice President of Global Strategic Marketing and Services at Abbott Laboratories Pharmaceutical Products Group and also served as its Senior Vice President of U.S. Pharmaceuticals from 2008 to 2009. Prior to this role, she served more than two decades in senior leadership roles at Abbott Laboratories. Ms. Szela is also a member of the board of directors of Novo Nordisk A/S, Coherus BioSciences, Inc., and Suneva Medical, Inc. Ms. Szela earned a B.S. in nursing and a Master of Business Administration from the University of Illinois. Our Board of Directors believes that Ms. Szela is qualified to serve on our Board of Directors due to her substantial experience in the biotechnology industry and her extensive leadership experience with Abbott Laboratories.
S. Edward Torres has served as one of our directors since November 2009. He has been a Managing Director of Lilly Ventures Fund I, LLC, a venture capital fund since 2009. From 2006 to 2009, he was a Managing Director of Lilly Ventures while Lilly Ventures was a subsidiary of Eli Lilly and Company. Since co-founding Lilly Ventures, he has led the investments in, and previously served on the boards of, Serenex (acquired by Pfizer), Conforma Therapeutics (acquired by Biogen Idec) and Cabrellis Pharmaceuticals (acquired by Pharmion Corporation). Mr. Torres currently sits on the boards of GlobeImmune Inc., Innocrin Pharmaceuticals and Viamet Pharmaceuticals as well as various non-profit institutions. Prior to joining Lilly Ventures, he had a diverse set of experiences throughout the domestic and international pharmaceutical businesses including operational finance, planning, M&A, business development and global marketing roles. Mr. Torres received a B.A. from Creighton University and a M.B.A. from the University of Michigan Business School, where he was a Consortium Fellow. Our Board of Directors believes that Mr. Torres is qualified to serve on our Board of Directors due to his extensive experience within the field of drug discovery and development, his broad leadership experience on various boards, and his financial expertise with life sciences companies.
Faheem Hasnain has served as our President, Chief Executive Officer and one of our directors since November 2010. Prior to joining us, Mr. Hasnain was the President and Chief Executive Officer and a director of Facet Biotech Corporation, a biology driven antibody company with a focus in multiple sclerosis and oncology. He held that position from December 2008 until the company’s acquisition by Abbott Laboratories in April 2010. Previously, Mr. Hasnain was President, Chief Executive Officer and a director of PDL BioPharma, Inc. from October 2008 until Facet Biotech was spun off from PDL BioPharma in December 2008. From October 2004 to September 2008, Mr. Hasnain served at Biogen Inc., most recently as Executive Vice President in charge of the oncology/rheumatology strategic business unit. Prior to Biogen, Mr. Hasnain held roles with Bristol Myers Squibb, where he was President of the Oncology Therapeutics Network, and for 14 years at GlaxoSmithKline and its predecessor organizations. He has been Chairman of the Board of Sente, Inc. since 2008 and Chairman of the Board of Tocagen Inc. since November 2014. He previously served as a member of the board of directors of Ambit Biosciences Corporation, Seragon Pharmaceuticals, Tercica, Inc., Aragon Pharmaceuticals and Somaxon Pharmaceuticals, Inc. Mr. Hasnain received a B.H.K. and B.Ed. from the University of Windsor Ontario in Canada. Our Board of Directors believes that Mr. Hasnain is qualified to serve on our Board of Directors due to his years of experience with drug discovery and development.
Executive Officers and Key Employees
The names of our executive officers and other key employees, their ages and positions within the Company as of April 17, 2015 are set forth below.
Name | Age | Position(s) | ||
Faheem Hasnain | 56 | President, Chief Executive Officer and Director | ||
Graham Cooper | 45 | Chief Financial Officer | ||
Sheila Gujrathi, M.D. | 44 | Chief Medical Officer | ||
Marcus F. Boehm, Ph.D. | 55 | Chief Technology Officer and Co-Founder | ||
Robert J. Peach, Ph.D. | 59 | Chief Scientific Officer and Co-Founder | ||
Christian Waage | 48 | Senior Vice President and General Counsel | ||
Chrysa Mineo | 48 | Senior Vice President, Corporate Development |
Mr. Hasnain’s biographical information is set forth above.
Graham Cooper joined us as Chief Financial Officer in February 2013. Prior to joining us, during 2012, Mr. Cooper was the Executive Vice President, Finance and Chief Financial Officer of Geron Corporation, a biopharmaceutical company focused on cancer therapies. From 2006 until 2011, Mr. Cooper served as Senior Vice President, Chief Financial Officer and Treasurer of Orexigen Therapeutics, Inc., a biotechnology company focused on obesity. From 1999 to 2006, Mr. Cooper held positions of increasing responsibility including Director, Health Care Investment Banking, at Deutsche Bank Securities, where he was responsible for executing and managing a wide variety of financing and merger and acquisition transactions in the life sciences field. From August 1992 to January 1995, he worked as an accountant at Deloitte & Touche, and was previously a C.P.A. Mr. Cooper has served on the board of directors of Celladon Corporation since September 2013. Mr. Cooper holds a B.A. in Economics from the University of California at Berkeley and an M.B.A. from the Stanford Graduate School of Business.
Sheila Gujrathi, M.D. has served as our Chief Medical Officer since June 2011. She joined us from Bristol Myers Squibb where she was Vice President of the Global Clinical Research Group in Immunology from 2008 to 2011. Prior to joining BMS, Dr. Gujrathi worked at Genentech where she held roles of increasing responsibility in the Immunology, Tissue Growth and Repair clinical development group from 2002 to 2008. From 1999 to 2002, Dr. Gujrathi was a management consultant at McKinsey & Company in the healthcare practice where she provided strategic advice on a variety of projects in the healthcare and pharmaceutical industry. Dr. Gujrathi received her B.S. with highest distinction in Biomedical Engineering and M.D. from Northwestern University in their accelerated Honors Program in Medical Education. She completed her Internal Medicine Internship and Residency at Brigham and Women’s Hospital, Harvard Medical School and is board certified in internal medicine. She received additional training at University of California, San Francisco and Stanford University in their Allergy and Immunology Fellowship Program.
Marcus F. Boehm, Ph.D. has served as our Chief Technology Officer since October 2011, as well as our Vice President of Chemistry from May 2009 to October 2011, and he is a Co-Founder. From 2007 to 2009, Dr. Boehm served as the Vice President of Chemistry for Apoptos, Inc., which we acquired in May 2009. From 2006 to 2007, Dr. Boehm held the position of Senior Director of Chemistry at Biogen Inc. with responsibility for multiple medicinal chemistry programs and served as the head of chemistry for the San Diego site. Dr. Boehm formerly served as Vice President of Chemistry at Conforma Therapeutics until its acquisition by Biogen Inc. in 2006. Prior to joining Conforma, Dr. Boehm held various positions with progressing responsibility in medicinal chemistry at Ligand Pharmaceuticals, where he led chemistry efforts on multiple intracellular receptor programs. Dr. Boehm received a B.A. in Chemistry from the University of California, San Diego and a Ph.D. in Chemistry from State University of New York Stony Brook, and completed a National Institutes of Health Postdoctoral Fellowship at Columbia University.
Robert J. Peach, Ph.D. has served as our Chief Scientific Officer since October 2011, as well as our Vice President of Biology from May 2009 to October 2011, and he is a Co-Founder. From 2007 to 2009, Dr. Peach co-founded and served as the Vice President of Biology for Apoptos, Inc., which we acquired in May 2009. From 2005 to 2007, Dr. Peach was Senior Director of Oncology Discovery at Biogen Inc. where he had responsibility for several bicoastal research programs. From 2001 to 2005, Dr. Peach served as Director of Antibody Discovery and Tumor Immunology at IDEC Pharmaceuticals and at the merged Biogen Inc. where he worked on developing new autoimmune therapeutic opportunities. Prior to joining Biogen Inc., Dr. Peach held several research positions with increasing responsibility at Bristol Myers Squibb from 1991 to 2000. He received his B.S. and M.S. (1st class honors) from the University of Canterbury and a Ph.D. in Biochemistry from the University of Otago, New Zealand.
Christian Waage has served as our Senior Vice President and General Counsel since November 2013. He joined Receptos from Websense Inc., where he served as Vice President and General Counsel from July 2012 until its acquisition in August 2013. Prior to Websense, Mr. Waage served as Vice President and General Counsel of Ardea Biosciences, Inc. from March 2008 until its acquisition in July 2012. Prior to Ardea Biosciences, Mr. Waage practiced law for over a decade at DLA Piper, where he was a partner. He received a J.D. from the University of San Diego School of Law and a B.A. in Economics from the University of California, San Diego.
Chrysa Mineo has served as our Senior Vice President, Corporate Development since January 2014. She previously served as our Vice President, Corporate Development beginning in July 2009. She is responsible for our collaborations with AbbVie, Ono and Lilly and our partnership with Janssen Pharmaceuticals. Ms. Mineo has extensive experience in the biotechnology industry, including in roles of increasing responsibility from 1997 to 2009, leading to Senior Director of Business Development for Neurocrine Biosciences. Prior to Neurocrine, Ms. Mineo served in various capacities in research, marketing and business development for such companies as Amgen, DNAX Research Institute, Schering Plough and Baxter Biotech. She began her career in 1987 with Amgen as a member of a cellular biology team. Ms. Mineo holds a B.S. in Zoology from the University of California, Davis and received her M.B.A. from Duke University’s Fuqua School of Business.
Corporate Governance
Code of Ethics
We have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website at www.receptos.com under the Corporate Governance section of our Investor Relations page. We will promptly disclose on our website (i) the nature of any amendment to the code that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the code that is granted to one of these specified individuals that is required to be disclosed pursuant to SEC rules and regulations, the name of such person who is granted the waiver and the date of the waiver.
Board of Directors and Committees
Meetings of the Board of Directors
The Board of Directors met 12 times during the last fiscal year. All directors who served in 2014 attended at least 75% of the aggregate number of meetings of the Board and of the committees on which they served, held during the portion of the last fiscal year for which they were directors or committee members, respectively.
Board Leadership Structure
Our Board of Directors is currently chaired by Dr. Rastetter, who has authority, among other things, to call and preside over Board meetings, including meetings of the independent directors, to set meeting agendas and to determine materials to be distributed to the Board. Accordingly, the Board Chairman has substantial ability to shape the work of our Board. As a general policy, our Board of Directors believes that separation of the positions of Chairman and Chief Executive Officer reinforces the independence of the Board of Directors from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of the Board of Directors as a whole, including in the area of risk oversight. As such, Mr. Hasnain serves as our President and Chief Executive Officer while Dr. Rastetter serves as our Chairman of the Board of Directors, but is not an officer. We expect and intend the positions of Chairman of the Board of Directors and Chief Executive Officer to continue to be held by separate individuals in the future.
Role of the Board in Risk Oversight
One of the key functions of our Board of Directors is informed oversight of our risk management process. The Board of Directors does not have a standing risk management committee, but rather administers this oversight function directly through the Board of Directors as a whole, as well as through various standing committees of our Board of Directors that address risks inherent in their respective areas of oversight. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk exposure, and our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors non-financial risks, including compliance with legal and regulatory requirements. Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.
Board Committees
Audit Committee. The Audit Committee of the Board of Directors was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee our corporate accounting and financial reporting processes and audits of its financial statements. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of and assesses the qualifications of the independent auditors; determines and approves the engagement of the independent auditors; determines whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors; reviews and approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on our audit engagement team as required by law; reviews and approves or rejects transactions between us and any related persons; confers with management and the independent auditors regarding the effectiveness of internal controls over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and meets to review our annual audited financial statements and quarterly financial statements with management and the independent auditor, including a review of our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The Audit Committee is currently composed of three directors: Mr. Torres (chair), Dr. Rastetter and Mr. Mast. The Audit Committee met seven times during the 2014 fiscal year. The Audit Committee has adopted a written charter that is available to stockholders on our website at www.receptos.com.
The Board of Directors reviews the NASDAQ listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of our Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A)(i) and (ii) of the NASDAQ listing standards). The Board of Directors has also determined that each of Messrs. Torres and Mast and Dr. Rastetter qualify as an “audit committee financial expert,” as defined in applicable SEC rules. The Board made a qualitative assessment of Mr. Torres’ level of knowledge and experience based on a number of factors, including his formal education, operational finance background and broad financial experience with life sciences companies. The Board also made a qualitative assessment of Mr. Mast’s level of knowledge and experience based on a number of factors, including his formal education, his experience as a chief financial officer for a public company and his service as a Partner with Deloitte & Touche LLP. The Board also made a qualitative assessment of Dr. Rastetter’s level of knowledge and experience based on a number of factors, including his formal education, his experience as a chief executive officer of a public company and his deep experience with financial matters.
Compensation Committee. The Compensation Committee is currently composed of three directors: Ms. Burow (chair), Dr. Hedley and Mr. Torres. Dr. Hedley became a member of the Compensation Committee in July 2014. Our Board of Directors has determined that each of the Compensation Committee members is an independent director under NASDAQ Marketplace Rules. The Compensation Committee met five times during the 2014 fiscal year. The Compensation Committee has adopted a written charter that is available to stockholders on our website at www.receptos.com.
The Compensation Committee of the Board of Directors acts on behalf of the Board to review, adopt and/or recommend for adoption and oversee our compensation strategy, policies, plans and programs, including:
• | establishment of corporate and individual performance objectives relevant to the compensation of our executive officers, directors and other senior management and evaluation of performance in light of these stated objectives; |
• | review and recommendation to the Board for approval of the compensation and other terms of employment or service, including severance and change-in-control arrangements of our Chief Executive Officer and the other executive officers and directors; and |
• | administration of our equity compensation plans, pension and profit-sharing plans, deferred compensation plans and other similar plan and programs. |
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee of the Board of Directors is responsible for identifying, reviewing and evaluating candidates to serve as our directors (consistent with criteria approved by the Board), reviewing and evaluating incumbent directors, recommending to the Board for selection candidates for election to the Board of Directors, making recommendations to the Board regarding the membership of the committees of the Board, assessing the performance of the Board and monitoring our adherence to the Code of Business Conduct and Ethics.
The Nominating and Corporate Governance Committee is currently composed of four directors: Dr. Rastetter (chair), Ms. Burow, Dr. Heyman and Ms. Szela. Dr. Heyman and Ms. Szela became members of the Nominating and Corporate Governance Committee concurrently with their appointment to the Board in July 2014. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). The Nominating and Corporate Governance Committee met three times during the 2014 fiscal year. The Nominating and Corporate Governance Committee has adopted a written charter that is available to stockholders on our website and www.receptos.com.
The Nominating and Corporate Governance Committee believes that candidates for director, both individually and collectively, can and do provide the integrity, experience, judgment, commitment (including having sufficient time to devote to us and level of participation), skills, diversity and expertise appropriate for us. In assessing the directors, both individually and collectively, the Nominating and Corporate Governance Committee may consider the current needs of the Board and of us to maintain a balance of knowledge, experience and capability in various areas. However, the Nominating and Corporate Governance Committee retains the right to modify these
qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board, our operating requirements and the long-term interests of stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee typically considers diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board and us, to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors’ overall service to us during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee is independent for NASDAQ purposes, which determination is based upon applicable NASDAQ listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the Board by majority vote.
During 2014, the Nominating and Corporate Governance Committee’s efforts led to the recommendation of three new qualified candidates to serve on our Board of Directors, Drs. Hedley and Heyman and Ms. Szela, all of whom joined our Board of Directors in 2014.
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address: 3033 Science Park Road, Suite 300, San Diego, CA 92121, Attn: Secretary, no later than the 90th day and no earlier than the 120th day prior to the one-year anniversary of the date of the proxy statement for the preceding year’s annual meeting. Submissions must include (1) the name and address of the stockholder on whose behalf the submission is made; (2) the number of shares that are owned beneficially by such stockholder as of the date of the submission; (3) a description of all arrangements or understandings between such stockholder and the proposed candidate pursuant to which the proposed nomination is being made; (4) the full name, age and business and residence addresses of the proposed candidate; (5) a description of the proposed candidate’s business experience for at least the previous five years; (6) the number of shares that are owned beneficially by the proposed candidate; (7) any other information relating to the proposed candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder; (8) the nominee’s written consent to serve, if elected; and (9) any other information required by our Bylaws. We may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such proposed nominee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2014, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.
Compensation Discussion and Analysis
Executive Summary
The Compensation Committee designs our executive compensation programs to reward corporate and individual performance against clearly defined goals and align the long-term interests of our executive officers with our stockholders. We compensate our executive officers with a mix of salary, employee benefits, annual cash incentive compensation and long-term equity incentive compensation. Overall, over eighty percent (80%) of our Named Executive Officers’ compensation is targeted for delivery in the form of incentive compensation. As a biopharmaceutical company without a product approved for marketing, our corporate goals focus on the timely development and testing of our two key therapeutic candidates, ozanimod (formerly RPC1063) and RPC4046, the advancement of a pre-clinical stage development program and the strategic use of fundraising to support our balance sheet. Our incentive compensation programs are informed by these corporate goals.
In order to retain our successfully integrated leadership team, we design our executive compensation program to be competitive with market standards. The Compensation Committee generally looks to the 50th percentile of our peer group for cash compensation and the 50th through 75th percentile of our peer group for equity compensation in checking our compensation levels against the market. However, our compensation targets are not bound strictly to market rates. Each of our executive’s compensation is ultimately personalized based on corporate and individual accomplishments, personal experience and skillsets as well as the executive’s responsibilities under our management framework.
Our compensation to executive officers for 2014 is reflective of a highly successful year at a critical juncture in our corporate development. We executed and exceeded a number of corporate funding and clinical development milestones, including:
• | Completed the Phase 2 portion of the RADIANCE study for use of ozanimod in treatment of patients with relapsing multiple sclerosis. Positive results of such Phase 2 portion not only met primary and secondary efficacy endpoints, but also indicated differentiated safety characteristics. |
• | Completed the induction portion of the Phase 2 TOUCHSTONE study for use of ozanimod in treatment of patients with ulcerative colitis. Positive results of such induction portion of TOUCHSTONE met primary and secondary efficacy endpoints, and echoed safety and tolerability indicia of the Phase 2 portion of the RADIANCE study. |
• | Proceeded with the Phase 3 portion of the RADIANCE study and commenced SUNBEAM, a second Phase 3 trial for use of ozanimod in treatment of patients with relapsing multiple sclerosis. |
• | Completed three (3) secondary stock offerings to the public that raised approximately $700 million in net proceeds. |
• | Initiated the Phase 2 HEROES study for use of RPC4046 in treatment of patients with eosinophilic esophagitis. |
During 2014, the Compensation Committee and Board, as applicable, approved salary increases, annual cash incentive targets and criteria and annual refresher equity grants for our Named Executive Officers. In January 2014, the Board enacted annual salary increases for our executive officers, including Named Executive Officers, pursuant to a proposal of the Compensation Committee. In April 2014, the Compensation Committee established performance criteria and weighting for our 2014 annual cash incentive program after having previously approved the annual cash incentive targets for each Named Executive Officer in December 2013. Awards under the 2014 cash incentive program were approved and paid at above-target levels in February 2015. In April 2014, the Board granted annual stock option awards to the Company’s executive officers, including Named Executive Officers, on terms proposed by the Compensation Committee. These stock options were priced at fair market value and subject to four (4)-year graded vesting with a one (1)-year cliff. Stock options were determined to be the most appropriate form of equity award considering our pre-commercial stage of development and peer company practices.
Compensation Philosophy and Objectives
The Compensation Committee believes that the compensation of our executive officers, including our Named Executive Officers, should:
• | Encourage creation of stockholder value and achievement of strategic corporate objectives; |
• | Integrate compensation with our annual and long-term corporate objectives and strategy, and focus executive behavior on the fulfillment of those objectives; |
• | Provide a competitive total compensation package that enables us to attract and retain, on a long-term basis, qualified personnel; and |
• | Provide fair compensation consistent with internal compensation programs. |
Implementing Our Objectives
Role of Compensation Committee. The Compensation Committee designs, administers and interprets our executive compensation and benefits policies, including our cash incentive and equity incentive plans. Our Board has authority to review and approve the proposals of our Compensation Committee on executive compensation matters. The performance of our Chief Executive Officer (“CEO”) is reviewed by the Compensation Committee in light of our corporate goals. Our Compensation Committee considers input from our CEO to assess the performance of our other executive officers and determine their compensation. From time to time, our Human Resources department provides market data and other information to assist the Compensation Committee in determining appropriate compensation levels for our executives.
Role of Compensation Consultant. The Compensation Committee directly retained the services of Radford, an Aon Hewitt Company (Radford), as an independent compensation consultant to advise on executive compensation for 2014. Radford supports the Compensation Committee on various topics relating to executive compensation, including selection of our peer group companies, review of our equity compensation program, competitive assessment of pay levels and analysis of the structure of our executive incentive compensation programs. The Compensation Committee conducted an independence review of Radford and determined that there was no conflict of interest that would prevent Radford from being objective in its work for the Compensation Committee. In making this determination, the Compensation Committee considered the fees paid to Radford or any affiliate of its parent company Aon plc, Radford’s policies and procedures in place to prevent conflicts of interest, the absence of any Radford advisors who own shares of our common stock, and the absence of any business or material personal relationships between the Radford lead advisor and our executives.
Peer Group Benchmarking
While the Compensation Committee did not use market benchmarks to determine executive compensation for 2014, the Committee reviewed market reference data to evaluate the competitiveness of each component of our Named Executive Officers’ compensation and to determine whether the total compensation paid to each of our Named Executive Officers was reasonable in the aggregate. The Compensation Committee reviewed two types of market references for this purpose: a select peer group of 20 biotechnology and pharmaceutical companies and the Radford Global Life Sciences survey. The peer group for executive compensation purposes was chosen based on the following characteristics: comparable stage in key product and corporate development, broadly similar size in market capitalization value and similar growth and performance potential. This peer group was approved by the Board in July 2013 and includes the following companies:
ACADIA Pharmaceuticals | Enanta | Regulus Therapeutics | ||
AcelRx Pharmaceuticals | Endocyte | Sangamo BioSciences | ||
Amicus Therapeutics | Intercept Pharmaceuticals | Synta Pharmaceuticals |
Anacor Pharmaceuticals | KaloBios Pharmaceuticals | Threshold Pharmaceuticals | ||
ChemoCentryx | New Link Genetics | Transcept Pharmaceuticals | ||
Durata Therapeutics | OncoGenex | Trius Therapeutics | ||
Dyax | Orexigen |
Key Elements of Executive Compensation
Our executive officers’ compensation includes three primary components: base salary, annual cash incentive awards, and long-term equity-based incentive awards. Our compensation mix is weighted towards incentive compensation (generally, in excess of 80% of target compensation is incentive-based compensation) in order to best align executive and shareholder interests. Beyond these three key elements of compensation, we also provide our executive officers a variety of benefits that are available generally to all full-time regular employees.
Base Salary. Our base salaries are designed to attract and retain qualified personnel by providing a consistent cash flow throughout the year as compensation for performance of day-to-day responsibilities. Base salaries for our executive officers are established based on the scope of their responsibilities, their performance, and their prior relevant background, training and experience. Salary levels also take into account compensation paid by competing companies for similar positions and the overall market demand for those executive officers at the time of hire. The Compensation Committee reviews each executive officer’s salary at the beginning of each year to determine what, if any, changes are appropriate based on the applicable executive’s contributions and responsibilities over the prior 12 months and any change in competitive market pay levels.
In January 2014, the Compensation Committee proposed, and the Board adopted, the 2014 base salaries for our executive officers, including Named Executive Officers. Consistent with market trends, base salary in 2014 for each Named Executive Officer was increased by 3% from the 2013 salary levels that became effective after our initial public offering.
Name | 2013 Post-IPO Base Salary (effective September 17, 2013) | 2014 Base Salary | Total% Increase Over 2013 Post-IPO Base Salary | |||||||||
Faheem Hasnain | $ | 519,500 | $ | 535,085 | 3.0 | % | ||||||
Graham Cooper* | $ | 328,500 | $ | 337,329 | 2.7 | % | ||||||
Sheila Gujrathi, M.D. | $ | 370,000 | $ | 381,100 | 3.0 | % | ||||||
Marcus F. Boehm, Ph.D. | $ | 308,200 | $ | 317,446 | 3.0 | % | ||||||
Robert J. Peach, Ph.D. | $ | 308,200 | $ | 317,446 | 3.0 | % |
* | Mr. Cooper’s 2014 Base Salary increase was pro-rated to reflect his hiring in February 2013. |
Cash Incentive Compensation. Our cash incentive program provides annual award opportunities for eligible employees, including all of our Named Executive Officers. This program is designed to reward participants for executing on our key corporate objectives and, in the case of executive officers other than our CEO, the achievement of individual objectives. While awards are determined by reference to pre-determined objectives, the final award amounts to executive officers are not guaranteed and can be adjusted in the sole discretion of the Compensation Committee after review of the year’s accomplishments.
Awards for our executive officers under the 2014 cash incentive program were approved by the Compensation Committee and Board in February 2015 and paid promptly thereafter. In December 2013, the Compensation Committee proposed and the Board approved award targets for our Named Executive Officers other than our CEO at 40% of annual base salary and the award target for our CEO at 50% of annual base salary. These target incentive award amounts for each participant were determined based upon consideration of the participant’s potential impact on our operating and financial results and on market pay practices. The award amount under the program is determined by reference to the award target multiplied by the final payout factor. For each of our Named Executive Officers other than the CEO, the payout factor was determined at a targeted 80% by reference to corporate performance against objectives and at a targeted 20% by reference to the executive officer’s achievement of
individual performance goals. Our CEO’s payout factor was set at a targeted 100% by reference to corporate performance against objectives. The individual performance goals for our Named Executive Officers were established by our CEO based on the applicable executive’s sphere of responsibility within our operations, with categories including strategic leadership, communication, results, performance, collaboration and personnel development.
Corporate performance objectives for 2014 focused on clinical development execution, progress toward regulatory approval, and corporate fundraising and development accomplishments. A basic payout factor was set at 100% upon target accomplishment of certain core goals. However, this basic payout factor was eligible for increase in the following two ways: (i) by outperformance with respect to one or more core goals, with a possible aggregate increase in the payout factor of 30%; and (ii) subject to a minimum performance level in the core goals, accomplishment of stretch goals, with a possible aggregate increase in the payout factor of 50%. At the time the corporate performance objectives for 2014 were set, the Compensation Committee believed that achievement of the target levels of performance (both core goals and stretch goals) would be difficult and challenging, but achievable with significant effort and skill.
In February 2015, the Compensation Committee first, and the Board second, evaluated the achievement of the 2014 corporate performance objectives and determined that incentive awards under our 2014 cash incentive program should be calculated with a 135% payout factor based upon applicable corporate achievements. Accordingly, our CEO’s award under the 2014 cash incentive program was set at 67.5% of his base salary (50% target multiplied by 135% payout factor) and the corporate performance component (with reference to an 80% target) of the awards for each of our other Named Executive Officers under the 2014 cash incentive program was set at 43% of his or her base salary (40% target multiplied by 135% payout factor and 80% weighting). In addition, based upon input from our CEO, the Compensation Committee first, and the Board second, evaluated the achievement of the 2014 individual performance goals of our Named Executive Officers other than our CEO. Payout factors for the individual performance goals of such Named Executive Officers (with reference to a 20% target) were determined to be 130%, 140%, 110% and 110% based on individual performances of Mr. Cooper, Dr. Gujrathi, Dr. Boehm and Dr. Peach, respectively. Finally, based on their exemplary performance, the Compensation Committee recommended and the Board approved additional discretionary cash awards of $49,897 and $57,213 to Mr. Cooper and Dr. Gujrathi, respectively. The cash incentive awards and discretionary cash awards so paid are set forth in the table below entitled “Summary Compensation Table.”
Equity-Based Incentive Awards. The Compensation Committee administers the equity-based incentive awards, such as stock option grants, that are made to our executive officers, including Named Executive Officers, under our 2013 Stock Plan. Equity-based awards fulfill two key objectives of our executive compensation program: they serve as a retention tool for securing our leadership team and as an incentive tool for rewarding superior results to the benefit of our stockholders. Equity awards are determined as part of the total compensation awarded to employees, taking into account base salary and cash incentive plan payout potential.
Prior to implementing the equity award program for 2014, the Compensation Committee conducted a review of alternative equity award designs, including both option and full value awards. Stock option awards priced at fair market value serve to align our employees and executive officers’ interests with the long-term interests of our stockholders by delivering value only if our stock price appreciates above the market price on the date of grant. The Compensation Committee determined that stock options with time-based vesting continued to be the best equity award design for our executive compensation program as of 2014 due to these pro-growth attributes, our status as a growth-focused biopharmaceutical company without a product approved for marketing and the practices of other similarly situated companies. The Compensation Committee determined that four (4)-year vesting, with a one (1)-year cliff delivered appropriate retentive and incentive dimensions and would be consistent with market reference points.
In determining the size of the 2014 equity awards to our executive officers, including Named Executive Officers, the Compensation Committee considered the highly vested status of our executive officers’ then-outstanding awards, our corporate performance in 2013 and expected contributions to future corporate performance. The Compensation Committee also considered the overall share reserve available under our 2013 Stock Plan and the annual equity plan “burn” rates of market references. In March 2014, the Compensation Committee proposed grants of stock options to our executive officers and this proposal was adopted by the Board in April 2014. These 2014
stock option grants to our Named Executive Officers are shown in the table below entitled “Grants of Plan-Based Awards.”
Termination-Based Compensation. Each of our Named Executive Officers is party to an employment agreement. These employment agreements provide for severance payments and acceleration of vesting of equity-based awards upon termination of employment under the circumstances described below under “Employment Agreements with Named Executive Officers.” In general, the employment agreements provide for severance benefits in the form of salary and benefits continuation if an officer’s employment is terminated without “cause” or is “constructively terminated” (as such terms are defined in the agreements). The agreements generally provide for enhanced benefits, including equity award vesting acceleration, if a termination without cause or constructive termination occurs within one month prior to or twelve months after a “change in control” (as defined in the agreements). These agreements are designed both to attract executives, as we compete for talented employees in a marketplace where such protections are routinely offered, and to retain executives and provide continuity of management in the event of an actual or threatened change in control.
Other Compensation. All of our full-time employees, including our Named Executive Officers, may participate in our health programs, such as medical, dental and vision care coverage, and our 401(k) and life and disability insurance programs. These benefits are designed to provide our executive officers and eligible employees a competitive total compensation package that enables us to attract and retain qualified personnel.
Compensation Policies and Practices
Equity Grant Practices. The exercise price of each stock option awarded to our executive officers under our 2013 Stock Plan is the closing price of our common stock on the date of grant. Starting in 2014, the Compensation Committee adopted a policy of attempting to schedule our annual equity awards for ongoing executive officers and employees to occur on or about April 1 of each year. Under our 2013 Stock Plan, we may not reprice or replace options at lower exercise price options without stockholder approval.
Tax Deductibility of Compensation. Section 162(m) of the Internal Revenue Code generally places a limit of $1,000,000 on the amount of compensation that we may deduct in any one year with respect to our CEO and each of the next three most highly compensated executive officers (excluding the CEO). The Compensation Committee considers the implications of Section 162(m) in designing our compensation programs. However, to maintain flexibility in compensating our executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all executive compensation to be deductible. In 2014 we were eligible for transitional relief under Section 162(m) that exempts compensation plans adopted prior to a company’s initial public offering from the deduction limit under Section 162(m). This transitional relief for awards under our 2013 Stock Plan expires upon the earlier of our 2017 annual meeting or upon a material modification of the plan.
Stock Ownership Guidelines. We have not currently adopted stock ownership guidelines for our Named Executive Officers or other employees.
Policy Regarding Restatements. We do not currently have a formal policy requiring a fixed course of action with respect to compensation adjustments, or “clawbacks,” following later restatements of financial results. Under those circumstances, our Board or Compensation Committee would evaluate whether compensation adjustments were appropriate based upon the facts and circumstances surrounding the restatement, including the requirements of the Sarbanes-Oxley Act of 2002 and any policies adopted pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Assessment of Risk. The Compensation Committee annually reviews the elements of Named Executive Officer compensation to determine whether any portion of the overall program encourages excessive risk taking. The Compensation Committee’s current assessment is that although the majority of compensation provided to our Named Executive Officers is performance-based, our compensation programs do not encourage excessive or unnecessary risk taking. The Compensation Committee believes that the design of these compensation programs encourages our Named Executive Officers to remain focused on both short-term and long-term strategic goals. Safeguards integrated into the Company’s compensation practices include: (1) the balance of short-term and long-
term incentive compensation; (2) the use of time-based vesting criteria in long-term incentive awards to align holders’ interests with the Company’s long-term prospects; (3) the use of multiple performance metrics in the annual cash incentive plan, each linked to overall Company progress as opposed to narrow targets; (4) the limitation on annual awards under the Company’s equity incentive plan; and (5) the reservation of Compensation Committee discretion to reduce amounts payable under the cash incentive award program.
2014 Summary Compensation Table
The following table shows for the fiscal years ended December 31, 2014, 2013 and 2012, compensation awarded to, paid to, or earned by, the Named Executive Officers. Information for Mr. Cooper is provided only for the fiscal years ended December 31, 2014 and 2013 because his employment with the Company began in 2013, and information for Drs. Boehm and Peach is provided only for the fiscal year ended December 31, 2014 because they were not Named Executive Officers prior to 2014.
Name and Principal Position | Fiscal Year | Salary | Bonus | Option Awards(1) | Non-Equity Incentive Plan Compensation(2) | All Other Compensation | Total | |||||||||||||||||||||
Faheem Hasnain |
| 2014 2013 2012 |
| $ $ $ | 534,366 451,644 400,000 |
| $ $ $ | — — — |
| $ $ $ | 3,806,058 3,865,160 4,465 |
| $ $ $ | 361,182 348,233 190,000 |
| $ $ $ | 5,000 5,000 5,000 | (3)
| $ $ $ | 4,706,606 4,670,037 599,465 |
| |||||||
Graham Cooper(4) |
| 2014 2013 |
| $ $ | 336,922 254,767 |
| $ $ | 49,897 — | (6)
| $ $ | 1,325,217 1,495,027 |
| $ $ | 180,807 119,707 |
| $ $ | 31,000 24,167 | (5)
| $ $ | 1,923,843 1,893,668 |
| |||||||
Sheila Gujrathi, M.D. |
| 2014 2013 2012 |
| $ $ $ | 380,588 364,327 345,000 |
| $ $ $ | 57,213 — 5,175 | (6)
(6) | $ $ $ | 1,987,844 2,359,966 1,496 |
| $ $ $ | 207,317 153,180 98,325 |
| $ $ $ | 5,000 7,305 5,000 | (3)
| $ $ $ | 2,637,962 2,884,778 454,996 |
| |||||||
Marcus F. Boehm, Ph.D. | 2014 | $ | 317,019 | $ | — | $ | 1,325,217 | $ | 165,072 | $ | 3,750 | (3) | $ | 1,811,058 | ||||||||||||||
Robert J. Peach, Ph.D. | 2014 | $ | 317,019 | $ | — | $ | 1,325,217 | $ | 165,072 | $ | 5,000 | (3) | $ | 1,812,308 |
(1) | This column represents the aggregate grant date fair value of options granted during 2014, 2013 and 2012 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock Compensation, or FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. These amounts generally reflect the amount that the Company expects to expense in its financial statements over the award’s vesting schedule, and do not correspond to the actual value that will be realized by the Named Executive Officers. For additional information on the valuation assumptions used in the calculation of these amounts for the respective year-end, refer to note 10 to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2014, as filed with the SEC. |
(2) | Amounts shown represent performance bonuses earned for 2014, 2013 and 2012, as applicable, which were each paid in a cash lump sum in the first quarter of 2015, 2014 and 2013, respectively. |
(3) | Amount contributed by us to a health savings account on behalf of the executive. This benefit is provided to the Named Executive Officers on the same terms as provided to all of our regular full-time employees in the United States. For more information regarding these benefits, see below under “Perquisites, Health, Welfare and Retirement Benefits.” |
(4) | Mr. Cooper joined as our Chief Financial Officer in February 2013, and his compensation totals for 2013 reflect his February 2013 employment start date. |
(5) | Represents a commuting benefit paid to the executive ($26,000) and amount contributed by us to a health savings account on behalf of the executive ($5,000). |
(6) | Amount shown represents bonus amount paid in the sole discretion of our Board of Directors, which amount is in addition to the amount calculated for performance based bonuses shown in the column “Non-Equity Incentive Plan Compensation.” |
2014 Grants of Plan-Based Awards
The following table sets forth summary information regarding all grants of plan-based awards made to the Named Executive Officers during the fiscal year ended December 31, 2014:
Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | All Other Option Awards: Number of Securities Underlying Options(2) (#) | Exercise or Base Price of Option Awards ($/share) | Grant Date Fair Value of Stock and Option Awards(3) ($) | ||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||
Faheem Hasnain | 1-28-14 | $ | 267,543 | |||||||||||||||||||||
4-3-14 | 106,107 | $ | 41.51 | $ | 3,806,058 | |||||||||||||||||||
Graham Cooper | 1-28-14 | $ | 134,932 | |||||||||||||||||||||
4-3-14 | 36,945 | $ | 41.51 | $ | 1,325,217 | |||||||||||||||||||
Sheila Gujrathi, M.D. | 1-28-14 | $ | 152,440 | |||||||||||||||||||||
4-3-14 | 55,418 | $ | 41.51 | $ | 1,987,844 | |||||||||||||||||||
Marcus F. Boehm, Ph.D. | 1-28-14 | $ | 126,978 | |||||||||||||||||||||
4-3-14 | 36,945 | $ | 41.51 | $ | 1,325,217 | |||||||||||||||||||
Robert J. Peach, Ph.D. | 1-28-14 | $ | 126,978 | |||||||||||||||||||||
4-3-14 | 36,945 | $ | 41.51 | $ | 1,325,217 |
(1) | Represents the annual performance-based bonus each Named Executive Officer is eligible to receive based on (i) the individual’s target bonus, as a percentage of base salary, (ii) a Company-based performance factor and (iii) for our Named Executive Officers other than our CEO, an individual performance factor. There is no maximum bonus percentage or amount established for the Named Executive Officers. Annual performance-based bonuses for 2014 awarded in early 2015 were as follows: $361,182 for Mr. Hasnain; $180,807 for Mr. Cooper, $207,317 for Dr. Gujrathi and $165,072 for each of Drs. Boehm and Peach. Additionally, based on their exemplary performance, the Compensation Committee recommended and the Board approved additional discretionary cash awards of $49,897 and $57,213 to Mr. Cooper and Dr. Gujrathi, respectively. |
(2) | These options vest at the rate of 25% of the total number of shares subject to the option on the first anniversary of the date of grant and 1/48th of the total number of shares subject to the option on each monthly anniversary thereafter, provided that the option holder continues to provide services to us through such dates. |
(3) | This column represents the aggregate grant date fair value of options granted during 2014 in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. These amounts generally reflect the amount that the Company expects to expense in its financial statements over the award’s vesting schedule, and do not correspond to the actual value that will be realized by the Named Executive Officers. For additional information on the valuation assumptions used in the calculation of these amounts, refer to note 10 to the consolidated financial statements included in our annual report onForm 10-K for the year ended December 31, 2014, as filed with the SEC. |
Narrative Disclosure Relating to Summary Compensation Table and Grants of Plan-Based Awards Table
Annual Base Salary
The compensation of our Named Executive Officers is generally determined and approved by our Compensation Committee, which recommends its decisions to our Board of Directors. Our Board of Directors, without members of management present, ultimately approves all compensation decisions for our Named Executive Officers. Base salaries for our Named Executive Officers in 2014 were as follows.
Name | 2014 Base Salary | |||
Faheem Hasnain | $ | 535,085 | ||
Graham Cooper | $ | 337,329 | ||
Sheila Gujrathi, M.D. | $ | 381,100 | ||
Marcus F. Boehm, Ph.D. | $ | 317,446 | ||
Robert J. Peach, Ph.D. | $ | 317,446 |
Annual Performance-Based Bonus Opportunity
In addition to base salaries, our Named Executive Officers are eligible to receive annual performance-based cash bonuses, which are designed to provide appropriate incentives to our executives to achieve defined annual corporate goals and to reward our executives for individual achievement towards these goals.
The annual performance-based bonus each Named Executive Officer is eligible to receive is based on (i) the individual’s target bonus, as a percentage of base salary, (ii) a company-based performance factor, or CPF, and (iii) an individual performance factor, or IPF, except that the CEO does not have an IPF. The actual performance-based bonus paid, if any, is calculated by multiplying the executive’s annual base salary, target bonus percentage, percentage attainment of the CPF and percentage attainment of the IPF. There is no maximum bonus percentage or amount established for the Named Executive Officers and, as a result, the bonus amounts vary from year to year based on corporate and individual performance. At the end of the year, the Committee recommends and our Board of Directors approves the extent to which we achieved the CPF. The extent to which each individual executive (other than the CEO) achieves his or her IPF is determined based on our CEO’s review and recommendation to the Committee, and the Committee recommends and our Board of Directors makes the final decisions with respect to each IPF. Additionally, the Committee has the discretion to determine the weighting of each of the goals that comprise the CPF and IPF. Our Board of Directors may award a bonus in an amount above or below the amount resulting from the calculation described above, based on other factors that the Board determines, in its sole discretion, are material to our corporate performance and provide appropriate incentives to our executives, for example based on events or circumstances that arise after the original CPF and IPF goals are set. Our Board of Directors exercised this discretion in awarding the bonuses for 2012 and 2014 performance, and the amount awarded discretionarily is shown in the “Bonus” column of the Summary Compensation Table.
Pursuant to their employment agreements and as modified by our Board of Directors, each Named Executive Officer has a target bonus represented as a percentage of base salary, or a target bonus percentage, each of which is set forth below:
Name | 2014 Target Bonus | |||
Faheem Hasnain | 50 | % | ||
Graham Cooper | 40 | % | ||
Sheila Gujrathi, M.D. | 40 | % | ||
Marcus F. Boehm, Ph.D. | 40 | % | ||
Robert J. Peach, Ph.D. | 40 | % |
The CPF and IPF goals are determined by the Board and communicated to the Named Executive Officers each year, prior to or shortly following the beginning of the year to which they relate. The CPF is composed of several goals that relate to our annual corporate goals and various business accomplishments which vary from time to time depending on our overall strategic objectives, but relate generally to achievement of clinical, regulatory and discovery milestones for clinical development candidates and performance against our business development goals. The IPF is composed of factors that relate to each Named Executive Officer’s ability to drive his or her own performance and the performance of his or her direct employee reports towards reaching our corporate goals. The proportional emphasis placed on each goal within the CPF and IPF may vary from time to time depending on our overall strategic objectives and the Board’s subjective determination of which goals have more impact on our performance.
For 2014, the CPF goals were weighted at 100% for Mr. Hasnain and weighted at a targeted 80% for the balance of the management team. CPF goals established and achieved included various financing and drug development activities and objectives. The IPF goals were weighted at a targeted 20% and varied among the non-CEO members of the management team, with categories including strategic leadership, communication, results, performance, collaboration and personnel development. The Board approved the recommendation of its Compensation Committee for a 2014 CPF achievement of 135%. Mr. Hasnain’s bonus, weighted 100% on CPF goals determined to be 135% achieved, resulted in a performance-based bonus of $361,182. A CPF rate of 108% (135% achievement at the target 80% weighting), combined with IPF achievements of 130%, 140%, 110% and 110% (at the target 20% weighting) based on individual performances of Mr. Cooper, Dr. Gujrathi, Dr. Boehm and Dr. Peach, respectively, resulted in a total cash incentive bonus of $180,807 for Mr. Cooper, $207,317 for Dr. Gujrathi and $165,072 for each of Drs. Boehm and Peach. Additionally, based on their exemplary performance, the Compensation Committee recommended and the Board approved additional discretionary cash awards of $49,897 and $57,213 to Mr. Cooper and Dr. Gujrathi, respectively.
Long-Term Incentive Compensation
Our long-term, equity-based incentive awards are designed to align the interests of our Named Executive Officers and our other employees, non-employee directors and consultants with the interests of our stockholders. Because vesting is based on continued service, our equity-based incentives also encourage the retention of our Named Executive Officers through the vesting period of the awards.
We use stock options as the primary incentive for long-term compensation to our Named Executive Officers because they are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price. We generally provide initial grants in connection with the commencement of employment of our Named Executive Officers and annual retention grants thereafter.
Prior to May 2013, we granted all stock options pursuant to our 2008 Stock Plan (the “2008 Plan”), the terms of which are described below under “Equity Compensation Plans and Other Benefit Plans—2008 Stock Plan.” All options granted under the 2008 Plan were granted at no less than the fair market value of our common stock on the date of grant of each award. Beginning in May 2013, all stock options have been granted pursuant to our 2013 Stock Incentive Plan (the “2013 Plan”), the terms of which are described below under “Equity Compensation Plans and Other Benefits Plans—2013 Stock Incentive Plan.” All options granted under the 2013 Plan are granted at the fair market value of our common stock on the date of grant.
All of our stock option grants typically vest over a four-year period and may be granted with an early exercise feature allowing the holder to exercise and receive unvested shares of our stock, so that the employee may exercise and have a greater opportunity for gains on the shares to be taxed at long-term capital gains rates rather than ordinary income rates.
See “Outstanding Equity Awards at Fiscal Year End” for option awards made to our Named Executive Officers during the last fiscal year.
Vesting Acceleration
With respect to shares of stock acquired by our Named Executive Officers pursuant to options granted prior to our initial public offering in May 2013 under our 2008 Stock Plan, as well as restricted stock awards granted to our Named Executive Officers prior to our initial public offering outside of our 2008 Stock Plan, in the event of any corporate transaction such as a merger, reorganization or sale or transfer of all or substantially all of our assets or capital stock, in each case resulting in our stockholders immediately prior to such transaction holding 50% or less of the voting power of the surviving entity (unless such transaction is a sale of securities, the primary purpose of which is to generate financing, or is effected only for the purpose of changing our domicile), then, as of immediately prior to such transaction: (i) 50% of the unvested time-based shares will vest; (ii) 75% of the unvested shares subject to a milestone which has been achieved as of such termination will vest, with the remaining 25% vesting during continued employment in equal monthly portions over six months, unless a lesser time otherwise remains on the original vesting schedule; and (iii) provided that the transaction results in our pre-initial public offering investors receiving a return of at least five times on their pre-initial public offering investment, 75% of the unvested shares
subject to any milestone will vest, with the remaining 25% vesting during continued employment in equal monthly portions over six months, unless a lesser time otherwise remains on the original vesting schedule.
In the event of termination without cause or a constructive termination surrounding a “change in control,” the vesting of outstanding stock options and restricted shares held by our Named Executive Officers may accelerate. Please see “—Employment Agreements with Named Executive Officers” for a discussion of such accelerated vesting arrangements.
Employment Agreements with Named Executive Officers
In September 2013, we entered into amended and restated employment agreements with each of our Named Executive Officers, which agreements provide that their employment is at will and may be terminated at any time by the executive or by us with or without cause and without notice. The employment agreements are substantially the same other than differences in base salary, target annual bonus percentages and severance. The employment agreements for Mr. Hasnain, Dr. Gujrathi, Mr. Cooper and Drs. Boehm and Peach provided for an annual base salary of $519,500, $370,000, $328,500, $308,200 and $308,200, respectively. Early in 2014, our Board of Directors approved a merit increase of 3% to base salaries of all employees, including our Named Executive Officers. Additionally, the target annual bonuses were set in the September 2013 agreements at 50% of annual base salary for Mr. Hasnain and 30% of the respective base salaries for each of the other Named Executive Officers (subsequently increased to 40% by our Board of Directors commencing for 2014).
Pursuant to each agreement, and subject to the Named Executive Officer’s execution of a general release of all claims against us, if the Named Executive Officer’s employment with us is terminated by us without “cause” or the Named Executive Officer’s employment with us is constructively terminated pursuant to a material reduction in compensation or responsibilities, a relocation of principal office or a material breach by us of the employment agreement, then the Named Executive Officer is entitled to receive (i) a lump sum cash payment of an amount equal to base salary payable for a period of (a) 12 months in the case of Mr. Hasnain and (b) nine months in the case of each of our other Named Executive Officers, and (ii) if the Named Executive Officer elects to continue health insurance coverage under COBRA, reimbursement for the same portion of monthly premiums we pay for active employees over (a) a 12-month period in the case of Mr. Hasnain and (b) a nine-month period in the case of each of our other Named Executive Officers.
Pursuant to each employment agreement, and subject to the Named Executive Officer’s execution of a general release of all claims against us, if one month prior to, or 12 months following the occurrence of, a “change in control” such as a change in the majority composition of the Board of Directors or a merger, reorganization or sale or transfer of all or substantially all of our assets or capital stock, in each case resulting in our stockholders immediately prior to such transaction holding 50% or less of the voting power of the surviving entity, the Named Executive Officer’s employment is terminated by us without “cause” or is constructively terminated pursuant to a material reduction in compensation or responsibilities, a relocation of principal office or a material breach by us of the employment agreement, then the Named Executive Officers is entitled to receive the following: (i) a lump sum cash payment of an amount equal to (a) base salary payable for a period of 24 months and two times target annual bonus in the case of Mr. Hasnain and (b) base salary payable for a period of 12 months and one times target annual bonus in the case of each of our other Named Executive Officers; (ii) if the Named Executive Officer elects to continue health insurance coverage under COBRA, reimbursement for the same portion of monthly premiums as we pay for active employees over (a) a 24-month period in the case of Mr. Hasnain and (b) a 12-month period in the case of our other Named Executive Officers (or in either case, if applicable, such lesser period as is available under COBRA); and (iii) the full vesting of all outstanding stock options, restricted shares and any other equity-based compensation. If any payment or benefit received by any Named Executive Officer pursuant to a change in control where a definitive agreement is entered into on or prior to March 31, 2015 had constituted a “parachute payment” under Section 280G of the Internal Revenue Code and had become subject to excise tax under Section 4999 of such Code, we would have paid a gross-up payment equal to the excise tax with respect to the parachute payment as well as all taxes with respect to such gross-up payment, subject to the applicable limits set forth in the employment agreement (including that the total amount of gross-up payments for all benefitted executives is capped at 1.5% of transaction value ). The timing of any payments to our Named Executive Officers under their respective employment agreements is subject to applicable requirements of Section 409A of the Code and the related Treasury Regulations.
Compensation Recovery Policies
The Board of Directors and the Compensation Committee have not determined whether they would attempt to recover bonuses from our executive officers if the performance objectives that led to the bonus determination were to be restated, or found not to have been met to the extent originally believed by the Board of Directors or the Compensation Committee. However, as a public company subject to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002, if we are required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive. In addition, we will comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will adopt a compensation recovery policy once final regulations on the subject have been adopted.
Equity Compensation Plans and Other Benefits Plans
2008 Stock Plan
General —Our 2008 Stock Plan was initially adopted by our Board of Directors in November 2008 and approved by our stockholders in January 2009 and was last amended on April 18, 2013. The purpose of the 2008 Stock Plan is to offer selected persons an opportunity to acquire a proprietary interest in our success, by acquiring shares of our common stock. Effective upon completion of our initial public offering in May 2013, our 2008 Stock Plan was terminated for purposes of future grants and no shares of our common stock remain available for future issuance of new awards under the 2008 Stock Plan.
Our 2008 Stock Plan permitted the direct award or sale of shares and for the grant of nonstatutory stock options and restricted stock to our employees, directors and consultants and any of our parents’ or subsidiaries’ employees and consultants. Incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, could also be granted but only to our employees and our parents’ or subsidiaries’ employees.
Share reserve—As of December 31, 2014, options to purchase a total of 387,693 shares of common stock were outstanding under the 2008 Stock Plan. Shares originally reserved for issuance under our 2008 Stock Plan but which were not issued or subject to outstanding awards on the effective date of our 2013 Stock Plan, which is described below, and shares subject to outstanding awards under our 2008 Stock Plan on the effective date of our 2013 Stock Plan that are subsequently forfeited or terminated for any reason before being exercised or settled, including shares subject to vesting restrictions that are subsequently forfeited, will become available for award under our 2013 Stock Plan. However, shares that have actually been issued under the 2008 Stock Plan, upon exercise of an award, will not be returned to the 2008 Stock Plan and will not become available for future distribution thereunder, except that if unvested shares of restricted stock are repurchased by us at their original purchase price, such shares will become available for future grant under the 2013 Stock Plan.
Administration—Our Board of Directors or a committee appointed thereby administers the 2008 Stock Plan. Subject to the provisions of our 2008 Stock Plan and, in the case of a committee, the specific duties delegated to such committee by the Board, and subject to the approval of any relevant authorities, the administrator has the authority in its discretion to take the following actions: (i) determine fair market value of our common stock; (ii) select recipients of awards under the 2008 Stock Plan; (iii) determine and modify or amend the number of shares, terms and conditions and forms of agreement related to awards under the 2008 Stock Plan; (iv) prescribe, amend and rescind rules and regulations related to the 2008 Stock Plan; (v) construe and interpret terms of the 2008 Stock Plan and awards; (vi) authorize any person to execute on our behalf any instrument required to effect the grant of an award and (vii) institute an option exchange program. All actions of the administrator will be final and binding on all persons.
Stock options—Prior to our initial public offering in May 2013, the administrator could grant incentive and/or nonstatutory stock options under our 2008 Stock Plan; provided that incentive stock options are only granted to employees. The exercise price of options granted under the plan must be equal to or greater than 100% of the fair market value of our common stock on the date of grant. The term of an option may not exceed ten years; provided, however, that an incentive stock option held by an optionee who owns more than 10% of the total combined voting
power of all classes of our stock, our parent or any of our subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value of our common stock on the grant date. The exercise price for an option may be paid in cash or check. In addition, the administrator may allow for payment by surrender of shares, promissory note, cashless exercise, or other forms of payment as may be permitted by our Board of Directors. Subject to the provisions of our 2008 Stock Plan, the administrator determines the remaining terms of the options (e.g., exercisability and vesting). The administrator may permit an optionee to exercise his or her option as to shares that have not vested. The optionee may exercise his or her option, to the extent vested, following termination of the optionee’s service for the period specified in the award agreement, such period to be three months (or twelve months in the case of termination due to death or disability) unless otherwise specified. For California optionees only, to the extent required by California law, such period will be no less than thirty days. However, in no event may an option be exercised later than the expiration of its term.
Restricted shares—Prior to our initial public offering in May 2013, restricted shares could be offered either alone, in addition to, or in tandem with other awards granted under the 2008 Stock Plan and/or cash awards made outside of the 2008 Stock Plan. The administrator will advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of shares that such person will be entitled to purchase, the price to be paid (if any), and the time within which such person must accept such offer. Unless the administrator determines otherwise, we will have a repurchase option to purchase the shares for the original purchase price within 90 days of the termination of the holder’s services.
Transferability/Forfeiture —Unless determined otherwise by the administrator, the 2008 Stock Plan generally does not allow for options to be transferred in any manner other than by will or the laws of descent and distribution. Notwithstanding the foregoing, for California optionees only, to the extent permitted by the administrator, an option may be transferred to a revocable trust or as permitted by Rule 701 of the Securities Act. Shares awarded or sold under the 2008 Stock Plan or received upon the exercise of options may be subject to certain forfeiture conditions, rights to repurchase, rights of first refusal and other transfer restrictions as the administrator may determine and as set forth in the applicable award agreement.
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 our shares or other securities, or other change in our corporate structure affecting the shares occurs, the administrator will adjust the number and class of shares that may be delivered under the 2008 Stock Plan and/or the number, class, and price of shares covered by each outstanding award.
Corporate transaction—If we are a party to a merger or consolidation, and in the event of a change in control, outstanding awards under the 2008 Stock Plan will be treated as the administrator determines, including, without limitation, that each award be assumed or an equivalent award substituted by the successor corporation or a parent or subsidiary of the successor corporation. The administrator will not be required to treat all awards similarly in the transaction. Notwithstanding the foregoing, in the event of a change in control in which the successor corporation does not assume or substitute for the award, the optionee will fully vest in and have the right to exercise his or her outstanding awards, including shares as to which such award would not otherwise be vested or exercisable, and restrictions on all of the participant’s restricted stock will lapse. In addition, if an award is not assumed or substituted in the event of a merger or change in control, the administrator will notify the optionee in writing or electronically that the award will be fully vested and exercisable for a period of time determined by the administrator in its sole discretion, and any award not assumed or substituted for will terminate upon the expiration of such period for no consideration, unless otherwise determined by the administrator. Pursuant to the 2008 Stock Plan, a “change in control” results from: (i) a merger or reorganization immediately after which persons who were not our stockholders immediately prior to such transaction own 50% or more of the voting power of the surviving entity and any direct or indirect parent thereof; (ii) a sale, transfer or other disposition of all or substantially all of our assets or our stockholders approve a plan of complete liquidation of us; or (iii) the aggregation by any person of 50% or more of the combined voting power of our outstanding securities (unless such transaction is an initial public offering or sale of securities, the primary purpose of which is to generate financing, or is effected only for the purpose of changing our state of incorporation or creating a holding company).
Plan termination—Our Board terminated in the 2008 Stock Plan for purposes of future grants in connection with our initial public offering in May 2013, and no shares of common stock remain available for future issuance of new awards under the 2008 Stock Plan.
2013 Stock Incentive Plan
General—Our 2013 Stock Incentive Plan, or the 2013 Stock Plan, was adopted by our Board of Directors in April 2013 and the plan became effective in May 2013 concurrent with our initial public offering.
The 2013 Stock Plan provides for the granting of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and the granting of nonstatutory stock options to employees, non-employee directors, advisors and consultants. The 2013 Stock Plan also provides for the grants of restricted stock, stock appreciation rights, stock unit and cash-based awards to employees, non-employee directors, advisors and consultants.
Share Reserve—As of December 31, 2014, options to purchase a total of 1,539,006 shares of common stock were outstanding under the 2013 Stock Plan. In addition, 360,301 shares of common stock were reserved for future issuance as of December 31, 2014, plus any future increases in the number of shares of common stock reserved for issuance pursuant to the evergreen provision of the 2013 Stock Plan. Under the evergreen provision of the 2013 Stock Plan, an additional 1,260,656 shares of common stock became available for future grant on January 1, 2015.
Administration—The Compensation Committee of our Board of Directors, or our Board of Directors acting as a committee, administers the 2013 Stock Plan, including the determination of the recipient of an award, the number of shares or amount of cash subject to each award, whether an option is to be classified as an incentive stock option or nonstatutory option, and the terms and conditions of each award, including the exercise and purchase prices and the vesting or duration of the award.
At the discretion of our Board of Directors, our Compensation Committee may consist of two or more non-employee directors. To the extent required by our Board of Directors, the composition of our Compensation Committee may satisfy the requirements for plans intended to qualify for exemption under Rule 16b-3 of the Exchange Act and Section 162(m) of the Internal Revenue Code. Our Board of Directors may appoint one or more separate committees of our Board of Directors, each consisting of one or more members of our Board of Directors, to administer our 2013 Stock Plan with respect to employees who are not subject to Section 16 of the Exchange Act. Subject to applicable law, our Board of Directors may also authorize one or more officers to designate employees, other than employees who are subject to Section 16 of the Exchange Act, to receive awards under our 2013 Stock Plan and/or determine the number of such awards to be received by such employees subject to limits specified by our Board of Directors. In this regard, our Board of Directors has established a Non-Management Stock Option Committee, currently composed of Messrs. Hasnain and Cooper, to which authority has been delegated to grant, without any further action required by the Board or the Compensation Committee, stock options to non-management employees, particularly new employees, within specified limits approved by the Compensation Committee.
Authorized shares—Under our 2013 Stock Plan, the aggregate number of shares of our common stock authorized for issuance may not exceed (i) 1,093,333 plus (ii) the sum of number of shares subject to outstanding awards under the 2008 Stock Plan as of the 2013 Stock Plan’s effective date that are subsequently forfeited or terminated for any reason before being exercised or settled, plus the number of shares subject to vesting restrictions under the 2008 Stock Plan on the 2013 Stock Plan’s effective date that are subsequently forfeited, plus the number of shares reserved but not issued or subject to outstanding grants under the 2008 Stock Plan as of the 2013 Stock Plan’s effective date. In addition, the number of shares that have been authorized for issuance under the 2013 Stock Plan will be automatically increased on the first day of each fiscal year beginning on January 1, 2014 and ending on (and including) January 1, 2023, in an amount equal to the lesser of (i) four percent of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (ii) another amount determined by our Board of Directors. Under this provision, an additional 733,984 shares of common stock became available for future grant on January 1, 2014 and an additional 1,260,656 shares of common stock became available for future grant on January 1, 2015. Shares subject to awards granted under the 2013 Stock Plan that are forfeited or terminated before being exercised or settled, or are not delivered to the participant because such award is settled in cash, will again become available for issuance under the 2013 Stock Plan. Shares withheld to satisfy the grant, exercise price or tax
withholding obligation related to an award will again become available for issuance under the 2013 Stock Plan. However, shares that have actually been issued shall not again become available unless forfeited. No more than 8,000,000 shares may be delivered upon the exercise of incentive stock options granted under the 2013 Stock Plan plus, to the extent allowable under applicable tax law, any shares that again become available for issuance under the 2013 Stock Plan. During any time when the tax deduction limitations of Section 162(m) of the Internal Revenue Code apply to awards under the 2013 Stock Plan, and options or stock appreciation rights are intended to qualify as “performance-based compensation” under Section 162(m), no person may receive options or stock appreciation rights in any calendar year for an aggregate of more than 1,333,333 shares, and no more than two times this amount in the first year of employment.
Types of Awards
Stock options—A stock option is the right to purchase a certain number of shares of stock, at a certain exercise price, in the future. Under our 2013 Stock Plan, incentive stock options and nonstatutory options must be granted with an exercise price of at least 100% of the fair market value of our common stock on the date of grant. Incentive stock options granted to any holder of more than 10% of our voting shares must have an exercise price of at least 110% of the fair market value of our common stock on the date of grant. No incentive stock option can be granted to an employee if as a result of the grant, the employee would have the right in any calendar year to exercise for the first time one or more incentive stock options for shares having an aggregate fair market value in excess of $100,000. The stock option agreement specifies the date when all or any installment of the option is to become exercisable. We expect that 1/4th of the total number of shares subject to the options will vest and become exercisable 12 months after the vesting commencement date for options granted, and the remaining options will vest and become exercisable at a rate of 1/48th of the total number of shares subject to the options each month thereafter. Each stock option agreement sets forth the term of the options, provided that the term of an incentive stock option is prohibited from exceeding ten years (five years in the case of an incentive stock option granted to any holder of more than 10% of our voting shares), and the extent to which the optionee will have the right to exercise the option following termination of the optionee’s service with us. Payment of the exercise price may be made in cash or, if provided for in the stock option agreement evidencing the award, (i) by surrendering, or attesting to the ownership of, shares which have already been owned by the optionee, (ii) by delivery of an irrevocable direction to a securities broker to sell shares and to deliver all or part of the sale proceeds to us in payment of the aggregate exercise price, (iii) by delivery of an irrevocable direction to a securities broker or lender to pledge shares and to deliver all or part of the loan proceeds to us in payment of the aggregate exercise price, (iv) by a “net exercise” arrangement, (v) by delivering a full-recourse promissory note or (vi) by any other form that is consistent with applicable laws, regulations and rules.
Restricted stock—Restricted stock is a share award that may be subject to vesting conditioned upon continued service, the achievement of performance objectives or the satisfaction of any other condition as specified in a restricted stock agreement. Participants who are granted restricted stock awards generally have all of the rights of a stockholder with respect to such stock, other than the right to transfer such stock prior to vesting. Subject to the terms of the 2013 Stock Plan, our Compensation Committee will determine the terms and conditions of any restricted stock award, including any vesting arrangement, which will be set forth in a restricted stock agreement to be entered into between us and each recipient. Restricted stock may be awarded for such consideration as our Compensation Committee may determine, including without limitation cash, cash equivalents, full-recourse promissory notes, future services or services rendered prior to the award, without cash payment by the recipient.
Stock unit—Stock units give recipients the right to acquire a specified number of shares of stock (or cash amount) at a future date upon the satisfaction of certain conditions, including any vesting arrangement, established by our Compensation Committee and as set forth in a stock unit agreement. Unlike restricted stock, the stock underlying stock units will not be issued until the stock units have vested and are settled, and recipients of stock units generally will have no voting or dividend rights prior to the time the vesting conditions are satisfied and the award is settled. At our Compensation Committee’s discretion, stock units may provide for the right to dividend equivalents. Our Compensation Committee may elect to settle vested stock units in cash or in common stock or in a combination of cash and common stock. Subject to the terms of the 2013 Stock Plan, our Compensation Committee will determine the terms and conditions of any stock unit award, which will be set forth in a stock unit agreement to be entered into between us and each recipient.
Stock appreciation rights—Stock appreciation rights typically will provide for payments to the recipient based upon increases in the price of our common stock over the exercise price of the stock appreciation right. The exercise price of a stock appreciation right will be determined by our Compensation Committee, which shall not be less than the fair market value of our common stock on the date of grant. Our Compensation Committee may elect to pay stock appreciation rights in cash or in common stock or in a combination of cash and common stock.
Cash-based awards—A cash-based award is denominated in cash. The Compensation Committee may grant cash-based awards in such number and upon such terms as it shall determine. Payment, if any, will be made in accordance with the terms of the award, and may be made in cash or in shares of common stock, as determined by the Compensation Committee.
Performance-based awards—Awards under our 2013 Stock Plan may be made subject to the attainment of performance criteria. Awards of restricted stock, stock units or cash-based awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code will be subject to the attainment of one or more pre-established performance goals, including cash flows, earnings per share, earnings before interest, taxes and amortization, return on equity, total stockholder return, share price performance, return on capital, return on assets or net assets, revenue, income or net income, operating income or net operating income, operating profit or net operating profit, operating margin or profit margin, return on operating revenue, return on invested capital, market segment shares, costs, expenses, initiation or completion of research activities, initiation or completion of clinical studies or other development programs, other milestones with respect to research activities or clinical studies or other development programs, regulatory body approval for commercialization of a product or implementation or completion of critical projects, and other milestones with respect to commercialization of a product. The maximum aggregate number of shares that may be subject to restricted stock or stock unit awards intended to qualify as performance-based compensation under this tax rule granted to any individual in any calendar year is 1,333,333 shares, and no more than two times this amount in the first year of employment. The maximum aggregate amount of cash that may be payable under cash-based awards intended to qualify as performance-based compensation under this tax rule granted to any individual in any calendar year is $10,000,000.
Other Plan Features
Under the 2013 Stock Plan:
• | Unless the agreement evidencing an award expressly provides otherwise, no award granted under the plan may be transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to shares issued under such award), other than by will or the laws of descent and distribution, provided, however, that an incentive stock option may be transferred or assigned only to the extent consistent with Section 422 of the Internal Revenue Code. |
• | In the event of a recapitalization, stock split or similar capital transaction, our Compensation Committee will make appropriate and equitable adjustments to the number of shares reserved for issuance under the 2013 Stock Plan, the limitations regarding the total number of shares underlying awards given to an individual participant in any calendar year, the number of shares that can be issued as incentive stock options, the number of shares subject to outstanding awards and the exercise price under each outstanding option or stock appreciation right. |
• | If we are involved in a merger or other reorganization, outstanding awards will be subject to the agreement or merger or reorganization. Such agreement will provide for (i) the continuation of the outstanding awards by us, if we are the surviving corporation, (ii) the assumption or substitution of the outstanding awards by the surviving corporation or its parent or subsidiary, (iii) immediate vesting, exercisability and settlement of the outstanding awards followed by their cancellation, or (iv) settlement of the intrinsic value of the outstanding awards (whether or not vested or exercisable) in cash, cash equivalents, or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such award or the underlying shares) followed by cancellation of such awards. |
• | The administrator of the 2013 Stock Plan may modify, extend or renew outstanding awards or may accept the cancellation of outstanding awards (to the extent not previously exercised), whether or not granted under the 2013 Stock Plan, in return for the grant of new awards for the same or a different number of shares and at the same or a different exercise price, or in return for the grant of a different award for the same or a different number of shares, all without stockholder approval. However, no modification of an award shall, without the consent of the individual participant, materially impair his or her rights or obligations under such award. |
• | Our Board of Directors may amend or terminate the plan at any time, subject to stockholder approval where required by applicable law. Any amendment or termination may not materially impair the rights of holders of outstanding awards without their consent. No incentive stock option may be granted after the tenth anniversary of the earlier of (i) the date the 2013 Stock Plan was adopted by our Board of Directors, or (ii) the date the plan was approved by our stockholders. |
2013 Employee Stock Purchase Plan
General—Our Board of Directors adopted, and our stockholders approved, the Employee Stock Purchase Plan, or ESPP, in April 2013. The ESPP became effective concurrently with our initial public offering in May 2013. However, our Board has not yet commenced an offering under the ESPP. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and the purpose of the ESPP is to provide eligible employees with an opportunity to increase their proprietary interest in our success by purchasing common stock from us at favorable terms and to pay for their purchases through payroll deductions. Our Board of Directors believes that establishing an ESPP will enable us to attract, retain and motivate valued employees. As of December 31, 2014, a total of 343,496 shares of common stock have been reserved for issuance under the ESPP plus any future increases in the number of shares of common stock reserved for issuance pursuant to the evergreen provision of the ESPP. Previously, the evergreen provision of the ESPP provided that the number of shares reserved for issuance under the ESPP would automatically increase by an amount equal the least of (i) one percent of the outstanding shares of stock on such date or (ii) such other lesser amount the Board of Directors determines. However, our Board of Directors has adopted an amendment to the evergreen provision of the ESPP, which is subject to stockholder approval at the 2015 annual meeting. The amended evergreen provision of the ESPP provides that the annual increase of shares reserved for issuance under the ESPP shall be equal to the least of: (i) 1% of the outstanding shares on such date; (ii) 320,000 shares of common stock; or (iii) such lesser amount as determined by the Board of Directors. No annual increase shall be added more than ten years after the ESPP’s effective date. Under the evergreen provision of the ESPP, an additional 315,164 shares of common stock became available for future grant on January 1, 2015.
Administration—Except as noted below, our ESPP is administered by a committee of our Board of Directors. The committee has full power and authority, subject to the provisions of the ESPP, necessary for the proper administration of the plan. The committee may adopt such rules, guidelines and forms as it deems appropriate to implement the ESPP, including sub-plans, which the committee may establish for the purpose of facilitating participation by non-US employees and compliance with foreign laws. Our Board of Directors may, in its sole discretion, at any time, resolve to administer the ESPP.
Eligibility—Each of our employees and of each present or future subsidiary, as designated by the committee, whose customary employment is more than five months per calendar year and more than 20 hours per week, and who is employed on the day preceding the start of any offering period will be eligible to participate in the ESPP when it is implemented. The ESPP permits an eligible employee to purchase common stock through payroll deductions (and by cash or check if permitted by the committee), which may not be less than 1% nor more than 15% of the employee’s eligible compensation. No participant may purchase stock under the ESPP if immediately after electing to purchase stock, the participant would own stock (including stock such employee may purchase under the ESPP or other outstanding options) representing 5% or more of the total combined voting power or value of all classes of our or any parent or subsidiary company’s stock. No participant may purchase more than such number of shares as may be determined by the committee with respect to a single offering period, or purchase period, if applicable. In addition, no participant may accrue, under the ESPP and all similar purchase plans of ours or of our parent or subsidiary companies, a right to purchase shares of our stock having a fair market value in excess of $25,000 (determined at the time the right is granted) for each calendar year. Participants may withdraw their accumulated payroll deductions prior to the end of the offering period, or purchase period, if applicable, in
accordance with the terms of the offering. Participation in the ESPP will end automatically on termination of employment with us.
Offering Periods and Purchase Price—Our ESPP will be implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, except as noted below, the committee may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. During each purchase period, payroll deductions will accumulate, without interest. On the last day of the purchase period, i.e., the purchase date, accumulated payroll deductions will be used to purchase common stock for employees participating in the offering.
The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than the lesser of (i) 85% of the fair market value per share of our common stock on the purchase date, or (ii) 85% of the fair market value per share of our common stock on the last trading day preceding the offering date. The committee will determine the purchase period and the purchase price of shares that may be purchased pursuant to each offering.
Reset Feature—The committee may specify that if the fair market value of a share of our common stock on any purchase date within a particular offering period is less than or equal to the fair market value on the start date of that offering period, then the offering period will automatically terminate and the employee in that offering period will automatically be transferred and enrolled in a new offering period, which will begin on the next day following such purchase date.
Changes to Capital Structure—In the event that there is a specified type of change in our capital structure, such as a stock split, appropriate adjustments will be made to (a) the number of shares reserved under the ESPP, (b) the individual and aggregate participant share limitations described in the ESPP and (c) the price of shares that any participant has elected to purchase.
Corporate Reorganization—Immediately before a corporate reorganization such as a merger or sale of substantially all of the Company, the offering period and any purchase period then in progress shall terminate and stock will be purchased with the accumulated payroll deductions, unless the ESPP is assumed by the surviving corporation or its parent corporation under the plan of merger or consolidation.
Amendment and Termination—Our Board of Directors will have the right to amend, suspend or terminate the ESPP at any time. Any increase in the aggregate number of shares of stock to be issued under the ESPP is subject to stockholder approval. Any other amendment is subject to stockholder approval only to the extent required under applicable law or regulation.
Perquisites, Health, Welfare and Retirement Benefits
Our Named Executive Officers are eligible to participate in all of our employee benefit plans, including our medical, dental, vision, group life and disability insurance plans, in each case on the same basis as other employees.
Except as described below, we currently have no plans that provide for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans and nonqualified defined contribution plans.
We do not provide perquisites or personal benefits to our Named Executive Officers.
401(k) Plan
All of our full-time employees in the United States, including our Named Executive Officers, are eligible to participate in our 401(k) plan, which is a retirement savings defined contribution plan established in accordance with Section 401(a) of the Code. Pursuant to our 401(k) plan, employees may elect to defer their eligible compensation into the plan on a pre-tax basis, up to the statutorily prescribed annual limit of $17,500 in 2014 (additional salary
deferrals not to exceed $5,500 are available to those employees 50 years of age or older) and to have the amount of this reduction contributed to our 401(k) plan. In general, eligible compensation for purposes of the 401(k) plan includes an employee’s wages, salaries, fees for professional services and other amounts received for personal services actually rendered in the course of employment with us to the extent the amounts are includible in gross income, and subject to certain adjustments and exclusions required under the Code. The 401(k) plan currently does not offer the ability to invest in our securities. In 2014 we did not offer employer matching or make other employer contributions to our 401(k) plan.
2014 Outstanding Equity Awards at Fiscal Year-End
The following table shows for the fiscal year ended December 31, 2014 certain information regarding outstanding equity awards at fiscal year-end for the Named Executive Officers.
Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name | Grant Date | Number of securities underlying unexercised options (exercisable) (#) | Number of securities underlying unexercised options (unexercisable) (#) | Option exercise price ($/share) | Option expiration date | Number of shares or units that have not vested (#) | Market value of shares or units that have not vested(1) ($) | |||||||||||||||||||||
Faheem Hasnain | 11-19-10 | 11,963 | (2) | $ | 1,465,587 | |||||||||||||||||||||||
11-19-10 | 23,927 | (2) | $ | 2,931,297 | ||||||||||||||||||||||||
1-25-12 | 5,436 | (3) | $ | 665,964 | ||||||||||||||||||||||||
4-18-13 | 55,557 | (4) | 77,776 | (4) | $ | 8.10 | 4-18-23 | |||||||||||||||||||||
7-17-13 | 50,825 | (4) | 92,675 | (4) | $ | 18.77 | 7-17-23 | |||||||||||||||||||||
4-3-14 | 106,107 | (4) | $ | 41.51 | 4-3-24 | |||||||||||||||||||||||
Graham Cooper | 2-15-13 | 48,885 | (4) | 57,780 | (4) | $ | 5.10 | 2-15-23 | ||||||||||||||||||||
2-15-13 | 19,996 | (5) | 20,004 | (5) | $ | 5.10 | 2-15-23 | |||||||||||||||||||||
7-17-13 | 17,709 | (4) | 32,291 | (4) | $ | 18.77 | 7-17-23 | |||||||||||||||||||||
4-3-14 | 36,945 | (4) | $ | 41.51 | 4-3-24 | |||||||||||||||||||||||
Sheila Gujrathi, M.D. | 6-29-11 | 12,903 | (6) | $ | 1,580,747 | |||||||||||||||||||||||
6-29-11 | 19,987 | (6) | $ | 2,448,607 | ||||||||||||||||||||||||
1-25-12 | 1,818 | (3) | $ | 222,723 | ||||||||||||||||||||||||
4-18-13 | 11,114 | (4) | 15,552 | (4) | $ | 8.10 | 4-18-23 | |||||||||||||||||||||
7-17-13 | 45,829 | (4) | 83,571 | (4) | $ | 18.77 | 7-17-23 | |||||||||||||||||||||
4-3-14 | 55,418 | (4) | $ | 41.51 | 4-3-24 | |||||||||||||||||||||||
Marcus F. Boehm, Ph.D. | 7-30-09 | 5,000 | (7) | $ | 612,550 | |||||||||||||||||||||||
4-7-11 | 363 | (3) | $ | 44,471 | ||||||||||||||||||||||||
4-7-11 | 11,668 | (8) | $ | 1,429,447 | ||||||||||||||||||||||||
1-25-12 | 1,637 | (3) | $ | 200,549 | ||||||||||||||||||||||||
4-18-13 | 11,114 | (4) | 15,552 | (4) | $ | 8.10 | 4-18-23 | |||||||||||||||||||||
7-17-13 | 17,529 | (4) | 31,971 | (4) | $ | 18.77 | 7-17-23 | |||||||||||||||||||||
4-3-14 | 36,945 | (4) | $ | 41.51 | 4-3-24 | |||||||||||||||||||||||
Robert J. Peach, Ph.D. | 7-30-09 | 5,000 | (7) | $ | 612,550 | |||||||||||||||||||||||
4-7-11 | 363 | (3) | $ | 44,471 | ||||||||||||||||||||||||
4-7-11 | 11,668 | (8) | $ | 1,429,447 | ||||||||||||||||||||||||
1-25-12 | 1,637 | (3) | $ | 200,549 | ||||||||||||||||||||||||
4-18-13 | 11,114 | (4) | 15,552 | (4) | $ | 8.10 | 4-18-23 | |||||||||||||||||||||
7-17-13 | 17,529 | (4) | 31,971 | (4) | $ | 18.77 | 7-17-23 | |||||||||||||||||||||
4-3-14 | 36,945 | (4) | $ | 41.51 | 4-3-24 |
(1) | The market value of stock awards is based on the closing market price of our common stock of $122.51 per share on December 31, 2014. |
(2) | Represents the remaining unvested shares subject to a restricted stock award of common stock granted outside of our 2008 Stock Plan. This award was initially for an aggregate of 143,562 shares which commenced vesting upon the fulfillment of two milestones (71,781 shares for each milestone). The first milestone was the dosing of the first patient in our first clinical trial for a product candidate other than RPC1063 for multiple sclerosis (the “First Milestone”). The second milestone was the dosing of the first patient in our first pivotal study for a product candidate (with any Phase 3 clinical study satisfying this requirement) (the “Second Milestone”). Upon achievement of the First Milestone and the Second Milestone, 50% of the shares subject thereto vested, |
respectively, with 1/72nd of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of control transactions, and any unvested shares will vest on November 19, 2015. |
(3) | Represents shares acquired upon the early exercise of time-based options to purchase shares of common stock granted under our 2008 Stock Plan, which shares are subject to a right of repurchase at the original exercise price paid for such shares if the executive terminates employment before the shares have vested. Vesting is at the rate of 25% of the shares on the one-year anniversary of the grant date and 1/48th of the shares each month thereafter for three years. |
(4) | These options vest at the rate of 25% of the total number of shares subject to the option on the first anniversary of the date of grant and 1/48th of the total number of shares subject to the option on each monthly anniversary thereafter, provided that the option holder continues to provide services to us through such dates. |
(5) | Represents an option granted under our 2008 Stock Plan subject to performance-based vesting. Commencement of vesting was subject to the Second Milestone. The shares vested 25% upon the achievement of the Second Milestone and 1/48th of the shares vest each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of control transactions. |
(6) | Represents the remaining unvested 53,332 shares which were subject to milestone-based vesting (26,666 shares for each of two milestones, i.e., the First Milestone and the Second Milestone). Upon achievement of the First Milestone and the Second Milestone, 25% of the shares subject thereto vested, respectively, with 1/48th of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of control transactions, and any unvested shares will vest on June 13, 2016. |
(7) | Represents shares subject to a restricted stock award of common stock granted outside of our 2008 Stock Plan for an aggregate of 20,000 shares which commenced vesting upon the fulfillment of a milestone (i.e., the First Milestone). Upon achievement of the First Milestone, 25% of the shares vested immediately, with 1/48th of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of control transactions, and any unvested shares will vest on November 19, 2015. |
(8) | Represents the remaining unvested shares acquired upon the early exercise of options to purchase shares of common stock granted under our 2008 Stock Plan for an aggregate of 23,333 shares which were subject to milestone-based vesting (i.e., the Second Milestone). Upon achievement of the Second Milestone, 25% of the shares vested immediately, with 1/48th of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of control transactions, and any unvested shares will vest on November 19, 2015. |
2014 Option Exercises and Stock Vested
The following table includes certain information with respect to options exercised and stock that vested for each of our Named Executive Officers during the fiscal year ended December 31, 2014.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(2) ($) | ||||||||||||
Faheem Hasnain | — | — | 111,181 | $ | 6,497,446 | |||||||||||
Graham Cooper | 50,000 | $ | 2,809,877 | — | — | |||||||||||
Sheila Gujrathi, M.D. | — | — | 40,848 | $ | 2,552,115 | |||||||||||
Marcus F. Boehm, Ph.D. | — | — | 17,851 | $ | 1,105,630 | |||||||||||
Robert J. Peach, Ph.D. | — | — | 17,851 | $ | 1,105,630 |
(1) | Represents the difference between the exercise price of the option and the market price of the shares, multiplied by the number of shares for which the option was exercised. |
(2) | Represents the number of shares acquired on vesting of restricted stock awards multiplied by the market value of the underlying shares on the vesting date. |
Potential Payments Upon a Termination or a Change in Control
Our Named Executive Officers are eligible to receive severance and change in control benefits under the terms of their employment agreements described above under “Narrative Disclosure to Summary Compensation Table and Grant of Plan Based Awards Table—Employment Agreements with Named Executive Officers.” Additionally, stock options granted to our Named Executive Officers are subject to the change in control provisions set forth in the 2013 Plan and the 2008 Plan, as applicable and as further described above under “Narrative Disclosure to Summary Compensation Table and Grant of Plan Based Awards Table—Equity Compensation Plans and Other Benefit Plans.” The tables below reflect the amount of compensation and benefits payable to each Named Executive Officer in the event of (i) an involuntary termination without “cause” or a constructive termination pursuant to a material reduction in compensation or responsibilities, a relocation of principal office or a material breach by us of the employment agreement, and (ii) an involuntary termination without “cause” or a constructive termination pursuant to a material reduction in compensation or responsibilities, a relocation of principal office or a material breach by us of the employment agreement within one month prior to or within 12 months following a change in control. The amounts shown assume that the applicable triggering event occurred on December 31, 2014, and therefore are estimates of the amounts that would be paid to the Named Executive Officers upon the occurrence of such triggering event.
As described above under “Narrative Disclosure to Summary Compensation Table and Grant of Plan Based Awards Table—Employment Agreements with Named Executive Officers,” if any payment or benefit received by any Named Executive Officer pursuant to a change in control where a definitive agreement for such change in control transaction is entered into on or prior to March 31, 2015 had constituted a “parachute payment” under Section 280G of the Internal Revenue Code and had become subject to excise tax under Section 4999 of such Code, we would have paid a gross-up payment equal to the excise tax with respect to the parachute payment as well as all taxes with respect to such gross-up payment, subject to the applicable limits set forth in the employment agreements (including that the total amount of gross-up payments for all benefitted executives is capped at 1.5% of transaction value). Because no change in control occurred prior to March 31, 2015, the rights to the gross-up payments referenced below have expired. However, we are presenting the gross-up payments because the values shown below assume that the triggering event occurred on December 31, 2014.
Involuntary Termination not Involving a Change in Control
Name | Earned But Unpaid Base Salary(1) | Accrued Vacation(2) | Cash Severance(3) | Benefit Continuation(4) | Total | |||||||||||||||
Faheem Hasnain | $ | 26,754 | $ | 15,028 | $ | 535,085 | $ | 24,578 | $ | 601,445 | ||||||||||
Graham Cooper | $ | 16,866 | $ | (6,189 | ) | $ | 252,997 | $ | 12,672 | $ | 276,346 | |||||||||
Sheila Gujrathi, M.D. | $ | 19,055 | $ | 26,702 | $ | 285,825 | $ | 12,672 | $ | 344,254 | ||||||||||
Marcus F. Boehm, Ph.D. | $ | 15,872 | $ | 24,757 | $ | 238,085 | $ | 13,365 | $ | 292,079 | ||||||||||
Robert J. Peach, Ph.D. | $ | 15,872 | $ | 4,001 | $ | 238,085 | $ | 16,299 | $ | 274,257 |
Involuntary Termination Following a Change in Control
Name | Earned But Unpaid Base Salary(1) | Accrued Vacation(2) | Cash Severance(5) | Benefit Continuation(6) | Vesting Acceleration(7) | Gross-up(8) | Total | |||||||||||||||||||||
Faheem Hasnain | $ | 26,754 | $ | 15,028 | $ | 1,605,255 | $ | 49,157 | $ | 43,798,834 | $ | 5,236,776 | $ | 50,722,804 | ||||||||||||||
Graham Cooper | $ | 16,866 | $ | (6,189 | ) | $ | 472,261 | $ | 16,896 | $ | 25,399,483 | $ | 2,372,750 | $ | 28,272,067 | |||||||||||||
Sheila Gujrathi, M.D. | $ | 19,055 | $ | 26,702 | $ | 533,540 | $ | 16,896 | $ | 25,215,748 | $ | 2,811,002 | $ | 28,622,943 | ||||||||||||||
Marcus F. Boehm, Ph.D. | $ | 15,872 | $ | 24,757 | $ | 444,424 | $ | 17,820 | $ | 13,465,549 | $ | 1,746,814 | $ | 15,715,236 | ||||||||||||||
Robert J. Peach, Ph.D. | $ | 15,872 | $ | 4,001 | $ | 444,424 | $ | 21,732 | $ | 13,465,549 | $ | 1,570,057 | $ | 15,521,635 |
(1) | Represents all accrued but unpaid salary as of December 31, 2014. |
(2) | Represents all accrued but unpaid vacation as of December 31, 2014. |
(3) | Represents a lump sum cash payment of an amount equal to base salary payable for a period of (i) 12 months in the case of Mr. Hasnain and (ii) nine months in the case of each of our other Named Executive Officers. |
(4) | Represents a lump sum cash payment to cover COBRA payments in an amount equal to the reimbursement for the same portion of monthly premiums we pay for active employees over (i) a 12-month period in the case of Mr. Hasnain and (ii) a nine-month period in the case of each of our other Named Executive Officers. |
(5) | Represents a lump sum cash payment of an amount equal to (i) base salary payable for a period of 24 months and two times target annual bonus in the case of Mr. Hasnain and (ii) base salary payable for a period of 12 months and one times target annual bonus in the case of each of our other Named Executive Officers. |
(6) | Represents a lump sum cash payment to cover COBRA payments in an amount equal to the reimbursement for the same portion of monthly premiums we pay for active employees over (i) a 24-month period in the case of Mr. Hasnain and (ii) a 12-month period in the case of each of our other Named Executive Officers. |
(7) | Value of equity acceleration is based on the sum of (i) in the case of stock options, the difference between the closing price of our common stock on December 31, 2014 ($122.51) and the option exercise price, multiplied by the number of options for which vesting was subject to acceleration, and (ii) in the case of restricted stock, the closing price of our common stock on December 31, 2014 ($122.51) multiplied by the number of shares that were subject to acceleration. |
(8) | Represents the sum of (i) the excise tax with respect to the “parachute payment” and (ii) all taxes with respect to such gross-up payment, subject to the applicable limits set forth in the employment agreement. The rights of each of our Named Executive Officers to the gross-up payments presented expired on March 31, 2015. |
Director Compensation
The following describes the compensation policy for non-employee directors in effect during 2014:
• | Annual retainer: $35,000. |
• | Annual Board Chair retainer: $25,000. |
• | Annual Audit Committee Chair/member fees: $15,000 and $7,500, respectively. |
• | Annual Compensation Committee Chair/member fees: $15,000 and $7,500, respectively. |
• | Annual Nominating and Corporate Governance Committee Chair/member fees: $7,000 and $3,500, respectively. |
• | Initial equity award upon joining the Board: option to purchase 18,800 shares of our common stock, vesting monthly over three years, with vesting acceleration in the event of a change in control (as defined in our 2013 Stock Plan) during the period of Board service. |
• | Annual equity award thereafter at the annual meeting: option to purchase 9,400 shares of our common stock, vesting monthly over one year, with vesting acceleration in the event of a change in control (as defined in our 2013 Stock Plan) during the period of Board service. |
In March 2015, the Board of Directors approved the following changes to the compensation policy for non-employee directors:
• | Annual retainer: increased to $40,000. |
• | Annual Board Chair retainer: increased to $30,000. |
• | Annual Nominating and Corporate Governance Committee Chair/member fees: increased to $10,000 and $5,000, respectively. |
• | We also reimburse our non-employee directors for their reasonable out-of-pocket costs and travel expenses in connection with their attendance at Board and committee meetings. |
• | Directors who are also employees do not receive cash or equity compensation for service on our Board of Directors in addition to the compensation payable for their service as our employees. |
• | The following table shows certain information with respect to the compensation of our non-employee directors who served during any part of the fiscal year ended December 31, 2014: |
We also reimburse our non-employee directors for their reasonable out-of-pocket costs and travel expenses in connection with their attendance at Board and committee meetings.
Directors who are also employees do not receive cash or equity compensation for service on our Board of Directors in addition to the compensation payable for their service as our employees.
The following table shows certain information with respect to the compensation of our non-employee directors who served during any part of the fiscal year ended December 31, 2014:
2014 Director Compensation
Name | Fees Earned or Paid in Cash | Option Awards (1) | Total | |||||||||
William H. Rastetter, Ph.D. | $ | 82,000 | $ | 204,638 | $ | 286,638 | ||||||
Kristina Burow | $ | 53,500 | $ | 204,638 | $ | 258,138 | ||||||
Doug Cole, M.D.(2) | $ | 16,394 | — | $ | 16,394 | |||||||
Mary Lynne Hedley, Ph.D.(3) | $ | 29,741 | $ | 623,024 | $ | 652,765 | ||||||
Richard A. Heyman, Ph.D.(4) | $ | 16,530 | $ | 613,068 | $ | 629,598 | ||||||
Erle T. Mast | $ | 42,500 | $ | 204,638 | $ | 247,138 | ||||||
Amir Nashat, Sc.D (5) | $ | 19,878 | $ | 204,638 | $ | 224,516 | ||||||
Mary Szela(4) | $ | 16,530 | $ | 613,068 | $ | 629,598 | ||||||
S. Edward Torres | $ | 57,500 | $ | 204,638 | $ | 262,138 |
(1) | This column represents the aggregate grant date fair value of options granted during 2014 computed in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. These amounts generally reflect the amount that the Company expects to expense in its financial statements over the award’s vesting schedule, and do not correspond to the actual value that will be realized by the non-employee directors. For additional information on the valuation assumptions used in the calculation of these amounts, refer to note 10 to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2014, as filed with the SEC. The aggregate number of shares underlying outstanding option awards as of December 31, 2014 for each non-employee director were as follows: 28,200 for Dr. Rastetter; 28,200 for Ms. Burow; 18,800 for Dr. Cole; 20,190 for Dr. Hedley; 18,800 for Dr. Heyman; 28,200 for Mr. Mast; 28,200 for Mr. Nashat; 18,800 for Ms. Szela; and 28,200 for Mr. Torres. |
(2) | Mr. Cole did not stand for re-election at our 2014 annual meeting. |
(3) | Dr. Hedley was appointed to our Board of Directors in April 2014. |
(4) | Dr. Heyman and Ms. Szela were appointed to our Board of Directors in July 2014. |
(5) | Mr. Nashat resigned from our Board of Directors in July 2014. |
Transactions with Related Persons
In addition to the cash and equity compensation arrangements of our directors and Named Executive Officers discussed above under the section entitled “Executive Compensation,” the following is a description of transactions since January 1, 2014 to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with or immediate family members of any of the foregoing, had or will have a direct or indirect material interest. We believe the terms obtained or consideration we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s length transactions with unrelated parties.
Director Affiliations
Some of our directors are or were affiliated with and serve or served on our Board of Directors as representatives of entities which beneficially own or owned 5% or more of our common stock at the time, as indicated in the table below:
Director | Principal Stockholder | |
Kristina Burow | ARCH Venture Fund VII, L.P. and affiliates | |
Doug Cole, M.D. | Flagship Ventures Fund 2007, L.P. | |
S. Edward Torres | Lilly Ventures Fund I, LLC |
Third Amended and Restated Investors’ Rights Agreement
We are party to a third amended and restated investors’ rights agreement with certain holders who purchased shares of our Series A preferred stock and Series B preferred stock prior to our May 2013 initial public offering. All such preferred stock was converted into shares of common stock in connection with our initial public offering. These holders include certain of our executive officers and directors and entities with which certain of our directors are affiliated. This agreement provides that the holders of common stock issuable upon conversion of our preferred stock or exercise of our warrants to purchase common stock or any other common stock acquired have the right to demand that we file a registration statement or request that their shares of common stock be covered by a registration statement that we are otherwise filing. The provisions of the investors’ rights agreement, other than those relating to registration rights, terminated upon completion our initial public offering in May 2013.
Indemnification Agreements
We have entered into indemnification agreements with our directors and officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify these individuals to the fullest extent permitted by Delaware law.
Related Party Transaction Policy
We have a written related party transaction policy pursuant to which our executive officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us without the prior consent of our Audit Committee, or other independent members of our Board of Directors in the event it is inappropriate for our Audit Committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to our Audit Committee for review, consideration and approval. In approving or rejecting any such proposal, our Audit Committee is to consider the relevant facts and circumstances available and deemed relevant to our Audit Committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s
interest in the transaction. All of the transactions described above were entered into prior to the adoption of such policy.