PROPOSAL ONE
ELECTION OF DIRECTORS
General Information
Our board of directors is divided into three classes and currently consists of three Class I directors: Vincent J. Milano, Cristina
Csimma, PharmD, MHP, and Michael R. Dougherty; three
Class II directors: Howard Pien, James A. Geraghty and Maxine Gowen, Ph.D.; and two Class III directors: Mark Goldberg, M.D. and Carol A. Schafer. Each member of a class is elected for a
three-year term, with the terms staggered so that approximately one-third of our directors stand for election at each annual meeting of stockholders. The Class I, Class II and
Class III directors were elected to serve until the annual meeting of stockholders to be held in 2020, 2021 and 2019, respectively, and until their respective successors are elected and
qualified.
Our
board of directors, on the recommendation of the members of our nominating and corporate governance committee, has nominated Dr. Goldberg and Ms. Schafer for election
as Class III directors at the 2019 annual meeting. At the 2019 annual meeting, stockholders will be asked to consider the election of Dr. Goldberg and Ms. Schafer.
Ms. Schafer has been nominated for election as a director at a meeting of our stockholders for the first time. In December 2019, Ms. Schafer was elected to our board of directors as a
Class III director by action of our board of directors with a term expiring at our 2019 annual meeting. Ms. Schafer was recommended for initial election to our board of directors by our
nominating and corporate governance committee.
The
persons named in the enclosed proxy card will vote to elect Dr. Goldberg and Ms. Schafer to our board of directors unless you indicate that you withhold authority to
vote for the election of any or all nominees. You may not vote for more than two directors. Each Class III director will be elected to hold office until our 2022 annual meeting of stockholders
and until his or her successor is elected and qualified or until his or her earlier resignation, death or removal. Each of the nominees is presently a director and each has indicated a willingness to
serve as a director, if elected. If a nominee becomes unable or unwilling to serve, however, the persons acting under the proxy may vote for substitute nominees selected by the board of directors.
Information about our Directors
Set forth below is information about each member of our board of directors, including (a) the year in which each director first became a
director, (b) their age as of March 31, 2019, (c) their positions and offices with our Company, (d) their principal occupations and business experience during at least the
past five years and (e) the names of other public companies for which they currently serve, or have served within the past five years, as a director. We have also included information about
each director's specific experience, qualifications, attributes or skills that led our board of directors to conclude that such individual should serve as one of our directors. We also believe that
all of our directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as
a commitment of service to our Company and our board of directors.
Recommendation of the Board of Directors
Our board of directors unanimously recommends that the stockholders vote FOR the election of Dr. Goldberg and Ms. Schafer as Class III directors.
6
Table of Contents
Class III DirectorsTerms to Expire in 2019
Mark Goldberg, M.D.
Director since 2014
Dr. Goldberg,
age 64, has served as a member of the board of directors, compensation committee and governance and nomination committee of ImmunoGen, Inc. since November
2011, a member of the board of directors, governance and nomination committee and compensation committee of GlycoMimetics, Inc. since July 2014, a member of the board of directors, audit
committee and scientific committee of Idera Pharmaceuticals, Inc. since March 2014, and a member of the board of directors and compensation committee of Audentes Therapeutics, Inc. since
December 2017, and from April 2015 until December 2017 was a member of the board of directors of aTyr Pharma. Dr. Goldberg served as a member of the board of directors of Synageva Biopharma
Corp., or Synageva, from October 2008 until November 2011, when he stepped down to become a member of the executive management team at Synageva. Dr. Goldberg served as a member of the executive
management team at Synageva until late 2014, rising to executive vice president, medical and regulatory strategy. In late 2014, Dr. Goldberg stepped down from the executive management team at
Synageva and continued to be employed part-time, contributing to medical and regulatory strategy until leaving Synageva in June 2015 upon its acquisition by Alexion Pharmaceuticals, Inc. Prior
to joining Synageva, Dr. Goldberg served in various management capacities of increasing responsibility at Genzyme from November 1996 to July 2011, including most recently as senior vice
president, clinical development and global therapeutic head, oncology, genetic health, and as chairman of Genzyme's early product development board. Prior to joining Genzyme, Dr. Goldberg was a
full-time staff physician at Brigham and Women's Hospital and the Dana-Farber Cancer Institute, where he still holds appointments. Dr. Goldberg is a part-time Associate Professor of Medicine at
Harvard Medical School. From 2010 to 2017, Dr. Goldberg served as on the board of directors of the New England Division of the American Cancer Society. Since December 2017 he has chaired the
eastern New England Board of the American Cancer Society and since January 2019 has been a member of the national board of directors of the American Cancer Society. Dr. Goldberg received an
A.B. in biochemistry and molecular biology from Harvard University
and an M.D. from Harvard Medical School. We believe Dr. Goldberg is qualified to serve on our board of directors due to his extensive healthcare and regulatory experience. We believe that
Dr. Goldberg's qualifications to sit on our board of directors include his extensive scientific and medical background, public company board experience and extensive experience in the
management and operations of pharmaceutical companies.
Carol A. Schafer
Director since 2018
Ms. Schafer,
age 55, has more than 25 years of experience in investment banking, equity capital markets, corporate finance and business development in the biopharmaceutical
sector, with substantial experience financing and facilitating investor access for public and private healthcare companies. Ms. Schafer most recently served as Vice Chair, Equity Capital
Markets at Wells Fargo Securities. Prior to Wells Fargo, Ms. Schafer served as Vice President of Finance and Business Development at Lexicon Pharmaceuticals. Earlier in her career,
Ms. Schafer was a Managing Director and Equity Capital Markets Sector Head at J.P. Morgan. Ms. Schafer received a B.A. from Boston College and an M.B.A from New York University. We
believe that Ms. Schafer's qualifications to sit on our board of directors include her extensive financial background and her many years of experience providing investment banking, equity
capital markets and strategic support to companies within the healthcare sector.
7
Table of Contents
Class I DirectorsTerms to Expire in 2020
Vincent J. Milano
Director since 2014
Vincent
Milano, age 55, has been our President and Chief Executive Officer, and a member of our board of directors, since December 2014. Prior to joining us, Mr. Milano served as
Chairman, President and Chief Executive Officer of ViroPharma Inc., a pharmaceutical company that was acquired by Shire Plc in January 2014, from March 2008 to January 2014, as its Vice
President, Chief Financial Officer and Chief Operating Officer from January 2006 to March 2008 and as its Vice President, Chief
Financial Officer and Treasurer from April 1996 to December 2005. Mr. Milano also served on the board of directors of ViroPharma from March 2008 to January 2014. Prior to joining ViroPharma,
Mr. Milano served in increasingly senior roles, most recently senior manager, at KPMG LLP, an independent registered public accounting firm, from July 1985 to March 1996.
Mr. Milano currently serves on the board of directors of Spark Therapeutics, Inc. and Vanda Pharmaceuticals Inc., each a publicly traded company, and VenatoRx
Pharmaceuticals, Inc. Mr. Milano holds a Bachelor of Science degree in Accounting from Rider College. We believe Mr. Milano's qualifications to sit on our board of directors
include his knowledge of our company as our President and Chief Executive Officer, knowledge of our industry, including over 20 years of experience serving in a variety of roles of increasing
responsibility in the finance department, corporate administration and operations of a multinational biopharmaceutical company, and understanding of pharmaceutical research and development, sales and
marketing, strategy, and operations in both the United States and overseas. He also has corporate governance experience through service on other public company boards.
Cristina Csimma, PharmD, MHP
Director since 2019
Dr. Csimma,
age 60, currently serves as an independent director and Chair of the Nominating and Corporate Governance Committee of Neuralstem Inc. (CUR) and is a Board
Director of T1D Exchange (non-profit-Type 1 Diabetes). She also serves on advisory boards including the Muscular Dystrophy Association Venture Philanthropy Scientific Advisory Committee; the
Executive Oversight Board to the National Institutes of Health (NIH) NeuroNext Network, the Harvard and Brigham and Women's Hospital MRCT Center External Advisory Board, and the TREAT-NMD Advisory
Committee for Therapeutics (TACT). Dr. Csimma previously served as a Director on the boards of Juniper Pharma (acquired by Catalent in 2018), Vtesse Pharma (acquired by Sucampo in 2017), was
the Executive Chair of Exonics Therapeutics, and was President, founding CEO and Board Director of Cydan Inc. She also served on the NIH Blueprint Neurotherapeutics Network External Oversight
Committee, was Vice President of Drug Development at Virdante Pharmaceuticals Inc. (acquired by Momenta), Principal at Clarus Ventures LLC (now Blackstone Life Science) and held roles of
increasing responsibility in Clinical Development and Translational Research at Wyeth (now Pfizer), Genetics Institute and Dana Farber Cancer Institute. Dr. Csimma holds both a Doctor of
Pharmacy and a Bachelor of Science in Pharmacy from the Massachusetts College of Pharmacy and Allied Health Sciences, as well as a Master of Health Professions from Northeastern University. We believe
that Dr. Csimma's qualifications to sit on our board of directors include her significant public company management and board experience and knowledge of our industry.
Michael R. Dougherty
Director since 2019
Mr. Dougherty,
age 61, was Executive Chairman of Celator Pharmaceuticals, Inc., a biopharmaceutical company, from August 2015 until its acquisition by Jazz Pharmaceuticals
in July 2016; he also served as a director of Celator from July 2013 to July 2016. Mr. Dougherty previously served in a variety of senior positions, including chief executive officer of Kalidex
Pharmaceuticals, Inc.,
8
Table of Contents
chief
executive officer of Adolor Corporation, chief operating officer of Genomics Collaborative, Inc., chief executive officer of Genaera Corporation, and chief financial officer at
Centocor, Inc. He currently serves on the board of directors of Marinus Pharmaceuticals, Inc. and Trevena, Inc., both publicly traded life sciences organizations.
Mr. Dougherty also served on the board of directors of Foundation Medicine, Inc., Aviragen Therapeutics, Inc., Cempra, Inc., and ViroPharma Incorporated.
Mr. Dougherty received a B.S. in Accounting from Villanova University. We believe that Mr. Dougherty's qualifications to sit on our board of directors include his significant public
company management and board experience and knowledge of our industry.
Class II NomineesTerms to Expire in 2021
James A. Geraghty
Director since 2013
Mr. Geraghty,
age 64, has served as chairman of our board of directors since July 2013. Mr. Geraghty is an industry leader with over 35 years of strategic and
leadership experience, including more than 25 years as a senior member of executive teams at biotechnology companies developing and commercializing innovative therapies. From May 2013 to
October 2016, Mr. Geraghty was an Entrepreneur in Residence at Third Rock Ventures, a leading biotech venture fund. From April 2011 to December 2012, he served as a Senior Vice President of
Sanofi, a global healthcare company. Prior to that, he served in various senior management roles at Genzyme Corporation, a biotechnology company, from 1992 to April 2011, including as Senior Vice
President, International Development and President of Genzyme Europe. Mr. Geraghty currently serves as chairman of the board of Orchard Therapeutics and of Pieris Pharmaceuticals, and as a
member of the board of Voyager Therapeutics and of Fulcrum Therapeutics, a private company. We believe that Mr. Geraghty's qualifications to sit on our board of directors include his public
company board and management experience and his broad and deep knowledge of the industry in which we operate.
Maxine Gowen, Ph.D.
Director since 2016
Dr. Gowen,
age 61, served as the founding CEO and President of Trevena, Inc., a biopharmaceutical company, from November 2007 until her retirement in 2018, and remains a
member of its board of directors. Prior to joining Trevena, Dr. Gowen was Senior Vice President for the Center of Excellence for External Drug Discovery at GlaxoSmithKline plc, or GSK,
where she held a variety of leadership positions during her tenure of 15 years. Before GSK, Dr. Gowen was Senior Lecturer and Head, Bone Cell Biology Group, Department of Bone and Joint
Medicine, of the University of Bath, U.K. Dr. Gowen has served as a director of Akebia Therapeutics, Inc., a publicly traded company, since July 2014. From 2008 until 2012,
Dr. Gowen served as a director of Human Genome Sciences, Inc., a publicly traded company. She received her Ph.D. from the University of Sheffield, U.K., an M.B.A. with academic honors
from The Wharton School of the University of Pennsylvania, and a B.Sc. with Honors in Biochemistry from the University of Bristol, U.K. We believe that Dr. Gowen's qualifications to sit on our
board of directors include her significant public company management and board experience and knowledge of our industry.
Howard Pien
Director since 2018
Mr. Pien,
age 61, has worked in the pharmaceutical and biotechnology industries for over 30 years. He was Non-Executive Chairman of Juno Therapeutics, a development stage
company focused on immunotherapy aimed to cure cancer, until its acquisition by Celgene in 2018. He was also previously a director of Vanda, a commercial-stage public company specializing in CNS
(three years as Chairman), ImmunoGen, a public biotechnology company, and an advisor to the Life Sciences Practice of Warburg
9
Table of Contents
Pincus.
From 2007 to 2009, Mr. Pien was the Chairman and CEO of Medarex, Inc., a public biotechnology company, until it was acquired by Bristol-Myers Squibb. From 2003 to 2006, he was
the Chairman and CEO of Chiron, a public biotechnology company, which was acquired by Novartis. Mr. Pien's previous Board directorships include Talon, Arresto, Ikaria, Sage, Immunogen and
ViroPharma, Incorporated (where he was lead independent director)all biopharmaceutical companies that were acquired in strategic transactions. Between 1991 and 2003, he held various
executive positions at GlaxoSmithKline plc (GSK) and SmithKline Beecham, as Presidents of US, International, and Pharmaceuticals. Prior to GSK, Mr. Pien worked for Abbott Labs for six
years and Merck & Co., Inc. for five years. Mr. Pien holds a BS in engineering from MIT and an MBA from Carnegie-Mellon University. We believe that Mr. Pien's
qualifications to sit on our board of directors include Mr. Pien's extensive experience as a chief executive officer in the pharmaceutical industry, including an immuno-oncology company, and
his expertise in corporate governance matters.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis, or CD&A, should be read in conjunction with the compensation tables and narratives that immediately
follow this section.
Introduction
This CD&A provides an overview and analysis of the philosophy, objectives, process, components and additional aspects of our 2018 executive
compensation program. This analysis focuses on the compensation paid to our named executive officers, or NEOs:
-
-
Vincent J. Milano, President and Chief Executive Officer,
-
-
R. Clayton Fletcher, Senior Vice President of Business Development and Strategy
-
-
Joanna Horobin, Senior Vice President and Chief Medical Officer
-
-
John J. Kirby, Vice President of Finance, Principal Financial and Accounting Officer
-
-
Jonathan Yingling, Senior Vice President and Chief Scientific Officer
-
-
Louis J. Arcudi, III, Former Chief Financial Officer and Senior Vice President, Operations
Compensation Philosophy and Objectives
Our general executive compensation philosophy has been established by our compensation committee, which acts pursuant to authority delegated to
it by our board. Our compensation committee is comprised solely of independent directors as defined by applicable rules and regulations of Nasdaq and the SEC. The compensation committee seeks to
achieve the following broad goals in connection with our executive compensation program:
-
-
attract, retain and motivate the best possible executive talent;
-
-
ensure executive compensation is aligned with our corporate strategies and business objectives, including our short-term operating goals and
longer-term strategic objectives;
-
-
promote the achievement of key strategic and financial performance measures by linking short- and long-term cash and equity incentives to the
achievement of measurable corporate and individual performance goals; and
-
-
align executives' incentives with the creation of stockholder value.
To
achieve these objectives, the compensation committee:
-
-
sets short- and long-term compensation at levels the compensation committee believes are competitive with those of other companies in our
industry and our region that compete with us for executive talent;
-
-
ties a substantial portion of each executive officer's overall cash compensation to key strategic, financial, research, and operational goals
such as clinical trial and regulatory progress, intellectual property portfolio development, establishment and maintenance of key strategic relationships, and exploration of business development
opportunities, as well as our financial and operational performance; and
-
-
provides a portion of our executive compensation in the form of stock options that vest over time from the date of grant of the option awards
and from the time of achievement of performance milestones when applicable, which we believe helps to retain our executives and
25
Table of Contents
Advisory Vote on Executive Compensation
We conducted an advisory vote on executive compensation, commonly referred to as a "say-on-pay" proposal, at our 2018 Annual Meeting of
Stockholders. While this vote was not binding on us, we value the opinions of our stockholders and, to the extent there is any significant vote against the compensation of our named executive officers
in the future, we will consider our
stockholders' concerns and our board and compensation committee will evaluate whether any actions are necessary to address those concerns.
At
our 2018 Annual Meeting of Stockholders, approximately 97% of the votes cast on the advisory vote on executive compensation approved the compensation paid to our named executive
officers as disclosed in the proxy statement for that meeting. The board of directors and compensation committee considered the results of this advisory vote, together with the other factors and data,
in determining executive compensation decisions and will continue to consider the outcome of our say-on-pay votes when making future compensation decisions for our named executive officers.
Executive Compensation Process
Role of Our Compensation Committee and Our Chief Executive Officer
In order to accomplish its objectives consistent with its philosophy for executive compensation and determine compensation for our named
executive officers, our compensation committee reviews competitive information on executive compensation practices from peer companies as well as an assessment of overall corporate performance and
individual performance. In connection therewith, our compensation committee typically takes the following actions annually:
-
-
reviews chief executive officer performance;
-
-
seeks input from our chief executive officer on the performance of all other executive officers;
-
-
reviews all components of executive officer compensation, including base salary, cash bonus targets and awards, equity compensation, the dollar
value to the executive and cost to us of all health and life insurance and other employee benefits, and the estimated payout obligations under severance and change in control scenarios;
-
-
consults with its independent compensation consultant;
-
-
holds executive sessions (without our management present);
-
-
reviews information regarding the performance and executive compensation of other companies; and
-
-
reviews the outcomes from the foregoing with the board of directors.
Our
chief executive officer does not submit an assessment of his own performance, does not present a recommendation on his own compensation, and does not participate in the portion of
the meeting where his compensation is determined. Our compensation committee determines and recommends for final approval by the full Board, the compensation for our chief executive officer and other
executive officers.
Under
our annual performance review program for our executive officers, annual performance goals are determined for our company as a whole and for each executive officer individually.
-
-
Annual corporate goals
are proposed by management and approved by the board of directors. These
corporate goals target the achievement of specific research, clinical, operational, and
26
Table of Contents
At
the end of each year, the compensation committee evaluates corporate and individual performance.
In
assessing corporate performance, the compensation committee evaluates corporate performance alongside the approved corporate goals for the year and also evaluates other aspects of
corporate performance, including achievements and progress made by us outside of the corporate goals.
In
assessing individual performance, the compensation committee evaluates corporate performance in the areas of each officer's responsibility and relies on the chief executive officer's
evaluation of each other officer. The chief executive officer prepares evaluations of the other executives and in doing so compares individual performance to the individual performance goals. The
chief executive officer recommends annual executive salary increases, annual stock option awards and bonuses, if any, for the other executives, which are then reviewed and approved by the compensation
committee. In the case of the chief executive officer, the compensation committee conducts his individual performance evaluation.
During
this process, the compensation committee consults with its independent compensation consultant. To that end, in connection with the compensation committee's annual performance and
compensation review in the fourth quarter of 2017, Pearl Meyer & Partners, LLC, or Pearl Meyer, provided the compensation committee with a blend of the data from the 2017 peer group
(identified below) and compensation survey data from the Radford 2017 Global Life Sciences Survey, a survey of U.S. biotech companies. We refer to this blended data as the "2017 market compensation
data."
For
all executives, annual base salary increases, if any, are awarded during the first quarter following the end of the fiscal year. Annual stock option awards and bonuses, if any, are
granted as determined by the compensation committee and are typically granted in the first quarter of the fiscal year. Beginning in 2019, the annual stock option awards will be given in two biannual
tranches.
The
compensation committee generally does not plan to approve annual equity grants to employees, including named executive officers, at a time when our company is in possession of
material non-public information. We do not award stock options to named executive officers concurrently with the release of material non-public information.
Role of the Compensation Committee's Independent Consultant
In the fourth quarter of 2017, our compensation committee engaged Pearl Meyer in connection with our 2018 annual compensation assessment to
review our executive compensation practices and to provide the compensation committee with an assessment of our compensation program against competitive market data. See "
Use
of Market Compensation Data
" below for a discussion of the competitive market compensation data compiled by Pearl Meyer. Based on this assessment, Pearl Meyer made
recommendations to our compensation committee regarding the amount and form of executive compensation, equity incentive programs, and compensation generally. Pearl Meyer did not
27
Table of Contents
provide
any services to our company during 2017 or 2018 other than pursuant to their respective engagement by the compensation committee.
Our
compensation committee analyzed whether the work of Pearl Meyer as a compensation consultant has raised any conflict of interest, taking into consideration the following factors:
(a) the provision of
other services to us by Pearl Meyer; (b) the amount of fees received from us by Pearl Meyer, as a percentage of the total revenue of Pearl Meyer; (c) Pearl Meyer's policies and
procedures that are designed to prevent conflicts of interest; (d) any business or personal relationship of Pearl Meyer or the individual advisors employed by Pearl Meyer with a member of the
compensation committee or any executive officer; and (e) any shares of our stock owned by Pearl Meyer or the individual advisors employed by Pearl Meyer. Our compensation committee determined,
based on its analysis of the above factors, that the work of Pearl Meyer and the individual compensation advisors employed by Pearl Meyer as compensation consultants has not created any conflict of
interest and the compensation committee is satisfied with the independence of Pearl Meyer. Going forward, the compensation committee intends to assess the independence of any of our compensation
advisers by reference to the foregoing factors, consistent with applicable rules and regulations of Nasdaq and the SEC.
Use of Market Compensation Data
In making compensation decisions, our compensation committee reviewed competitive market compensation data compiled by Pearl Meyer. As part of
its engagement, Pearl Meyer worked with the compensation committee in the fourth quarter of 2017 to select a peer group of publicly traded companies to be used in connection with our 2018 compensation
decisions, including stock options granted during 2018, fiscal year 2018 salary adjustments and fiscal year 2018 target bonus percentages. In selecting this peer group, the compensation committee and
Pearl Meyer generally targeted mid- to late-development stage companies in the Pharmaceuticals, Biotechnology and Life Sciences sectors that generally met the following screening
criteria:
-
-
Company Size: revenue less than or equal to $150M; operating expense less than or equal to four times our operating expense (i.e., less
than or equal to $240M); employees between 20-200;
-
-
Business Operations: conducting Phase 2 or Phase 3 clinical trials in at least one of oncology, rare diseases, or leveraging a
'technology platform' model; and
-
-
Other: exclude subsidiaries; companies with business challenges; companies having market valuations below $50M; and companies that have
recently conducted an initial public offering.
The
following table lists the companies included in the 2017 peer group used in connection with our 2018 compensation decisions referred to above:
|
|
|
|
|
Aduro BioTech, Inc.
|
|
Endocyte, Inc.
|
|
Regulus Therapeutics, Inc.
|
Advaxis, Inc.
|
|
Genocea Biosciences, Inc.
|
|
Sangamo Therapeutics, Inc.
|
Arrowhead Research Corp.
|
|
GlycoMimetics, Inc.
|
|
WAVE Life Sciences, Inc.
|
Celldex Therapeutics, Inc.
|
|
Immune Design Corp.
|
|
Xencor, Inc.
|
Concert Pharmaceuticals, Inc.
|
|
Immunomedics, Inc.
|
|
ZIOPHARM Oncology, Inc.
|
Dicerna Pharmaceuticals, Inc.
|
|
Inovio Pharmaceuticals, Inc.
|
|
|
Dynavax Technologies Corp.
|
|
OncoMed Pharmaceuticals, Inc.
|
|
|
The
foregoing peer group companies were recommended by Pearl Meyer and approved by our compensation committee because they have similar business profiles to ours taking into account
number of employees, market value and stage of development. Additionally, while there were no changes to the screening criteria used for determining the 2017 peer group used for 2018 compensation
decisions, as compared to the determination of the 2016 peer group used for 2017 compensation
28
Table of Contents
decisions,
certain companies were excluded from or added to the 2017 peer group, primarily due to application of our screening criteria (e.g. quantitative metrics and market capitalization).
Our
compensation committee intends that if we achieve our corporate goals and the executive performs at the level expected, the executive should have the opportunity to receive
compensation that is competitive with industry norms. Accordingly, our compensation committee generally targets overall compensation for executives towards the 50th percentile of the market
data. However, the compensation committee does not apply those targets formulaically and allows for individuals to be positioned at different percentiles based on experience, performance levels and
potential performance levels of the executive, and changes in duties and responsibilities.
Components of Executive Compensation
The primary elements of our executive compensation program are:
-
-
base salary;
-
-
annual cash bonuses;
-
-
stock option and restricted stock awards;
-
-
health insurance, life insurance, and other employee benefits; and
-
-
severance and change in control benefits.
The
value of our variable, performance-based compensation is allocated between short-term compensation in the form of a cash bonus and long-term compensation in the form of stock option
awards that vest over time from the date of grant of the option awards or from the time of achievement of performance milestones. The annual cash bonus is intended to provide an incentive to our
executives to achieve short-term operational objectives. The stock option award is intended to provide an incentive for our executives to achieve longer-term strategic business goals, which should
lead to higher stock prices and increased stockholder value. We have not had any formal or informal policy or target for allocating compensation between long-term and short-term compensation, between
cash and non-cash compensation, or among the different forms of non-cash compensation. Instead, the compensation committee, after reviewing industry information and our cash resources, determines
subjectively what it believes to be the appropriate level and mix of the various compensation components.
We
do not have any defined benefit pension plans or any non-qualified deferred compensation plans.
We
are party to employment agreements and employment offer letters with each of our named executive officers. Employment agreements and employment offer letters with our named executive
officers are described below under the caption "Employment and Separation Agreements with our Named Executive Officers."
Base Salary
In establishing base salaries for our named executive officers, our compensation committee typically reviews the market compensation data
presented by the committee's independent compensation consultant, considers historic salary levels of the executive officer and the nature of the executive officer's responsibilities, compares the
executive officer's base salary with those of our other executives, and considers the executive officer's experience, performance and contributions. The compensation committee also typically considers
the challenges involved in hiring and retaining executive talent in our industry and region. In assessing the executive officer's performance, the compensation committee considers the executive
officer's role in the achievement of the annual corporate goals, as well as, in the case of our executive officers other than our chief executive officer, the performance evaluation prepared by our
chief executive officer with respect to such executive officer. The compensation committee considers such evaluation as a means of informing the compensation committee's decision as to whether the
executive officer's performance was generally consistent with our expectations.
29
Table of Contents
As part of our 2017 annual performance and compensation review, the compensation committee approved annual base salaries for our executive officers for 2018. In
setting these annual base salaries, the compensation committee reviewed the 2017 market compensation data presented by Pearl Meyer. Similarly, as part of our December 2018 annual performance and
compensation review, the compensation committee reviewed the 2018 market compensation data and approved new annual base salaries for our executive officers for 2019. In each of the 2017 and 2018
reviews, after considering each named executive officer's current salary, performance, and experience in the context of the market compensation data as well as relative to one another, the
compensation committee approved the following salary increases and resulting base salaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
2017 Base
Salary
|
|
2018 Base
Salary
|
|
%
Increase
|
|
2019 Base
Salary
|
|
%
Increase
|
|
Mr. Milano
|
|
$
|
600,000
|
|
$
|
600,000
|
|
|
0.0
|
|
$
|
600,000
|
|
|
0.0
|
|
Mr. Fletcher
|
|
$
|
386,300
|
|
$
|
400,000
|
|
|
3.5
|
|
$
|
400,000
|
|
|
0.0
|
|
Dr. Horobin
|
|
$
|
410,000
|
|
$
|
425,000
|
|
|
3.7
|
|
$
|
425,000
|
|
|
0.0
|
|
Mr. Kirby(1)
|
|
$
|
231,750
|
|
$
|
280,000
|
|
|
20.8
|
|
$
|
280,000
|
|
|
0.0
|
|
Dr. Yingling
|
|
$
|
385,000
|
|
$
|
400,000
|
|
|
3.9
|
|
$
|
400,000
|
|
|
0.0
|
|
Mr. Arcudi(2)
|
|
$
|
357,900
|
|
$
|
370,000
|
|
|
3.4
|
|
|
|
|
|
|
|
-
(1)
-
Mr. Kirby
commenced employment with us in November 2015 and became the Company's principal financial officer and principal accounting officer effective
October 31, 2018. In connection with Mr. Kirby's appointment as principal financial officer and principal accounting officer, Mr. Kirby's annual base salary was increased from
$239,850 to $280,000.
-
(2)
-
Effective
October 31, 2018, Mr. Arcudi, our former Chief Financial Officer and Senior Vice President, Operations, departed from us as a result of our
consolidation to our Exton, PA headquarters.
Annual Cash Performance Bonuses
The compensation committee generally structures cash bonuses by linking them to the achievement of the annual corporate goals, corporate
performance outside of the corporate goals (i.e. an unexpected opportunistic business development deal would be factored subjectively as an adjustment to the score that the committee derived
from evaluation of the corporate goals), and individual performance. The amount of the bonus paid, if any, varies among the executive officers
depending on individual performance and their contribution to the achievement of our annual corporate goals and corporate performance generally. The compensation committee reviews and assesses
corporate goals and individual performance by executive officers and considers the reasons why specific goals have been achieved or have not been achieved. While achievement against the applicable
corporate goals is given substantial weight in connection with the determination of annual bonuses, we also factor in an evaluation of our named executive officers' individual performance based on
analysis of achievement of individual performance goals as well as the following subjective criteria:
-
-
leadership;
-
-
management;
-
-
judgment and decision-making skills;
-
-
results orientation; and
-
-
communication
30
Table of Contents
The
compensation committee sets the individual bonus target percentages for each of our named executive officers. In determining the target bonus percentages to be used for 2018, the
compensation committee concluded that the target bonus percentages should be competitive with the 50th percentile of the 2017 market compensation data and that there be no difference in the
target bonus percentages of our named executive officers, other than for Mr. Milano. The following table sets forth the individual bonus target percentages for each of our named executive
officers for 2018 and 2019.
|
|
|
|
|
|
|
|
|
|
Target Cash Bonus
(% of Base Salary)
|
|
Executive
|
|
2018
|
|
2019
|
|
Mr. Milano
|
|
|
50
|
%
|
|
50
|
%
|
Mr. Fletcher
|
|
|
40
|
%
|
|
40
|
%
|
Dr. Horobin
|
|
|
40
|
%
|
|
40
|
%
|
Mr. Kirby
|
|
|
30
|
%
|
|
30
|
%
|
Mr. Lim
|
|
|
40
|
%
|
|
40
|
%
|
Dr. Yingling
|
|
|
40
|
%
|
|
40
|
%
|
Mr. Arcudi
|
|
|
40
|
%
|
|
|
|
Consistent
with our company-wide annual incentive plan applicable to all employees, including our named executive officers, both a corporate performance score and individual performance
score factored into the determination of each executive officer's cash bonus award for 2018.
Under
the terms of our incentive plan, the corporate performance score is based on the degree to which corporate performance objectives have been achieved. This score is determined by
the compensation committee and may range from 0-125%. The individual performance score is based on:
-
-
the degree to which individual performance objectives have been achieved;
-
-
the competencies and behaviors demonstrated in achieving results;
-
-
the technical skills required by the position; and
-
-
the completion of the ongoing responsibilities required by the position.
The
individual performance score may range from 0-125% and is approved by the compensation committee. The individual's actual award is then calculated as follows:
In
setting corporate goals in the first quarter of 2018, the committee agreed to group the business objectives into one of three primary categories, each of which would contribute toward
the overall assessment of our corporate performance. In assessing our corporate performance against our 2018
31
Table of Contents
corporate
goals, and determining the corporate performance score, the compensation committee considered the extent to which the company achieved the business objectives in each of the categories, and
assigned a score for each category, as summarized in the following table:
|
|
|
|
|
|
|
|
|
Primary Goals
|
|
Contribution
toward Corporate
Performance Score
|
|
Committee's
Assessment of
Performance (out
of 100%)
|
|
Highlights of
Performance on
Key Objectives
|
Advance Tilsotolimod (IMO-2125) program through Phase 3 and beyond PD-1 refractory melanoma
|
|
|
75
|
%
|
|
40
|
%
|
Initiated ILLUMINATE-301
study.
Progressed ILLUMINATE-204 and ILLUMINATE-301 enrollment.
Continued program expansion initiatives for beyond
anti-PD1 refractory melanoma.
|
Advance 3GA program and IMO-8400 program to next decision point
|
|
|
15
|
%
|
|
10
|
%
|
Timely analysis of both
studies resulted in no-go decision for both 3GA and IMO-8400.
|
Enhance our ability to be successful through relevant foundational objectives
|
|
|
10
|
%
|
|
10
|
%
|
Implemented an
"at-the-market" equity program to facilitate future capital raising.
Reviewed strategic business development options.
|
Based
on these achievements and resulting category scores, the compensation committee approved a corporate performance score of 60%. However, as a result of additional factors the
compensation committee considered in determining the company score to be applied to executives, including proposed merger outcome and discovery outcomes during 2018, the compensation committee reduced
the overall corporate performance score by 10% for the 2018 bonus calculation for executives and determined to use a corporate performance score of 50%, excluding Mr. Kirby due to the timing of
his appointment.
In
assessing each named executive officer's individual performance score, the compensation committee determined:
-
-
Mr. Milano's overall score would be equivalent to the corporate performance score of 50%;
-
-
Mr. Fletcher's individual performance score, recognizing his achievement against his personal objectives, including his role in business
development along with his general leadership contributions, would be 115%, resulting in an overall bonus equal to 58% of his bonus target;
-
-
Dr. Horobin's individual performance score, recognizing her achievement against her personal objectives, including her role in
achievements against our tilsotolimod (IMO-2125) clinical program goals along with her general leadership contributions, would be 85%, resulting in an overall bonus equal to 43% of her bonus target;
-
-
Mr. Kirby's individual performance score, recognizing his achievement against his personal objectives, including his role as principal
financial and accounting officer, and general leadership contributions, would be 120%. Using the broader corporate score of 60%, as noted above, this resulted in an overall bonus equal to 86% of his
bonus target; and
-
-
Dr. Yingling's individual performance score, recognizing his achievement against his personal objectives, including his role in
advancing objective knowledge and understanding of our
32
Table of Contents
discovery
platform, contributions to business development, and his general leadership contributions, would be 100%, resulting in an overall bonus equal to 50% of his bonus target.
Mr. Arcudi
separated from the Company prior to the compensation committee's determinations and in connection with his severance agreement, received a prorated bonus for 2018 at
100% of target.
Equity Compensation
Our equity award program is the primary vehicle for offering long-term incentives to our executive officers, including our named executive
officers. We believe that equity awards provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our named executive
officers and our stockholders. Equity grants are intended as both a reward for contributing to the long-term success of our company and an incentive for future performance. The vesting feature of our
equity awards is intended to further our goal of executive retention by providing an incentive to our named executive officers to remain in our employ during the vesting period. In determining the
size of equity awards to our executives, our compensation committee considers:
-
-
the achievement of our annual corporate goals;
-
-
individual performance;
-
-
the applicable executive officer's previous awards, including the exercise price of such previous awards;
-
-
the recommendations of management;
-
-
the market compensation data presented by the committee's independent compensation consultant, and
-
-
the combined components of the executive officer's compensation.
The
compensation committee approves all equity awards to our executive officers. Our equity awards have typically taken the form of stock options. However, under the terms of our stock
incentive plans, we may grant equity awards other than stock options, such as restricted stock awards, stock appreciation rights, and restricted stock units. In January 2019, restricted stock units
were granted to all employees, including our executive officers, as part of our annual incentive program.
The
compensation committee typically makes initial stock option awards to named executive officers upon commencement of their employment and annual stock option awards thereafter. Stock
option awards to our named executive officers after the initial stock option awards have typically been granted annually after the annual performance review. For 2018, this review occurred at the
regularly scheduled meeting of the compensation committee held in the first quarter of 2018. Beginning in 2019, the annual stock option awards will be given in two biannual tranches. In general,
annual stock option grants vest with respect to 25% of the shares subject to the option on the first anniversary of the date of grant and with respect to the balance of the shares subject to the
option in 12 equal quarterly installments over the three-year period thereafter. The exercise price of stock options equals the fair market value of our common stock on the date of grant, which is
typically equal to the closing price of our common stock on Nasdaq on the date of compensation committee approval except in the case of new-hire grants, which are approved in advance by the
compensation committee with the grant occurring at an exercise price established at the closing price of our common stock on the first day of employment.
In
December 2017, as part of its annual executive compensation and performance review, the compensation committee reviewed the 2017 market compensation data regarding annual stock option
grants. In January 2018, the committee granted our named executive officers options to purchase shares
33
Table of Contents
of
our common stock. Additionally, in August 2018, in consideration of historical stock performance as well as reference to 2017 market compensation data, the compensation committee further granted
our named executive officer options to purchase shares of our common stock. The following table sets forth the number of options granted to our named executive officers in January 2018 and August
2018:
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Executive
|
|
January 2018
(# options)
|
|
August 2018
(# options)
|
|
Mr. Milano
|
|
|
74,999
|
|
|
65,000
|
|
Mr. Fletcher
|
|
|
33,749
|
|
|
32,500
|
|
Dr. Horobin
|
|
|
33,749
|
|
|
32,500
|
|
Mr. Kirby
|
|
|
16,874
|
|
|
10,000
|
|
Dr. Yingling
|
|
|
33,749
|
|
|
32,500
|
|
Mr. Arcudi
|
|
|
33,749
|
|
|
32,500
|
|
Benefits and Other Compensation
We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance, and a
401(k) plan. Through August 2018, consistent with our prior practice, we matched 50% of the employee contributions to our 401(k) plan up to a maximum of 6% of the participating employee's annual
salary, resulting in a maximum company match of 3% of the participating employee's annual salary, and subject to certain additional statutory dollar limitations. Commencing in August 2018 and
retroactive to January 2018, we matched 100% of the employee contributions to our 401(k) plan up to a maximum of 5% of the participating employee's annual salary. Named executive officers are eligible
to participate in all of our employee benefit plans, in each case on the same basis as other employees and subject to any limitations in such plans. Each of our named executive officers except for
Mr. Fletcher contributed to our 401(k) plan and their contributions were matched by us.
Our
board of directors has adopted a retirement policy to address the treatment of options in the event of an employee's retirement that applies to all employees, including all officers.
For purposes of this policy, an employee will be deemed to have retired if the employee terminates his or her employment with us, has been an employee of ours for more than 10 years and is
older than 65 upon termination of employment. Under the policy, if an employee retires, then:
-
-
all outstanding options held by the employee will automatically vest in full; and
-
-
the period during which the employee may exercise the options will be extended to the expiration of the term of the option under the applicable
option agreement.
Our
board adopted this policy for our employees in recognition of the importance of stock options to the compensation of employees and in order to provide each of our employees with the
opportunity to get the full benefit of the options held by the employee in the event of his or her retirement after making 10 years of contributions to our company.
We
occasionally pay relocation expenses for newly-hired executive officers who we require to relocate as a condition to their employment by us. We also occasionally pay local housing
expenses and travel costs for executives who maintain a primary residence outside of a reasonable daily commuting range
to our headquarters. We believe that these are typical benefits offered by comparable companies to executives who are asked to relocate and that we would be at a competitive disadvantage in trying to
attract executives who would need to relocate in order to work for us if we did not offer such assistance. We did not provide any relocation benefits to any of our executives in 2018.
Our
named executive officers may also participate in our employee stock purchase plan, which is generally available to all employees who work over 20 hours per week, so long as
they own less than
34
Table of Contents
5%
of our common stock, including for this purpose vested and unvested stock options. Dr. Horobin, Mr. Kirby and Mr. Arcudi participated in the employee stock purchase plan in
2018.
Severance and Change in Control Benefits
Under our employment agreements and employment offer letters with our named executive officers, other than with Mr. Kirby, we have agreed
to provide severance and other benefits in the event of the termination of their employment under specified circumstances. On March 7, 2017, the board of directors approved a form of Severance
and Change of Control Agreement to be entered into between the Company and our named executive officers. The severance benefits contained in the Change of Control Agreements supersede the severance
and change of control terms contained in the existing employment agreements and employment offer letters. We have provided more detailed information about these benefits, along with estimates of their
value under various circumstances, under the captions "Employment and Separation Agreements with our Named Executive Officers" and "Potential Payments Upon Termination or Change in Control" below.
We
believe providing severance and/or change in control benefits as a component of our compensation structure can help us compete for executive talent and attract and retain highly
talented executive officers whose contributions are critical to our long-term success. After reviewing the practices of companies in general industry surveys published by Radford
Survey + Consulting, and consultation with Pearl Meyer, we believe that our severance and change in control benefits are appropriate.
Tax Deductibility of Executive Compensation
Prior to December 22, 2017, when the TCJA was signed into law, Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") generally disallowed a tax deduction to publicly held companies for compensation paid to the chief executive officer and the three other most highly compensated executives (other than the
chief financial officer) in excess of $1 million per officer in any year that such compensation did not qualify as performance-based. In connection with fiscal 2018 compensation decisions, the
compensation committee considered the potential tax deductibility of executive compensation under Section 162(m) of the Internal Revenue Code and sought to qualify certain elements of these
applicable executives' compensation as performance-based while also delivering competitive levels and forms of compensation.
Under
the TCJA, the performance-based exception has been repealed and the $1 million deduction limit now applies to anyone serving as the chief executive officer or the chief
financial officer at any time during the taxable year and the top three other highest compensated executive officers serving at fiscal year end. In addition, once an individual becomes a covered
employee under Section 162(m) for any taxable year beginning after December 31, 2016, this status carries forward to all future years, even in the event of the employee's termination or
death. The new rules generally apply to taxable years beginning after December 31, 2017, but do not apply to remuneration provided pursuant to a written binding contract in effect on
November 2, 2017 that is not modified in any material respect after that date.
The
compensation committee reserves the right to use its judgment to authorize compensation payments that may be subject to the limit when the compensation committee believes such
payments are appropriate and in the best interests of our company and our stockholders. There can be no assurance that compensation awarded to our executive officers will be treated as qualified
performance-based compensation under Section 162(m).
35
Table of Contents
Employment and Separation Agreements with our Named Executive Officers
We have entered into agreements with our named executive officers, as discussed below, that provide benefits to the executives upon their
termination of employment in certain circumstances or under which we have agreed to specific compensation elements. Our named executive officers are at-will employees.
Employment Agreements and Offer Letters
Vincent J. Milano
We are a party to an employment offer letter with Mr. Milano, our President and Chief Executive Officer. Under the employment offer
letter, Mr. Milano is entitled to receive an annual base salary of $600,000 or such higher amount as our compensation committee or our board of directors may determine. In addition, under the
employment offer letter, Mr. Milano is eligible to receive an annual bonus of 50% of his base salary, subject to adjustment, based on the achievement of both individual and company performance
objectives as developed and determined by our board of directors.
Under
the employment offer letter, if we terminate Mr. Milano's employment without cause, prior to a change-in-control, as such terms are defined in the agreement, he will be
entitled to severance payments for 24 months equivalent to his then-current base salary, payable in accordance with our then-current payroll practices, and benefits continuation for the shorter
of 24 months or the date his COBRA continuation coverage expires and to receive any bonus that he earned and that our board of directors approved prior to the termination to the extent not then
paid. If we terminate Mr. Milano's employment without cause or Mr. Milano terminates his employment with us for good reason, as such terms are defined in the agreement, upon or within
one year after a change in control, he will be entitled to severance payments for 24 months equivalent to his then-current base salary, payable in accordance with our then-current payroll
practices, and benefits continuation for the shorter of 24 months or the date his COBRA continuation coverage expires and to receive any bonus that he
earned and that our board of directors approved prior to the termination to the extent not then paid and the inducement option award that he received upon his commencement of employment with us will
vest in full and become immediately exercisable.
Our
agreement to pay severance and benefits pursuant to the employment offer letter is subject to Mr. Milano entering into a separation and release agreement and is superseded by
his severance and change in control agreement described below to the extent then in effect.
R. Clayton Fletcher
We are a party to an employment letter with Mr. Fletcher, our Senior Vice President of Business Development and Strategic Planning. Under
the terms of the employment letter, Mr. Fletcher is entitled to receive an annual base salary of $360,000 or such higher amount as our compensation committee or our board of directors may
determine. In addition, under the employment letter, Mr. Fletcher is eligible to receive an annual bonus of 35% of his base salary, subject to adjustment, based on the achievement of both
individual and company performance objectives as established by our board of directors. Under the employment letter, if we terminate Mr. Fletcher's employment without cause at any time, or if
he terminates his employment for good reason upon a change in control or within one year after a change in control, as such terms are defined in the agreement, we have agreed
to:
-
-
continue to pay Mr. Fletcher his base salary as severance for 12 months following such termination payable in accordance with our
then current payroll practices plus any bonus earned and approved by the board of directors but unpaid at the time of termination;
36
Table of Contents
-
-
continue to provide Mr. Fletcher with health and dental benefits for 12 months following such termination, except to the extent
another employer provides Mr. Fletcher with comparable benefits; and
-
-
only in the event of a termination described above that occurs upon or within one year after a change in control, fully vest all options
granted to Mr. Fletcher upon the commencement of his employment.
Our
agreement to pay severance and benefits pursuant to the employment offer letter is subject to Mr. Fletcher entering into a separation and release agreement and is superseded
by his severance and change in control agreement (described below) to the extent then in effect.
Joanna Horobin, M.B., Ch.B
We are a party to an employment letter with Dr. Horobin, our Chief Medical Officer. Under the terms of the employment letter,
Dr. Horobin is entitled to receive an annual base salary of $390,000 or such higher amount as our compensation committee or our board of directors may determine. In addition, under the
employment letter, Dr. Horobin is eligible to receive an annual bonus of 40% of her base salary, subject to adjustment, based on the achievement of both individual and company performance
objectives as established by our board of directors. Under the employment letter, if we terminate Dr. Horobin's employment without cause at any time, or if she terminates her employment for
good reason upon a change in control or within one year after a change in control, as such terms are defined in the agreement, we have agreed to:
-
-
continue to pay Dr. Horobin her base salary as severance for 12 months following such termination payable in accordance with our
then current payroll practices plus any bonus earned and approved by the board of directors but unpaid at the time of termination;
-
-
continue to provide Dr. Horobin with health and dental benefits for 12 months following such termination, except to the extent
another employer provides Dr. Horobin with comparable benefits; and
-
-
only in the event of a termination described above that occurs upon or within one year after a change in control, fully vest all options
granted to Dr. Horobin upon the commencement of her employment.
Our
agreement to pay severance and benefits pursuant to the employment offer letter is subject to Dr. Horobin entering into a separation and release agreement and is superseded by
her severance and change in control agreement (described below) to the extent then in effect.
John J. Kirby
We are a party to an employment letter with Mr. Kirby, our prior Vice President of Corporate Accounting and, effective October 31,
2018, our current Vice President of Finance and principal financial and accounting officer. Under the terms of the employment letter, Mr. Kirby is entitled to receive an annual base salary of
$225,000 or such higher amount as our compensation committee or our board of directors may determine. In addition, under the employment letter, Mr. Kirby is eligible to receive an annual bonus
of 30% of his base salary, subject to adjustment, based on the achievement of both individual and company performance objectives as established by our board of directors. Mr. Kirby currently
does not have a severance and change in control agreement (described below) with us.
37
Table of Contents
Jonathan Yingling, Ph.D.
We are a party to an employment letter with Dr. Yingling, our prior Senior Vice President of Early Development and, effective
January 1, 2018, our current Chief Scientific Officer. Under the terms of the employment letter, Dr. Yingling is entitled to receive an annual base salary of $385,000 or such higher
amount as our compensation committee or our board of directors may determine. In addition, under the employment letter, Dr. Yingling is eligible to receive an annual bonus of 40% of his base
salary, subject to adjustment, based on the achievement of both individual and company performance objectives as established by our board of directors. Under the employment letter, if we terminate
Dr. Yingling's employment without cause at any time, or if he terminates his
employment for good reason upon a change in control or within one year after a change in control, as such terms are defined in the agreement, we have agreed
to:
-
-
continue to pay Dr. Yingling his base salary as severance for 12 months following such termination payable in accordance with our
then current payroll practices plus any bonus earned and approved by the board of directors but unpaid at the time of termination;
-
-
continue to provide Dr. Yingling with health and dental benefits for 12 months following such termination, except to the extent
another employer provides Dr. Yingling with comparable benefits; and
-
-
only in the event of a termination described above that occurs upon or within one year after a change in control, fully vest all options
granted to Dr. Yingling upon the commencement of his employment.
Our
agreement to pay severance and benefits pursuant to the employment offer letter is subject to Dr. Yingling entering into a separation and release agreement and is superseded
by his severance and change in control agreement (described below) to the extent then in effect.
Louis J. Arcudi, III
Prior to his resignation on October 31, 2018, the terms of Mr. Arcudi's employment as our Senior Vice President of Operations,
Chief Financial Officer, Treasurer and Assistant Secretary were set forth in an employment letter, as amended, with Mr. Arcudi. Under the employment letter, Mr. Arcudi was initially
entitled to receive an annual base salary of $315,000, such amount subject to adjustment from time to time in accordance with normal business practices. In addition, under the employment letter,
Mr. Arcudi was entitled to receive an annual bonus in an amount approved by our board or the compensation committee based on the achievement of both individual and company performance
objectives as developed and determined by our board of directors.
Pursuant
to his employment letter, if we terminated Mr. Arcudi's employment without cause at any time, or if he terminated his employment for good reason upon a change in control
or within one year after a change of control, as such terms are defined in the agreement, we agreed to:
-
-
continue to pay Mr. Arcudi his base salary as severance for 12 months following such termination payable in accordance with our
then current payroll practices; and
-
-
continue to provide Mr. Arcudi with health and dental benefits for 12 months following such termination, except to the extent
another employer provides Mr. Arcudi with comparable benefits.
Our
agreement to pay severance and benefits pursuant to the employment letter is subject to Mr. Arcudi entering into a separation and release agreement and is superseded by his
severance and change in control agreement described below to the extent then in effect.
38
Table of Contents
On
October 31, 2018, we entered into a separation agreement and release with Mr. Arcudi, under which Mr. Arcudi agreed to resign as our Senior Vice President of
Operations, Chief Financial Officer, Treasurer and Assistant Secretary. Pursuant to the agreement, we provided Mr. Arcudi the following separation benefits in exchange for him agreeing to a
release of claims and complying with certain other continuing obligations contained therein (including compliance with the restrictive covenants in his employment
agreement):
-
-
We paid Mr. Arcudi a pro-rated 2018 bonus payment of $103,182, less all applicable taxes and withholdings;
-
-
We have agreed that, commencing on the first regular payroll date following his separation date until October 31, 2019, we will pay
Mr. Arcudi with severance pay in the total gross amount of $525,115, payable in equal installments in accordance with our regular payroll practices;
-
-
Mr. Arcudi is eligible to receive health and dental benefits through reimbursement of COBRA premiums from his separation date through no
later than October 31, 2019; and
-
-
Any stock options or other equity incentive awards previously granted to Mr. Arcudi and held by Mr. Arcudi on his separation date
shall continue to remain exercisable until the earlier of (i) twelve months from the end of the quarter in which Mr. Arcudi terminates services from the with us, or (ii) the
original expiration date of such option.
In
addition, we (a) paid all of Mr. Arcudi's compensation due and owing to him as of October 31, 2018 in accordance with our usual compensation and payroll
practices, and (b) reimbursed Mr. Arcudi for all reasonable unreimbursed business expenses incurred by him as of October 31, 2018 in accordance with our expense reimbursement
policy.
Mr. Arcudi
also entered into a consulting agreement with us, effective October 31, 2018, under which Mr. Arcudi agreed to provide consulting services to us, and we
have agreed to pay Mr. Arcudi consulting fees at a rate of $500 per hour for any such services provided, not to exceed $50,000 without our consent, as well as reimbursement for pre-approved
reasonable expenses for a term of twelve months. The agreement also contains non-solicit provisions that apply during the consulting period and the one-year period thereafter.
Severance and Change in Control Agreements
We have entered into a Severance and Change of Control Agreement with each of Messrs. Milano, Arcudi and Fletcher, and Drs. Yingling and
Horobin.
The
Severance and Change of Control Agreements provide that if we consummate a change of control (as defined in the Severance and Change of Control Agreements), we will employ the
executive for a period of 24 months from the date of the consummation of the change of control. Pursuant to the Severance and Change of Control Agreements, during such
period:
-
(i)
-
the
executive's position and duties for the company will be commensurate with the most significant of the duties and positions held by the executive during the
90 day period preceding the date of the consummation of the change of control;
-
(ii)
-
the
executive's annual base salary will equal at least 12 times the highest monthly base salary paid to the executive during the 12 months prior to the date
of the change of control;
-
(iii)
-
the
executive will be entitled to an annual bonus equal to at least the greatest of (a) the average bonus paid to the executive in respect of the three
years immediately preceding the year in which the change of control occurs, (b) the annual bonus paid for the year immediately preceding the year in which the change of control occurs and
(c) 100% of the target bonus for (1) the year immediately preceding the year in which the change of control
39
Table of Contents
The
Severance and Change of Control Agreements also provide that if an executive is terminated without "cause" or resigns for "good reason" (as such terms are defined in the Severance
and Change of Control Agreements) in either case, within 24 months following a change of control, subject to the executive's timely execution and non-revocation of a general release of claims
in a form provided by us and the executive's continued compliance with the invention, non-disclosure and non-competition agreement previously entered into in connection with the commencement of
executive's employment, executives would receive a lump sum cash payment payable within 30 days after the date of termination equal to:
-
(i)
-
the
executive's target bonus for the year of termination prorated for the portion of the year worked;
-
(ii)
-
150%
of the sum of (a) such executive's annual base salary for the year immediately preceding the year of termination and (b) the greatest of
(1) the average bonus paid or earned and accrued, but unpaid to the executive in respect of the three years immediately preceding the year of termination, (2) the annual bonus paid for
the year immediately preceding the year of termination and (3) the target bonus for the year of termination; and
-
(iii)
-
150%
of the Company's share of the annual premium for group medical and/or dental insurance coverage that was in place for the executive immediately prior to the
date of termination.
In
addition, all unvested options, restricted stock or stock appreciation rights held by the executive as of the date of termination will be immediately and automatically vested and/or
exercisable in full as of the date of termination, and the executive will have the right to exercise any such options or stock appreciation rights for the longer of (A) the period of time
provided for in the applicable equity award agreement or plan, or (B) the shorter of one year after the date of termination or the remaining term of the applicable equity award. However, under
the terms of the Merger Agreement the post-termination exercise period of all outstanding stock options will continue in the event of the executive's termination of employment within 24 months
following the effective time of the Mergers (other than for cause or due to the executive's resignation without good reason), until the three-year anniversary of such executive's termination, but in
no event past the remaining term of the applicable equity award.
If
the executive is terminated without "cause" or resigns for "good reason," prior to the date of a change of control, such executive will be entitled to the following under the
Severance and Change of Control Agreement, subject to the executive's timely execution and non-revocation of a general release of claims in a form provided by us and the executive's continued
compliance with the invention,
non-disclosure and non-competition agreement previously entered into in connection with the commencement of executive's employment:
-
(i)
-
a
lump sum cash payment payable within 30 days after the date of termination in an amount equal to the greater of (x) the average bonus paid or earned
and accrued, but unpaid to the executive in respect of the three years immediately preceding the year of termination, and (y) the annual bonus paid for the year immediately preceding the year
of termination prorated for the portion of the year worked;
40
Table of Contents
-
(ii)
-
continued
payment of the executive's base salary payable in accordance with our standard payroll practices over the one-year period following termination; and
-
(iii)
-
if
the executive elects to continue receiving group medical and/or dental insurance under COBRA (to the extent the executive previously participated in such group
insurance plans immediately prior to the date of termination), payment by us of our share of the premium for such coverage that we pay for active and similarly-situated employees who receive the same
type of coverage for the one-year period following termination.
The
Severance and Change of Control Agreements expire on December 31, 2018, but on each anniversary thereof, unless notice of termination has been provided by a party, the term of
such agreements will automatically be extended by one year.
Indemnification Agreements
On March 7, 2017, the board of directors approved a form of Indemnification Agreement to be entered into between the Company and our
directors and officers. Each of Messrs. Milano, Arcudi, Fletcher and Kirby and Drs. Horobin and Yingling entered into an Indemnification agreement with the Company. In general, the
Indemnification Agreements provide that the Company will indemnify the director or officer to the fullest extent permitted by law for claims arising in his or her capacity as a director or officer of
the Company or in connection with their service at our request for another corporation or entity. The Indemnification Agreements also provide for procedures that will apply in the event that a
director or officer makes a claim for indemnification and establish certain presumptions that are favorable to the director or officer.
Formal Clawback Policy
In April 2015, ahead of any such requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act, our compensation committee
adopted a formal clawback policy, which will apply in the event we are required to prepare an accounting restatement after the adoption of the clawback policy due to any material noncompliance with
any financial reporting requirement under the U.S. federal securities laws. This policy requires us to use reasonable efforts to recover from any of our current or former executive officers who
receive incentive-based compensation (including stock options awarded as compensation) during the three-year period preceding the date on which we are required to prepare an accounting restatement
based on erroneous data, the excess of what would have been paid to such executive officer under the accounting restatement.
41
Table of Contents
Summary Compensation Table
The table below summarizes compensation paid to or earned by our named executive officers for 2018, 2017 and 2016.
Summary Compensation Table for Fiscal Year 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option
Awards
($)(1)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
All Other
Compensation
($)(2)
|
|
Total
($)
|
|
Vincent J. Milano
|
|
|
2018
|
|
|
600,000
|
|
|
|
|
|
998,081
|
|
|
150,000
|
|
|
33,863
|
|
|
1,781,944
|
|
President and Chief
|
|
|
2017
|
|
|
600,000
|
|
|
|
|
|
296,634
|
|
|
270,000
|
|
|
31,106
|
|
|
1,197,740
|
|
Executive Officer
|
|
|
2016
|
|
|
600,000
|
|
|
|
|
|
573,780
|
|
|
211,680
|
|
|
31,555
|
|
|
1,417,015
|
|
R. Clayton Fletcher
|
|
|
2018
|
|
|
400,000
|
|
|
|
|
|
461,837
|
|
|
92,000
|
|
|
23,613
|
|
|
977,450
|
|
Senior Vice President,
|
|
|
2017
|
|
|
386,300
|
|
|
|
|
|
182,924
|
|
|
145,908
|
|
|
22,988
|
|
|
738,120
|
|
Business Development
|
|
|
2016
|
|
|
375,000
|
|
|
|
|
|
353,831
|
|
|
114,660
|
|
|
23,580
|
|
|
867,071
|
|
and Strategy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joanna Horobin
|
|
|
2018
|
|
|
425,000
|
|
|
|
|
|
461,837
|
|
|
72,250
|
|
|
34,838
|
|
|
993,925
|
|
Senior Vice President,
|
|
|
2017
|
|
|
410,000
|
|
|
|
|
|
182,924
|
|
|
132,840
|
|
|
31,754
|
|
|
757,518
|
|
Chief Medical Officer
|
|
|
2016
|
|
|
390,000
|
|
|
|
|
|
|
|
|
119,246
|
|
|
31,187
|
|
|
540,433
|
|
John J. Kirby
|
|
|
2018
|
|
|
249,888
|
|
|
|
|
|
206,479
|
|
|
64,771
|
|
|
32,735
|
|
|
553,873
|
|
Vice President of Finance,
|
|
|
2017
|
|
|
231,750
|
|
|
|
|
|
98,878
|
|
|
62,573
|
|
|
28,676
|
|
|
421,877
|
|
Principal Financial and Accounting Officer(3)
|
|
|
2016
|
|
|
225,000
|
|
|
|
|
|
172,150
|
|
|
54,607
|
|
|
28,540
|
|
|
480,297
|
|
Jonathan Yingling
|
|
|
2018
|
|
|
400,000
|
|
|
|
|
|
461,837
|
|
|
80,000
|
|
|
33,926
|
|
|
975,763
|
|
Senior Vice President,
|
|
|
2017
|
|
|
348,542
|
|
|
|
|
|
577,782
|
|
|
144,296
|
|
|
31,277
|
|
|
1,101,897
|
|
Chief Scientific Officer(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louis J. Arcudi, III
|
|
|
2018
|
|
|
308,333
|
|
|
103,183
|
(6)
|
|
461,837
|
|
|
|
|
|
112,776
|
|
|
986,129
|
|
Former Senior Vice
|
|
|
2017
|
|
|
357,900
|
|
|
|
|
|
182,924
|
|
|
122,436
|
|
|
25,786
|
|
|
689,046
|
|
President of Operations,
|
|
|
2016
|
|
|
347,500
|
|
|
|
|
|
353,831
|
|
|
116,760
|
|
|
26,276
|
|
|
844,367
|
|
Chief Financial Officer, Treasurer and Assistant Secretary(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Represents
the aggregate grant date fair value of options granted to each of the named executive officers as computed in accordance with ASC 718. These amounts do
not represent the actual amounts paid to or realized by the named executive officers. See Note 11 to the financial statements included elsewhere in our annual report on Form 10-K for the
year ended December 31, 2018 regarding assumptions we made in determining the fair value of option awards.
42
Table of Contents
-
(2)
-
"All
Other Compensation" for 2018 for each of the named executive officers includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums paid
by us
for all
insurance
plans ($)
|
|
Company match
on 401(k)
($)
|
|
Severance
($)
|
|
Total
($)
|
|
Mr. Milano
|
|
|
23,613
|
|
|
10,250
|
|
|
|
|
|
33,863
|
|
Mr. Fletcher
|
|
|
23,613
|
|
|
|
|
|
|
|
|
23,613
|
|
Dr. Horobin
|
|
|
24,525
|
|
|
10,313
|
|
|
|
|
|
34,838
|
|
Mr. Kirby
|
|
|
23,239
|
|
|
9,496
|
|
|
|
|
|
32,735
|
|
Dr. Yingling
|
|
|
23,613
|
|
|
10,313
|
|
|
|
|
|
33,926
|
|
Mr. Arcudi
|
|
|
14,944
|
|
|
10,313
|
|
|
87,519
|
|
|
112,776
|
|
-
(3)
-
Upon
Mr. Kirby's appointment as our principal financial officer and principal accounting officer effective October 31, 2018, Mr. Kirby's annual
base salary was increased from $239,850 to $280,000.
-
(4)
-
Dr. Yingling
joined our company and became our Senior Vice President, Early Development effective as of February 6, 2017 and has served as our Chief
Scientific Officer since January 1, 2018.
-
(5)
-
Mr. Arcudi
served as our Senior Vice President of Operations, Chief Financial Officer, Treasurer and Assistant Secretary until his resignation, effective
October 31, 2018.
-
(6)
-
Pursuant
to Mr. Arcudi's separation agreement, Mr. Arcudi received a pro-rated cash bonus in 2018 calculated as the product of (i) the greater
of (a) the average bonus paid or that has been earned and accrued, but unpaid to Mr. Arcudi by us, in respect of the three fiscal years immediately preceding the fiscal year in which the
separation date occurred, and (b) the annual bonus paid for the fiscal year immediately preceding the separation date (both (a) and (b) annualized for any fiscal year consisting
of less than twelve full months or with respect to which Mr. Arcudi has been employed by us for less than twelve full months) and (ii) a fraction, the numerator of which is the number of
days in the current fiscal year through the separation date, and the denominator of which is 365.
CEO Pay Ratio
Following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our CEO to the median
of the annual total compensation of our other employees. We determined our median employee based on annualized 2018 base salary and annualized 2018 bonus awards for each of our 36 employees (excluding
the CEO) as of December 31, 2018. The annual total compensation of our median employee (other than the CEO) for 2018 was $297,391. As disclosed in the Summary Compensation Table included in
this CD&A, our CEO's annual total compensation for 2018 was $1,781,944. Based on the foregoing, the ratio of the 2018 annual total compensation of our CEO to the median of the annual total
compensation of all other employees was 6 to 1. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above
should not be used as a basis for comparison between companies.
Grants of Plan-Based Awards
The following table sets forth information regarding grants of plan-based awards to our named executive officers during 2018.
43
Table of Contents
Grants of Plan-Based Awards for Fiscal Year 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(1)
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
|
|
|
|
|
|
Grant Date
Fair Value
of Option
Awards
($)(2)
|
|
Name
|
|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Vincent J. Milano
|
|
|
|
|
|
|
|
|
300,000
|
|
|
468,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
74,999
|
|
|
17.92
|
|
|
743,965
|
|
|
|
|
8/13/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
7.39
|
|
|
254,116
|
|
R. Clayton Fletcher
|
|
|
|
|
|
|
|
|
160,000
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
33,749
|
|
|
17.92
|
|
|
334,779
|
|
|
|
|
8/13/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
32,500
|
|
|
7.39
|
|
|
127,058
|
|
Joanna Horobin
|
|
|
|
|
|
|
|
|
170,000
|
|
|
265,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
33,749
|
|
|
17.92
|
|
|
334,779
|
|
|
|
|
8/13/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
32,500
|
|
|
7.39
|
|
|
127,058
|
|
John J. Kirby
|
|
|
|
|
|
|
|
|
74,966
|
|
|
117,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
16,874
|
|
|
17.92
|
|
|
167,384
|
|
|
|
|
8/13/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
7.39
|
|
|
39,095
|
|
Jonathan Yingling
|
|
|
|
|
|
|
|
|
160,000
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
33,749
|
|
|
17.92
|
|
|
334,779
|
|
|
|
|
8/13/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
32,500
|
|
|
7.39
|
|
|
127,058
|
|
Louis J. Arcudi, III(4)
|
|
|
|
|
|
|
|
|
123,333
|
|
|
192,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
33,749
|
|
|
17.92
|
|
|
334,779
|
|
|
|
|
8/13/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
|
32,500
|
|
|
7.39
|
|
|
127,058
|
|
-
(1)
-
The
term of these options is ten years. The vesting of these stock options is time-based. See "Compensation Discussion and AnalysisComponents of
Executive CompensationEquity Compensation" for a full description of the vesting terms for these options. See "Employment and Separation Agreements with our Named Executive Officers" for
further information about acceleration of vesting of options in the event of the termination of employment and/or a change of control.
-
(2)
-
Represents
the aggregate grant date fair value of option awards made to the named executive officers in 2017 as computed in accordance with ASC 718. These amounts do
not represent the actual amounts paid to or realized by the named executive officers during 2018. See Note 11 to the financial statements included elsewhere in our annual report on
Form 10-K for the year ended December 31, 2018 regarding assumptions we made in determining the fair value of option awards.
-
(3)
-
Granted
pursuant to our 2013 Stock Incentive Plan.
-
(4)
-
The
target and maximum amounts reported under Estimated Possible Payouts Under Non-Equity Incentive Plan Awards for Mr. Arcudi are pro-rated for
Mr. Arcudi's resignation effective October 31, 2018. Pursuant to the Separation Agreement and Release dated October 31, 2018 by and between Mr. Arcudi and us,
Mr. Arcudi received a pro-rated bonus for 2018 in the amount of $103,183, the calculation of which is more fully described in the footnotes to the "Summary Compensation Table for Fiscal Year
2018."
44
Table of Contents
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding the outstanding stock options held by our named executive officers as of
December 31, 2018. None of our named executive officers held shares of unvested restricted stock as of December 31, 2018.
Outstanding Equity Awards at Fiscal Year-End for 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Vincent J. Milano
|
|
|
250,000
|
|
|
|
|
|
24.96
|
|
|
12/1/2024
|
|
|
|
|
25,780
|
|
|
11,719
|
(1)
|
|
23.04
|
|
|
1/6/2026
|
|
|
|
|
16,406
|
|
|
21,094
|
(2)
|
|
12.72
|
|
|
1/4/2027
|
|
|
|
|
|
|
|
74,999
|
(3)
|
|
17.92
|
|
|
1/3/2028
|
|
|
|
|
|
|
|
65,000
|
(4)
|
|
7.39
|
|
|
8/13/2028
|
|
R. Clayton Fletcher
|
|
|
70,312
|
|
|
4,688
|
(5)
|
|
37.36
|
|
|
1/26/2025
|
|
|
|
|
15,897
|
|
|
7,227
|
(1)
|
|
23.04
|
|
|
1/6/2026
|
|
|
|
|
10,117
|
|
|
13,007
|
(2)
|
|
12.72
|
|
|
1/4/2027
|
|
|
|
|
|
|
|
33,749
|
(3)
|
|
17.92
|
|
|
1/3/2028
|
|
|
|
|
|
|
|
32,500
|
(4)
|
|
7.39
|
|
|
8/13/2028
|
|
Joanna Horobin
|
|
|
56,248
|
|
|
18,751
|
(6)
|
|
31.04
|
|
|
11/30/2025
|
|
|
|
|
10,117
|
|
|
13,007
|
(2)
|
|
12.72
|
|
|
1/4/2027
|
|
|
|
|
|
|
|
33,749
|
(3)
|
|
17.92
|
|
|
1/3/2028
|
|
|
|
|
|
|
|
32,500
|
(4)
|
|
7.39
|
|
|
8/13/2028
|
|
John J. Kirby
|
|
|
14,061
|
|
|
4,689
|
(7)
|
|
24.88
|
|
|
11/2/2025
|
|
|
|
|
7,734
|
|
|
3,515
|
(1)
|
|
23.04
|
|
|
1/6/2026
|
|
|
|
|
5,468
|
|
|
7,031
|
(2)
|
|
12.72
|
|
|
1/4/2027
|
|
|
|
|
|
|
|
16,874
|
(3)
|
|
17.92
|
|
|
1/3/2028
|
|
|
|
|
|
|
|
10,000
|
(4)
|
|
7.39
|
|
|
8/13/2028
|
|
Jonathan Yingling
|
|
|
32,811
|
|
|
42,188
|
(8)
|
|
12.40
|
|
|
2/6/2027
|
|
|
|
|
|
|
|
33,749
|
(3)
|
|
17.92
|
|
|
1/3/2028
|
|
|
|
|
|
|
|
32,500
|
(4)
|
|
7.39
|
|
|
8/13/2028
|
|
Louis J. Arcudi, III
|
|
|
13,749
|
|
|
|
|
|
41.92
|
|
|
12/23/2019
|
|
|
|
|
11,874
|
|
|
|
|
|
21.92
|
|
|
12/27/2020
|
|
|
|
|
18,247
|
|
|
|
|
|
9.26
|
|
|
11/28/2021
|
|
|
|
|
43,541
|
|
|
|
|
|
5.52
|
|
|
5/22/2023
|
|
|
|
|
37,500
|
|
|
|
|
|
20.48
|
|
|
12/10/2023
|
|
|
|
|
24,999
|
|
|
|
|
|
31.76
|
|
|
12/10/2024
|
|
|
|
|
15,898
|
|
|
7,226
|
(1)
|
|
23.04
|
|
|
1/6/2026
|
|
|
|
|
10,117
|
|
|
13,007
|
(2)
|
|
12.72
|
|
|
1/4/2027
|
|
|
|
|
|
|
|
33,749
|
(3)
|
|
17.92
|
|
|
1/3/2028
|
|
|
|
|
|
|
|
32,500
|
(4)
|
|
7.39
|
|
|
8/13/2028
|
|
-
(1)
-
Represents
unvested portion of stock option award that vested 25% on January 6, 2017 (first anniversary date following the January 6, 2016 grant date),
with the remainder vesting in 12 equal
45
Table of Contents
quarterly
installments thereafter (until January 6, 2020), provided the named executive officer is still employed with us on each vesting date.
-
(2)
-
Represents
unvested portion of stock option award that vested 25% on January 4, 2018 (first anniversary date following the January 4, 2017 grant date),
with the remainder vesting in 12 equal quarterly installments thereafter (until January 4, 2021), provided the named executive is still employed with us on each vesting date.
-
(3)
-
Represents
unvested portion of stock option award that will vest 25% on the first anniversary date following the January 3, 2018 grant date, with the
remainder vesting in 12 equal quarterly installments thereafter (until January 3, 2022), provided the named executive is still employed with us on each vesting date.
-
(4)
-
Represents
unvested portion of stock option award that will vest 25% on the first anniversary date following the August 13, 2018 grant date, with the
remainder vesting in 12 equal quarterly installments thereafter (until August 13, 2022), provided the named executive is still employed with us on each vesting date.
-
(5)
-
Represents
unvested portion of stock option award that vested 25% on January 26, 2016 (first anniversary date following the January 26, 2015 grant
date), with the remainder vesting in 12 equal quarterly installments thereafter (until January 26, 2019), provided the named executive is still employed with us on each vesting date.
-
(6)
-
Represents
unvested portion of stock option award that vested 25% on November 30, 2016 (first anniversary date following the November 30, 2015 grant
date), with the remainder vesting in 12 equal quarterly installments thereafter (until November 30, 2019), provided the named executive is still employed with us on each vesting date.
-
(7)
-
Represents
unvested portion of stock option award that vested 25% on November 2, 2016 (first anniversary date following the November 2, 2015 grant
date), with the remainder vesting in 12 equal quarterly installments thereafter (until November 2, 2019), provided the named executive is still employed with us on each vesting date.
-
(8)
-
Represents
unvested portion of stock option award that will vest 25% on the first anniversary date following the February 6, 2017 grant date, with the
remainder vesting in 12 equal quarterly installments thereafter (until February 6, 2021), provided the named executive is still employed with us on each vesting date
Option Exercises and Stock Vested
None of our named executive officers exercised any options during the year ended December 31, 2018.
Potential Payments Upon Termination or Change in Control
Under our employment agreement and employment offer letters with our executive officers, we have agreed to provide severance and other benefits
in the event of the termination of their employment under specified circumstances. These agreements are described above under the caption "Employment and Separation Agreements with our Named Executive
Officers."
However,
in March 2017, we entered into a Severance and Change of Control Agreement with each of Messrs. Milano, Arcudi and Fletcher, and Drs. Horobin and Yingling that superseded
the severance and change in control provisions of each of their respective employment offer letters. These agreements are also described above under the caption "Employment and Separation Agreements
with our Named Executive Officers."
46
Table of Contents
In October 2018, we entered into a separation agreement and release with Mr. Arcudi, in connection with Mr. Arcudi's resignation effective
October 31, 2018, as our Senior Vice President of Operations, Chief Financial Officer, Treasurer and Assistant Secretary, and we agreed to provide him certain severance benefits and other
compensation. This agreement is described above under the caption "Employment and Separation Agreements with our Named Executive Officers," and the payments upon Mr. Arcudi's resignation were
paid in accordance with this agreement and are set forth above in the "Summary Compensation Table."
Termination of Employment Not In Connection With or Following a Change in Control
The following table sets forth the estimated potential benefits that our named executive officers would be entitled to receive upon their
termination of employment with our company (other than a termination in connection with or following a change in control of our company) if the named executive officer's employment was terminated on
December 31, 2018. This table represents
estimates only and does not necessarily reflect the actual amounts that would be paid to our named executive officers, which would only be known at the time that they become eligible for payment
following their termination.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
Severance(1)
($)
|
|
Perquisites/
Benefits(2)
($)
|
|
Total
($)
|
|
Vincent J. Milano
|
|
|
810,560
|
|
|
25,414
|
|
|
835,974
|
|
R. Clayton Fletcher
|
|
|
517,523
|
|
|
25,414
|
|
|
542,937
|
|
Joanna Horobin
|
|
|
533,112
|
|
|
25,414
|
|
|
558,526
|
|
John J. Kirby(3)
|
|
|
|
|
|
|
|
|
|
|
Jonathan Yingling
|
|
|
519,695
|
|
|
25,414
|
|
|
545,109
|
|
-
(1)
-
Cash
severance under the Severance and Change of Control Agreements would be payable to Messrs. Milano and Fletcher, and Drs. Horobin and Yingling upon a
termination of the executive's employment by the executive for "good reason" or by us without "cause", in either case, subject to the executive's timely execution and non-revocation of a general
release of claims in a form provided by the Company and the executive's continued compliance with the invention, non-disclosure and non-competition agreement previously entered into in connection with
the commencement of executive's employment. In such an event, executives would receive:
-
(i)
-
a
lump sum cash payment payable within 30 days after the date of termination equal to the greater of (1) the average bonus paid or earned and accrued,
but unpaid to the executive in respect of the three fiscal years immediately preceding the year of termination, and (2) the annual bonus paid for the year immediately preceding the year of
termination ($210,560 for Mr. Milano, $117,523 for Mr. Fletcher, $108,112 for Dr. Horobin and $119,695 for Dr. Yingling); and
-
(ii)
-
salary
continuation payments at the executive's base salary on termination date for a period of 12 months paid in accordance with the Company's normal
payroll practices and subject to applicable tax withholding ($600,000 for Mr. Milano, $400,000 for Mr. Fletcher, $425,000 for Dr. Horobin and $400,000 for Dr. Yingling).
-
(2)
-
Under
the Severance and Change of Control Agreements, upon a qualifying termination by Messrs. Milano and Fletcher, and Drs. Horobin and Yingling, to the
extent the executives participated in our group medical/dental insurance immediately prior to the termination date, if executives elect to continue receiving group medical and/or dental insurance
under the continuation coverage rules known as COBRA, the Company will pay the Company's share of the premium for such coverage that it pays for active and similarly-situated employees who receive the
47
Table of Contents
same
type of coverage until the end of the period for which the Company is paying the salary continuation payments described within note (1)(ii), above.
The
payments described in this column include an estimated value of the employer share of the premiums for our insurance plans as follows:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Medical
Insurance
Premiums ($)
|
|
Dental
Insurance
Premiums ($)
|
|
Total ($)
|
|
Vincent J. Milano
|
|
|
23,584
|
|
|
1,830
|
|
|
25,414
|
|
R. Clayton Fletcher
|
|
|
23,584
|
|
|
1,830
|
|
|
25,414
|
|
Joanna Horobin
|
|
|
23,584
|
|
|
1,830
|
|
|
25,414
|
|
Jonathan Yingling
|
|
|
23,584
|
|
|
1,830
|
|
|
25,414
|
|
-
(3)
-
Mr. Kirby
currently does not have a Severance and Change in Control Agreement with us.
Termination of Employment In Connection With or Following a Change in Control
The following table sets forth the estimated potential benefits that our named executive officers would be entitled to receive upon their
termination of employment with our company in connection with or following a change in control of our company if the named executive officer's employment was terminated on December 31, 2018.
The amounts indicated below are estimates based on the material assumptions described in the notes to the table below, which may or may not actually occur. Some of these assumptions are based on
information currently available and, as a result, the actual amounts, if any, that may become payable to a named executive officer may differ in material respects from the amounts set forth below.
Furthermore, for purposes of calculating such amounts, we have assumed:
-
-
a change of control date of December 31, 2018;
-
-
each named executive officer's employment is terminated by us without "cause" or by the named executive officer for "good reason", in each case
on the date of the change of control; and
-
-
the value of the accelerated vesting of any equity award is calculated assuming a market price per share of our common stock equal to $2.77
(which equals the closing price of a share of our common stock on the Nasdaq Capital Market on December 31, 2018).
This
table represents estimates only and does not necessarily reflect the actual amounts that would be paid to our named executive officers, which would only be known at the time that
they become eligible for payment following their termination.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
Severance(1)
($)
|
|
Equity(2)
($)
|
|
Perquisites/
Benefits(3)
($)
|
|
Total
($)
|
|
Vincent J. Milano
|
|
|
1,650,000
|
|
|
|
|
|
38,121
|
|
|
1,688,121
|
|
R. Clayton Fletcher
|
|
|
1,000,000
|
|
|
|
|
|
38,121
|
|
|
1,038,121
|
|
Joanna Horobin
|
|
|
1,062,500
|
|
|
|
|
|
38,121
|
|
|
1,100,621
|
|
John J. Kirby(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan Yingling
|
|
|
1,000,000
|
|
|
|
|
|
38,121
|
|
|
1,038,121
|
|
-
(1)
-
Cash
severance under the Severance and Change of Control Agreements would be payable to Messrs. Milano and Fletcher, and Drs. Horobin and Yingling upon a
termination of the executive's employment by the executive for "good reason" or by us without "cause", in either case, within 24 months following a change of control (i.e., pursuant to a
"double trigger" arrangement), subject to the executive's timely execution and non-revocation of a general release of claims in a form provided by the Company and the executive's continued compliance
with the invention,
48
Table of Contents
non-disclosure
and non-competition agreement previously entered into in connection with the commencement of executive's employment. In such an event, executives would receive a lump sum cash payment
payable within 30 days after the date of termination equal to:
-
(i)
-
the
executive's target bonus for the year of termination prorated for the portion of the year worked ($300,000 for Mr. Milano, $160,000 for
Mr. Fletcher, $170,000 for Dr. Horobin and $160,000 for Dr. Yingling); and
-
(ii)
-
150%
of the sum of (a) such executive's annual base salary for the year immediately preceding the year of termination and (b) the greatest of
(1) the average bonus paid or earned and accrued, but unpaid to the executive in respect of the three years immediately preceding the year of termination, (2) the annual bonus paid for
the year immediately preceding the year of termination and (3) the target bonus for the year in which the termination occurs ($1,350,000 for Mr. Milano, $840,000 for Mr. Fletcher,
$892,500 for Dr. Horobin and $840,000 for Dr. Yingling).
-
(2)
-
Amounts
in this column quantify the intrinsic value of the unvested stock options held by the named executive officers that would accelerate upon a qualifying
termination of employment in connection with a change in control based on the assumptions described above.
Under
the Severance and Change of Control Agreements, upon a qualifying termination by Messrs. Milano and Fletcher, and Drs. Horobin and Yingling within 24 months following a change of
control, all outstanding stock options held by the executive as of the date of termination will be automatically vested in full as of the date of termination, and the executive will have the ability
to exercise any such options until the three year anniversary of such executive's termination, but in no event past the remaining term of the applicable equity award. Upon a qualifying change in
control event, Mr. Kirby's outstanding options shall fully vest, regardless of whether a termination event also occurs.
-
(3)
-
Under
the Severance and Change of Control Agreements, upon a qualifying termination by Messrs. Milano and Fletcher, and Drs. Horobin and Yingling within
24 months following a change of control, the executive will be eligible to receive 150% of the Company's share of the annual premium for group medical and/or dental insurance coverage that was
in place for the executive immediately prior to the date of termination, payable in a lump sum cash payment within 30 days after the date of termination.
The
payments described in this column include an estimated value of the employer share of the premiums for our insurance plans as follows:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Medical
Insurance
Premiums ($)
|
|
Dental
Insurance
Premiums ($)
|
|
Total ($)
|
|
Vincent J. Milano
|
|
|
35,376
|
|
|
2,745
|
|
|
38,121
|
|
R. Clayton Fletcher
|
|
|
35,376
|
|
|
2,745
|
|
|
38,121
|
|
Joanna Horobin
|
|
|
35,376
|
|
|
2,745
|
|
|
38,121
|
|
Jonathan Yingling
|
|
|
35,376
|
|
|
2,745
|
|
|
38,121
|
|
-
(4)
-
Mr. Kirby
currently does not have a Severance and Change in Control Agreement with us. However, following a qualifying change in control event, unvested stock
options held by Mr. Kirby would accelerate in connection with a change control as governed by his outstanding stock option agreements.
49
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2018 regarding total shares subject to outstanding stock options, warrants
and rights and total additional shares available for issuance under our existing equity incentive and employee stock purchase plans. In addition, from time to time, we grant "inducement grants"
pursuant to Nasdaq Listing Rule 5635(c)(4).
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans
(Excluding Securities
Reflected in Column (a))
(c)
|
|
Equity compensation plans approved by stockholders(1)
|
|
|
2,910,781
|
|
$
|
17.28
|
|
|
989,790
|
|
Equity compensation plans not approved by stockholders(2)
|
|
|
393,750
|
|
$
|
26.76
|
|
|
|
|
Total
|
|
|
3,304,531
|
|
$
|
18.41
|
|
|
989,790
|
|
-
(1)
-
Consists
of our: 2008 Stock Incentive Plan; 2013 Stock Incentive Plan and 2017 Employee Stock Purchase Plan. Shares are available for future issuance only under our
2013 Stock Incentive Plan and 2017 Employee Stock Purchase Plan.
-
(2)
-
Consists
of stock options issued as inducement grants as of December 31, 2018. These stock options are generally subject to the same terms and conditions as
those awarded pursuant to the plans approved by our stockholders.
50
Table of Contents
Report of the Audit Committee
The audit committee has reviewed our audited financial statements for the fiscal year ended December 31, 2018 and discussed them with our
management and our independent registered public accounting firm.
The
audit committee has also received from, and discussed with, our independent registered public accounting firm various communications that our independent registered public accounting
firm is required to provide to the audit committee, including the matters required to be discussed by the AS 1301:
Communications with Audit
Committees
, as adopted by the Public Company Accounting Oversight Board.
The
audit committee has received from Ernst & Young LLP the letter and other written disclosures required by applicable requirements of the Public Company Accounting
Oversight Board regarding its
communication with the audit committee concerning independence, and has discussed with Ernst & Young LLP its independence from the Company. The audit committee has also considered
whether the provision of other non-audit services by Ernst & Young LLP is compatible with maintaining their independence.
Based
on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in our annual report on
Form 10-K for the year ended December 31, 2018.
By
the audit committee of the board of directors,
William
S. Reardon, Chairman
James Geraghty
Mark Goldberg, M.D.
Carol Schafer
The report of the Audit Committee is not "soliciting material," is not deemed "filed" with the SEC and is not to be incorporated by reference into any filing of the Company
under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended.
Independent Registered Public Accounting Firm Fees
The following table sets forth all fees paid or accrued by us for professional services rendered by Ernst & Young LLP during the
years ended December 31, 2018 and 2017:
|
|
|
|
|
|
|
|
Fee Category
|
|
2018
|
|
2017
|
|
Audit Fees
|
|
$
|
581,145
|
|
$
|
600,122
|
|
Audit-Related Fees
|
|
|
230,318
|
|
|
204,814
|
|
Tax Fees
|
|
|
26,780
|
|
|
126,980
|
|
All Other Fees
|
|
|
1,925
|
|
|
1,995
|
|
Total Fees
|
|
$
|
840,168
|
|
$
|
933,911
|
|
Audit Fees
Audit fees represent the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the
audit of our annual financial statements and internal controls over financial reporting, review of financial statements included in our quarterly reports on Form 10-Q and services that are
normally provided in connection with statutory and regulatory filings or engagements.
73
Table of Contents
Audit-Related Fees
Audit-related fees represent the aggregate fees billed for assurance and related professional services rendered by our independent registered
public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and that are not reported under "Audit Fees" including consultations regarding
internal controls, financial accounting and reporting standards; the issuance of consents in connection with registration statement filings with the SEC and comfort letters in connection with
securities offerings.
Tax Fees
Tax fees represent the aggregate fees billed for professional services rendered by our independent registered public accounting firm for tax
compliance, tax advice and tax planning services. Tax compliance services, which relate to preparation of tax returns, accounted for $27,000 of the total tax fees billed in both 2018 and 2017. Tax
advice and tax planning services primarily relate to consultations on our net operating loss carry forwards and payroll taxes.
All Other Fees
All other fees represent the aggregate fees billed for all other products and services rendered by our independent registered public accounting
firm other than the services reported in the other categories. All other fees for all periods presented related to our subscription to Ernst & Young's online accounting research tool.
Our
audit committee believes that the non-audit services described above did not compromise Ernst & Young LLP's independence. Our audit committee charter, which you can
find by clicking "Investors" and "Corporate Governance" on our website, www.iderapharma.com, requires that all proposals to engage Ernst & Young LLP for services, and all proposed fees
for these services, be submitted to the audit committee for approval before Ernst & Young LLP may provide the services.
Pre-Approval Policies and Procedures
Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by
our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless
the service is specifically approved in advance by the audit committee or the engagement is entered into pursuant to the pre-approval procedures described below.
From
time to time, the audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the
next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount. All of the services
described above under the headings "Audit Fees," "Audit-Related Fees," "Tax Fees" and "All Other Fees" were pre-approved by our audit committee.
74
Table of Contents
TRANSACTIONS WITH RELATED PERSONS
Since January 1, 2018, we have not entered into or engaged in any related party transactions, as defined by the SEC, with our directors,
officers and stockholders who beneficially owned more than 5% of our outstanding common stock, as well as affiliates or immediate family members of those directors, officers and stockholders.
Policies and Procedures for Related Person Transactions
Our board of directors is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities and recognizes that
related party transactions can present a heightened risk of potential or actual conflicts of interest. Accordingly, as a general matter, it is our preference to avoid related party transactions.
In
accordance with our audit committee charter, members of the audit committee, all of whom are independent directors, review and approve all related party transactions for which
approval is required under applicable laws or regulations, including SEC and the Nasdaq Listing Rules. Current SEC rules define a related party transaction to include any transaction, arrangement or
relationship in which we are a participant and the amount involved exceeds $120,000, and in which any of the following persons has or will have a direct or indirect
interest:
-
-
our executive officers, directors or director nominees;
-
-
any person who is known to be the beneficial owner of more than 5% of our common stock;
-
-
any person who is an immediate family member, as defined under Item 404 of Regulation S-K, of any of our executive officers,
directors or director nominees or beneficial owners of more than 5% of our common stock; or
-
-
any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position
or in which such person, together with any other of the foregoing persons, has a 5% or greater beneficial ownership interest.
In
addition, the audit committee reviews and investigates any matters pertaining to the integrity of management, including conflicts of interest and adherence to our code of business
conduct and ethics. Under our code of business conduct and ethics, our directors, officers and employees are expected to avoid any relationship, influence or activity that would cause or even appear
to cause a conflict of interest. Under our code of business conduct and ethics, a director is required to promptly disclose to our board of directors any potential or actual conflict of interest
involving him or her. In accordance with our code of business conduct and ethics, the board of directors will determine an appropriate resolution on a case-by-case basis. All directors must recuse
themselves from any discussion or decision affecting their personal, business or professional interests.
75
Table of Contents
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, officers and the holders of more than 10% of our common stock, which we refer
to collectively as reporting persons, to file with the SEC initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a
Form 4 or Form 5. Reporting persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of
our records and written representations by the persons required to file these reports, during 2018, the reporting persons complied with all Section 16(a) filing requirements, except that a
Form 4 filed by Mr. Lim with respect to a grant of options to Mr. Lim upon his commencement of employment on September 10, 2018, was filed one day late, on
September 13, 2018.
By
order of the board of directors,
|
|
|
/s/ BRYANT D. LIM
Bryant D. Lim
Senior Vice President, General Counsel and Corporate Secretary
|
|
|
Exton,
Pennsylvania
April 25, 2019
76
Table of Contents
Appendix A
AMENDMENT TO THE
IDERA PHARMACEUTICALS, INC. 2013 STOCK INCENTIVE PLAN
WHEREAS, Idera Pharmaceuticals, Inc. (the "Company") desires to amend the Idera Pharmaceuticals, Inc. 2013 Stock Incentive Plan,
as amended (the "2013 Plan"), in the manner set forth below (the "Amendment"); and
WHEREAS,
on April [
·
], 2019, subject to stockholder approval,
the Board of Directors of the Company approved the Amendment; and
NOW
THEREFORE, in accordance with Section 11(d) of the 2013 Plan, the 2013 Plan is hereby amended as follows:
1. Section 4(a)
of the 2013 Plan is hereby amended by deleting subsection (1) thereof in its entirety and substituting the following in lieu
thereof:
-
"(1)
-
Authorized
Number of Shares. Subject to adjustment under Section 9, Awards may be made under the Plan, any or all of which Awards may be in the form of
Incentive Stock Options (as defined in Section 5(b)), for up to such number of shares of common stock, $0.001 par value per share, of the Company (the "Common Stock") as is equal to the sum
of:
(A)
27,724,460 shares of Common Stock; plus
(B)
such additional number of shares of Common Stock (up to 6,946,978 shares) as is equal to the sum of the number of shares of Common Stock subject to awards granted under the Company's 2005 Stock
Incentive Plan (the "2005 Plan") or the Company's 2008 Stock Incentive Plan (the "2008 Plan" and, together with the 2005 Plan, the "Existing Plans") which awards expire, terminate or are otherwise
surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options to
any limitations of the Code).
Shares
issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares."
The
Amendment shall be effective upon approval of the stockholders of the Company at the Company's 2019 annual meeting of stockholders and shall only be applicable with respect to Awards
granted after such approval. If the Amendment is not so approved at such meeting, then the amendment to the 2013 Plan set forth herein shall be void ab initio.
Except
as herein above provided, the 2013 Plan is hereby ratified, confirmed and approved in all respects.
A-1
Table of Contents
Appendix B
For
convenience, the following reflects the proposed changes to our 2013 Stock Incentive Plan, as amended by the Amendment (Appendix A) and as more fully
described in Proposal Three. The text indicated by underline shows additions, and the text indicated by strikethrough shows deletions.
IDERA PHARMACEUTICALS, INC.
2013 STOCK INCENTIVE PLAN
1.
Purpose
The
purpose of this 2013 Stock Incentive Plan (the "
Plan
") of Idera Pharmaceuticals, Inc., a Delaware corporation (the
"
Company
"), is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who are
expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to better align the
interests of such persons with those of the Company's stockholders. Except where the context otherwise requires, the term "
Company
" shall include any of
the Company's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations thereunder
(the "
Code
") and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a
controlling interest, as determined by the Board of Directors of the Company (the "
Board
").
2.
Eligibility
All
of the Company's employees, officers and directors, as well as consultants and advisors to the Company (as such terms are defined and interpreted for purposes of Form S-8
under the Securities Act of 1933, as amended (the "
Securities Act
"), or any successor form) are eligible to be granted Awards under the Plan. Each
person who is granted an Award under the Plan is deemed a "
Participant
." "
Award
" means Options (as
defined in Section 5), SARs (as defined in Section 6), Restricted Stock (as defined in Section 7), Restricted Stock Units (as defined in Section 7) and Other Stock-Based
Awards (as defined in Section 8).
3.
Administration and Delegation
(a)
Administration by Board of Directors.
The Plan will be administered by the Board. The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and interpret the
terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and
to the extent it shall deem expedient and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board's sole discretion and shall be final and
binding on all persons having or claiming any interest in the Plan or in any Award.
(b)
Appointment of Committees.
To the extent permitted by applicable law, the Board may delegate any or all of
its powers under the Plan to one or more committees or subcommittees of the Board (a "
Committee
"). All references in the Plan to the
"
Board
" shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board's powers or
authority under the Plan have been delegated to such Committee or officers.
(c)
Delegation to Officers.
To the extent permitted by applicable law, the Board may delegate to one or more
officers of the Company the power to grant Options and other Awards that constitute rights under Delaware law (subject to any limitations under the Plan) to employees or officers of the Company and to
exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of such Awards to be granted by such officers (including the exercise price
B-1
Table of Contents
of
such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to such Awards that the officers may grant; provided further,
however, that no officer shall be authorized to grant such Awards to any "executive officer" of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the
"
Exchange Act
")) or to any "officer" of the Company (as defined by Rule 16a-1 under the Exchange Act). The Board may not delegate authority under
this Section 3(c) to grant Restricted Stock, unless Delaware law then permits such delegation.
(d)
Awards to Non-Employee Directors.
Discretionary Awards to non-employee directors may be granted and
administered only by a Committee, all of the members of which are independent directors as defined by Section 5605(a)(2) of the NASDAQ Marketplace Rules.
4.
Stock Available for Awards
(a) Number of Shares; Share Counting
.
(1)
Authorized Number of Shares.
Subject to adjustment under Section 9, Awards may be made under the
Plan, any or all of which Awards may be in the form of Incentive Stock Options (as defined in Section 5(b)), for up to such number of shares of common stock, $0.001 par value per share, of the
Company (the "
Common Stock
") as is equal to the sum of:
(A)
25,224,460
27,724,460
shares of Common Stock; plus
(B) such
additional number of shares of Common Stock (up to 6,946,978 shares) as is equal to the sum of the number of shares of Common Stock subject to awards granted under
the Company's 2005 Stock Incentive Plan (the "
2005 Plan
") or the Company's 2008 Stock Incentive Plan (the "
2008
Plan
" and, together with the 2005 Plan, the "
Existing Plans
") which awards expire, terminate or are otherwise surrendered,
canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options to any
limitations of the Code).
Shares
issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
(2)
Fungible Share Pool.
Subject to adjustment under Section 9, any Award that is not a Full-Value Award
shall be counted against the share limits specified in Sections 4(a)(1) and 4(b)(2) as one share for each share of Common Stock subject to such Award and any Award that is a Full-Value Award
shall be counted against the share limits specified in Sections 4(a)(1) and 4(b)(2) as 1.25 shares for each one share of Common Stock subject to such Full-Value Award.
"
Full-Value Award
" means any Award of Restricted Stock, Restricted Stock Unit Award or Other Stock-Based Award (as defined below) with a per share price
or per unit purchase price lower than 100% of Fair Market Value (as defined below) on the date of grant. To the extent a share that was subject to an Award that counted as one share is returned to the
Plan pursuant to Section 4(a)(3), each applicable share reserve will be credited with one share. To the extent that a share that was subject to an Award that counts as 1.25 shares is returned
to the Plan pursuant to Section 4(a)(3), each applicable share reserve will be credited with 1.25 shares.
(3)
Share Counting.
For purposes of counting the number of shares available for the grant of Awards under the
Plan and under the sublimits contained in Section 4(b)(2):
(A) all
shares of Common Stock covered by SARs shall be counted against the number of shares available for the grant of Awards under the Plan and against the sublimit listed
in the first clause of this Section 4(a)(3); provided, however, that (i) SARs that may be settled only in cash shall not be so counted and (ii) if the Company grants an SAR in
tandem with an Option for the same number of shares of Common Stock and provides that only one such Award may be exercised (a "
Tandem SAR
"), only the
shares covered by the Option, and not
B-2
Table of Contents
the
shares covered by the Tandem SAR, shall be so counted, and the expiration of one in connection with the other's exercise will not restore shares to the Plan;
(B) if
any Award (i) expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the
result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or (ii) results in any Common
Stock not being issued (including as a result of an SAR that was settleable either in cash or in stock actually being settled in cash), the unused Common Stock covered by such Award shall again be
available for the grant of Awards; provided, however, that (1) in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code, (2) in the case
of the exercise of an SAR, the number of shares counted against the shares available under the Plan and against the sublimit listed in the first clause of this Section 4(a)(3) shall be the full
number of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number of shares actually used to settle such SAR upon exercise and (3) the
shares covered by a Tandem SAR shall not again become available for grant upon the expiration or termination of such Tandem SAR;
(C) shares
of Common Stock delivered (either by actual delivery, attestation, or net exercise) to the Company by a Participant to (i) purchase shares of Common Stock
upon the exercise of an Award or (ii) satisfy tax withholding obligations (including shares retained from the Award creating the tax obligation) shall not be added back to the number of shares
available for the future grant of Awards; and
(D) shares
of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available
for future grant of Awards.
(b)
Sub-limits.
Subject to adjustment under Section 9, the following sub-limits on the number of shares
subject to Awards shall apply:
(1)
Section 162(m) Per-Participant Limit.
The maximum number of shares of Common Stock with respect to
which Awards may be granted to any Participant under the Plan shall be 1,500,000 per calendar year. For purposes of the foregoing limit, (i) the combination of an Option in tandem with an SAR
shall be treated as a single Award and (ii) each share of Common Stock subject to an Award (including each share of Common Stock subject to a Full-Value Award) shall be counted as one share of
Common
Stock. The per Participant limit described in this Section 4(b)(1) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the
regulations thereunder ("
Section 162(m)
").
(2)
Limit on Awards to Directors.
The maximum number of shares with respect to which Awards may be granted to
directors who are not employees of the Company at the time of grant shall be 20% of the maximum number of authorized shares set forth in Section 4(a)(1).
(c)
Substitute Awards.
In connection with a merger or consolidation of an entity with the Company or the
acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall
not count against the overall share limit set forth in Section 4(a)(1) or any sublimits contained in the Plan, except as may be required by reason of Section 422 and related provisions
of the Code.
B-3
Table of Contents
5.
Stock Options
(a)
General.
The Board may grant options to purchase Common Stock (each, an
"
Option
") and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable.
(b)
Incentive Stock Options.
An Option that the Board intends to be an "incentive stock option" as defined in
Section 422 of the Code (an "
Incentive Stock Option
") shall only be granted to employees of Idera Pharmaceuticals, Inc., any of Idera
Pharmaceuticals, Inc.'s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are
eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. An Option that is not
intended to be an Incentive Stock Option shall be designated a "
Nonstatutory Stock Option
." The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or if the Company converts an Incentive Stock Option to a Nonstatutory
Stock Option.
(c)
Exercise Price.
The Board shall establish the exercise price of each Option and specify the exercise price
in the applicable Option agreement. The exercise price shall be not less than 100% of the fair market value per share of Common Stock as determined by (or in a manner approved by) the Board
("
Fair Market Value
") on the date the Option is granted; provided that if the Board approves the grant of an Option with an exercise price to be
determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value on such future date.
(d)
Duration of Options
. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Board may specify in the applicable option agreement; provided, however, that no Option will be granted with a term in excess of 10 years.
(e)
Exercise of Options
. Options may be exercised by delivery to the Company of a notice
of exercise in a form (which may be electronic) approved by the Company, together with payment in full (in the manner specified in Section 5(f)) of the exercise price for the number of shares
for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company as soon as practicable following exercise.
(f)
Payment Upon Exercise.
Common Stock purchased upon the exercise of an Option granted under the Plan shall be
paid for as follows:
(1) in
cash, by check or by wire transfer, payable to the order of the Company;
(2) except
as may otherwise be provided in the applicable Option agreement or approved by the Board, in its sole discretion, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and
any required tax withholding;
(3) to
the extent provided for in the applicable Option agreement or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of
shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if
acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not
subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;
B-4
Table of Contents
(4) to
the extent provided for in the applicable Nonstatutory Stock Option agreement or approved by the Board in its sole discretion, by delivery of a notice of "net
exercise" to the Company, as a result of which the Participant would receive (i) the number of shares underlying the portion of the Option being exercised, less (ii) such number of
shares as is equal to (A) the aggregate exercise price for the portion of the Option being exercised divided by (B) the Fair Market Value on the date of exercise;
(5) to
the extent permitted by applicable law and provided for in the applicable Option agreement or approved by the Board, in its sole discretion, by payment of such other
lawful consideration as the Board may determine; or
(6) by
any combination of the above permitted forms of payment.
(g)
Limitation on Repricing.
Unless such action is approved by the Company's stockholders, the Company may not
(except as provided for under Section 9): (1) amend any outstanding Option granted under the Plan to provide an exercise price per share that is lower than the then-current exercise
price per share of such outstanding Option, (2) cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than
Awards granted pursuant to Section 4(c)) covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per
share of the cancelled option, (3) cancel in exchange for a cash payment any outstanding Option with an exercise price per share above the then-current Fair Market Value, other than pursuant to
Section 9, or (4) take any other action under the Plan that constitutes a "repricing" within the meaning of the rules of the NASDAQ Stock Market
("
NASDAQ
").
(h)
No Reload Options.
No Option granted under the Plan shall contain any provision entitling the Participant to
the automatic grant of additional Options in connection with any exercise of the original Option.
(i)
No Dividend Equivalents.
No option shall provide for the payment or accrual of Dividend Equivalents (as
defined below).
6.
Stock Appreciation Rights
(a)
General.
The Board may grant Awards consisting of stock appreciation rights
("
SARs
") entitling the holder, upon exercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be determined by the
Board) determined by reference to appreciation, from and after the date of grant, in the Fair Market Value of a share of Common Stock over the measurement price established pursuant to
Section 6(c). The date as of which such appreciation is determined shall be the exercise date.
(b)
Grants.
SARs may be granted in tandem with, or independently of, Options granted under the Plan.
(1)
Tandem Awards.
When SARs are expressly granted in tandem with Options, (i) the SAR will be
exercisable only at such time or times, and to the extent, that the related Option is exercisable (except to the extent designated by the Board in connection with a Reorganization Event) and will be
exercisable in accordance with the procedure required for exercise of the related Option; (ii) the SAR will terminate and no longer be exercisable upon the termination or exercise of the
related Option, except to the extent designated by the Board in connection with a Reorganization Event and except that a SAR granted with respect to less than the full number of shares covered by an
Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the SAR; (iii) the Option
will terminate and no longer be exercisable upon the exercise of the related SAR; and (iv) the SAR will be transferable only with the related Option.
B-5
Table of Contents
(2)
Independent SARs.
A SAR not expressly granted in tandem with an Option will become exercisable at such time
or times, and on such conditions, as the Board may specify in the SAR Award.
(c)
Measurement Price.
The Board shall establish the measurement price of each SAR and specify it in the
applicable SAR agreement. The measurement price shall not be less than 100% of the Fair Market Value on the date the SAR is granted; provided that if the Board approves the grant of an SAR effective
as of a future date, the measurement price shall be not less than 100% of the Fair Market Value on such future date.
(d)
Duration of SARs.
Each SAR shall be exercisable at such times and subject to such terms and conditions as
the Board may specify in the applicable SAR agreement; provided, however, that no SAR will be granted with a term in excess of 10 years.
(e)
Exercise of SARs.
SARs may be exercised by delivery to the Company of a notice of exercise in a form (which
may be electronic) approved by the Company, together with any other documents required by the Board.
(f)
Limitation on Repricing.
Unless such action is approved by the Company's stockholders, the Company may not
(except as provided for under Section 9): (1) amend any outstanding SAR granted under the Plan to provide a measurement price per share that is lower than the then-current measurement
price per share of such outstanding SAR, (2) cancel any outstanding SAR (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards
granted pursuant to Section 4(c)) covering the same or a different number of shares of Common Stock and having an exercise or measurement price per share lower than the then-current measurement
price per share of the cancelled SAR, (3) cancel in exchange for a cash payment any outstanding SAR with a measurement price per share above the then-current Fair Market Value, other than
pursuant to Section 9, or (4) take any other action under the Plan that constitutes a "repricing" within the meaning of the rules of NASDAQ.
(g)
No Reload Rights.
No SAR granted under the Plan shall contain any provision entitling the grantee to the
automatic grant of additional SARs in connection with any exercise of the original SAR.
(h)
No Dividend Equivalents.
No SAR shall provide for the payment or accrual of Dividend Equivalents.
7.
Restricted Stock; Restricted Stock Units
(a)
General.
The Board may grant Awards entitling recipients to acquire shares of Common Stock
("
Restricted Stock
"), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price
(or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the
applicable restriction period or periods established by the Board for such Award. The Board may also grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at
the time such Award vests ("
Restricted Stock Units
") (Restricted Stock and Restricted Stock Units are each referred to herein as a
"
Restricted Stock Award
").
(b)
Terms and Conditions for All Restricted Stock Awards.
The Board shall determine the terms and conditions of
a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.
(c) Additional Provisions Relating to Restricted Stock
.
(1)
Dividends.
Unless otherwise provided in the applicable Award agreement, any dividends (whether paid in cash,
stock or property) declared and paid by the Company with respect to shares of Restricted Stock ("
Accrued Dividends
") shall be paid to the Participant
only if and when such
B-6
Table of Contents
shares
become free from the restrictions on transferability and forfeitability that apply to such shares. Each payment of Accrued Dividends will be made no later than the end of the calendar year in
which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the lapsing of the restrictions on transferability and the
forfeitability provisions applicable to the underlying shares of Restricted Stock.
(2)
Stock Certificates.
The Company may require that any stock certificates issued in respect of shares of
Restricted Stock, as well as dividends or distributions paid on such Restricted Stock, shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company
(or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or
if the Participant has died, to his or her Designated Beneficiary. "
Designated Beneficiary
" means (i) the beneficiary designated, in a manner
determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant's death or (ii) in the absence of an effective designation
by a Participant, the Participant's estate.
(d) Additional Provisions Relating to Restricted Stock Units
.
(1)
Settlement.
Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with
respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or (if so provided in the applicable Award agreement) an amount of cash
equal to the Fair Market Value of one share of Common Stock. The Board may, in its discretion, provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the
election of the Participant in a manner that complies with Section 409A of the Code.
(2)
Voting Rights.
A Participant shall have no voting rights with respect to any Restricted Stock Units.
(3)
Dividend Equivalents.
The Award agreement for Restricted Stock Units may provide Participants with the right
to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock ("
Dividend
Equivalents
"). Dividend Equivalents will be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which such Dividend
Equivalents were granted.
8.
Other Stock-Based Awards
(a)
General.
Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by
reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants ("
Other Stock-Based
Awards
"). Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of
compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine.
(b)
Terms and Conditions.
Subject to the provisions of the Plan, the Board shall determine the terms and
conditions of each Other Stock-Based Award, including any purchase price applicable thereto.
(c)
Dividends.
Unless otherwise provided in the applicable Award agreement, any dividends (whether paid in cash,
stock or property) declared and paid by the Company with respect to shares of Common Stock granted under an Other Stock-Based Award shall be paid to the Participant only if and when such shares become
free from the restrictions on transferability and forfeitability that apply to
B-7
Table of Contents
such
shares. Each payment of any such accrued dividends will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the
15th day of the third month following the lapsing of the restrictions on transferability and the forfeitability provisions applicable to the underlying Other Stock-Based Award.
(d)
Dividend Equivalents.
The Award agreement for Other Stock-Based Awards may provide Participants with the
right to receive Dividend Equivalents. Dividend Equivalents will be subject to the same restrictions on transfer and forfeitability as the Other Stock-Based Awards with respect to which such Dividend
Equivalents were granted.
9.
Adjustments for Changes in Common Stock and Certain Other Events
(a)
Changes in Capitalization.
In the event of any stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than
an ordinary cash dividend, (i) the number and class of securities available under the Plan, (ii) the share counting rules and sublimits set forth in Sections 4(a) and 4(b),
(iii) the number and class of securities and exercise price per share of each outstanding Option, (iv) the share and per-share provisions and the measurement price of each outstanding
SAR, (v) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award and (vi) the share and per-share-related provisions and the
purchase price, if any, of each outstanding Other Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the
Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares
subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between
the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon
such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
(b) Reorganization Events
.
(1)
Definition.
A "
Reorganization Event
" shall mean:
(a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive
cash, securities or other property or is cancelled, (b) any transfer or disposition of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange
or other transaction or (c) any liquidation or dissolution of the Company.
(2)
Consequences of a Reorganization Event on Awards Other than Restricted Stock.
(A) In
connection with a Reorganization Event, the Board may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than
Restricted Stock on such terms as the Board determines (except to the extent specifically provided otherwise in an applicable Award agreement or another agreement between the Company and the
Participant): (i) provide that such Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof),
(ii) upon written notice to a Participant, provide that all of the Participant's unexercised Awards will terminate immediately prior to the consummation of such Reorganization Event unless
exercised by the Participant (to the extent then exercisable) within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable,
realizable, or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the
B-8
Table of Contents
event
of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the
"
Acquisition Price
"), make or provide for a cash payment to Participants with respect to each Award held by a Participant equal to (A) the number
of shares of Common Stock subject to the vested portion of the Award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such Reorganization Event) multiplied
by (B) the excess, if any, of (I) the Acquisition Price over (II) the exercise, measurement or purchase price of such Award and any applicable tax withholdings, in exchange for
the termination of such Award, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if
applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings) and (vi) any combination of the foregoing. In taking any of the actions permitted
under this Section 9(b)(2), the Board shall not be obligated by the Plan to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically.
(B) Notwithstanding
the terms of Section 9(b)(2)(A), in the case of outstanding Restricted Stock Units that are subject to Section 409A of the Code:
(i) if the applicable Restricted Stock Unit agreement provides that the Restricted Stock Units shall be settled upon a "change in control event" within the meaning of Treasury Regulation
Section 1.409A-3(i)(5)(i), and the Reorganization Event constitutes such a "change in control event", then no assumption or substitution shall be permitted pursuant to
Section 9(b)(2)(A)(i) and the Restricted Stock Units shall instead be settled in accordance with the terms of the applicable Restricted Stock Unit agreement; and (ii) the Board may only
undertake the actions set forth in clauses (iii), (iv) or (v) of Section 9(b)(2)(A) if the Reorganization Event constitutes a "change in control event" as defined under
Treasury Regulation Section 1.409A-3(i)(5)(i) and such action is permitted or required by Section 409A of the Code; if the Reorganization Event is not a "change in control event" as so
defined or such action is not permitted or required by Section 409A of the Code, and the acquiring or succeeding corporation does not assume or substitute the Restricted Stock Units pursuant to
clause (i) of Section 9(b)(2)(A), then the unvested Restricted Stock Units shall terminate immediately prior to the consummation of the Reorganization Event without any payment in
exchange therefor.
(C) For
purposes of Section 9(b)(2)(A)(i), an Award (other than Restricted Stock) shall be considered assumed if, following consummation of the Reorganization Event,
such Award confers the right to purchase or receive pursuant to the terms of such Award, for each share of Common Stock subject to the Award immediately prior to the consummation of the Reorganization
Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior
to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not
solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to
be received upon the exercise or settlement of the Award to consist solely of such number of shares of common stock of the acquiring or succeeding corporation (or an affiliate thereof) that the Board
determined to be equivalent in value (as of the date of such determination or another date specified by the Board) to the per share consideration received by holders of outstanding shares of Common
Stock as a result of the Reorganization Event.
B-9
Table of Contents
(3)
Consequences of a Reorganization Event on Restricted Stock.
Upon the occurrence of a Reorganization Event
other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company with respect to outstanding Restricted Stock shall inure to the benefit of the Company's
successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization
Event in the same manner and to the same extent as they applied to such Restricted Stock; provided, however, that the Board may provide for termination or deemed satisfaction of such repurchase or
other rights under the instrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, either initially or by amendment. Upon the occurrence of a
Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock or any other
agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock then outstanding shall automatically be deemed terminated or satisfied.
10.
General Provisions Applicable to Awards
(a)
Transferability of Awards.
Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered
by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option,
pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, that the Board may permit or provide in an
Award for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participant
and/or an immediate family member thereof if the Company would be eligible to use a Form S-8 under the Securities Act for the registration of the sale of the Common Stock subject to such Award
to such proposed transferee; provided further, that the Company shall not be required to recognize any such permitted transfer until such time as such permitted transferee shall, as a condition to
such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the
Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. For the avoidance of doubt, nothing contained in this
Section 10(a) shall be deemed to restrict a transfer to the Company.
(b)
Documentation.
Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board
shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.
(c)
Board Discretion.
Except as otherwise provided by the Plan, each Award may be made alone or in addition or
in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
(d)
Termination of Status.
The Board shall determine the effect on an Award of the disability, death,
retirement, termination or other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during
which, the Participant, or the Participant's legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.
(e)
Withholding.
The Participant must satisfy all applicable federal, state, and local or other income and
employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may decide to satisfy the
withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full
amount, if any, required for withholding or have a broker tender to the Company cash equal to the
B-10
Table of Contents
withholding
obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise, vesting or release from forfeiture of an Award or at the same time as payment
of the exercise or purchase price, unless the Company determines otherwise. If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations
in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market
Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company's minimum
statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income).
Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(f)
Amendment of Award.
Except as otherwise provided in Section 5(g) with respect to repricings,
Section 10(i) with respect to Performance Awards or Section 11(d) with respect to actions requiring stockholder approval, the Board may, subject to Section 10(h), amend, modify or
terminate any
outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock
Option to a Nonstatutory Stock Option. The Participant's consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, does
not materially and adversely affect the Participant's rights under the Plan or (ii) the change is permitted under Section 9.
(g)
Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove restrictions from shares previously issued or delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of
the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable
securities laws and regulations and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations
or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
(h)
Acceleration.
The Board may, at any time, provide that (i) any Award granted on or prior to
April 13, 2015 shall become immediately exercisable in whole or in part, free of some or all of the restrictions or conditions applicable to such Award or otherwise realizable in whole or in
part, as the case may be, and (ii) any Award granted after April 13, 2015 (a "New Award") shall become immediately exercisable in whole or in part, free of some or all of the
restrictions or conditions applicable to such New Award or otherwise realizable in whole or in part, as the case may be, solely (A) upon the death or disability of the Participant or
(B) in connection with a change in control of the Company. Notwithstanding the foregoing, the Board may provide, at any time and for any reason, that any New Award shall become immediately
exercisable in full or in part, free from some or all of the restrictions or conditions applicable to such New Award or otherwise realizable in full or in part, as the case may be, if required under
any contractual obligation of the Company or other policy of the Company, in each case to the extent such obligation or policy is in effect on April 13, 2015.
(i) Performance Awards
.
(1)
Grants.
Restricted Stock Awards and Other Stock-Based Awards under the Plan may be made subject to the
achievement of performance goals pursuant to this Section 10(i) ("
Performance Awards
"). Performance Awards can also provide for cash payments of
up to $1,500,000 per fiscal year per individual.
B-11
Table of Contents
(2)
Committee.
Grants of Performance Awards to any Covered Employee (as defined below) intended to qualify as
"performance-based compensation" under Section 162(m) ("
Performance-Based Compensation
") shall be made only by a Committee (or a subcommittee of
a Committee) comprised solely of two or more directors eligible to serve on a committee making Awards qualifying as "performance-based compensation" under Section 162(m). In the case of such
Awards granted to Covered Employees, references to the Board or to a Committee shall be treated as referring to such Committee (or subcommittee). "
Covered
Employee
" shall mean any person who is, or whom the Committee, in its discretion, determines may be, a "covered employee" under Section 162(m)(3) of the Code.
(3)
Performance Measures.
For any Award that is intended to qualify as Performance-Based Compensation, the
Committee shall specify that the degree of granting, vesting and/or payout shall be subject to the achievement of one or more objective performance measures established by the Committee, which shall
be based on the relative or absolute attainment of specified levels of one or any combination of the following, which may be determined pursuant to generally accepted accounting principles
("
GAAP
") or on a non-GAAP basis, as determined by the Committee: (a) earnings per share, (b) return on average equity or average assets
with respect to a pre-determined peer group, (c) earnings, (d) earnings growth, (e) revenues, (f) expenses, (g) stock price, (h) market share,
(i) return on sales, assets, equity or investment, (j) regulatory compliance, (k) achievement of balance sheet or income statement objectives, (l) total shareholder return,
(m) net operating profit after tax, (n) pre-tax or after tax income, (o) cash flow, (p) achievement of research, development, clinical or regulatory milestones,
(q) product sales, (r) business development activities, (s) the entry into an arrangement or agreement with a third party for the development, commercialization, marketing or
distribution of products, services or technologies, or for conducting a research program to discover and develop a product, service or technology, and/or the achievement of milestones under such
arrangement or agreement, including events that trigger an obligation or payment right, (t) achievement of domestic and international regulatory milestones, including the submission of filings
required to advance products, services and technologies in clinical development and the achievement of approvals by regulatory authorities relating to the commercialization of products, services and
technologies, (u) the achievement of discovery, preclinical and clinical stage scientific objectives, discoveries or inventions for products, services and technologies under research and
development, (v) the entry into or completion of a phase of clinical development for any product, service or technology, such as the entry into or completion of phase 1, 2 and/or 3
clinical trials, (w) the consummation of debt or equity financing transactions, or acquisitions of business, technologies and assets, (x) new product or service releases,
(y) specified levels of product sales, net income, earnings before or after discontinued operations, interest, taxes, depreciation and/or amortization, operating profit before or after
discontinued operations and/or taxes, sales, sales growth, earnings growth, cash flow or cash position, gross margins, stock price, market share, return on sales, assets, equity or investment and
(z) improvement of financial ratings. Such goals may reflect absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities or other
external measure of the selected performance criteria and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. The
Committee may specify that such performance measures shall be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued
operations, (iii) the cumulative effects of changes in accounting principles, (iv) the writedown of any asset, (v) fluctuation in foreign currency exchange rates, and
(vi) charges for restructuring and rationalization programs. Such performance measures: (i) may vary by Participant and may be different for different Awards; (ii) may be
particular to a Participant or the department, branch, line of business, subsidiary or other unit in which the Participant works and may cover such period as may be specified by the Committee; and
(iii) shall be set by the Committee within the time
B-12
Table of Contents
period
prescribed by, and shall otherwise comply with the requirements of, Section 162(m). Awards that are not intended to qualify as Performance-Based Compensation may be based on these or
such other performance measures as the Board may determine.
(4)
Adjustments.
Notwithstanding any provision of the Plan, with respect to any Performance Award that is
intended to qualify as Performance-Based Compensation, the Committee may adjust downwards, but not upwards, the cash or number of shares payable pursuant to such Award, and the Committee may not waive
the achievement of the applicable performance measures except in the case of the death or disability of the Participant or a change in control of the Company.
(5)
Other.
The Committee shall have the power to impose such other restrictions on Performance Awards as it may
deem necessary or appropriate to ensure that such Awards satisfy all requirements for Performance-Based Compensation. Dividend Equivalents will be subject to the same restrictions on transfer and
forfeitability as the Performance Awards with respect to which such Dividend Equivalents were granted.
(j)
Limitations on Vesting.
Subject to Section 10(h) and notwithstanding anything to the contrary in the
Plan, no New Award shall vest earlier than the first anniversary of its date of grant. The foregoing sentence shall not apply to an aggregate of up to 5% of the maximum number of authorized shares set
forth in Section 4(a)(1).
11.
Miscellaneous
(a)
No Right To Employment or Other Status.
No person shall have any claim or right to be granted an Award by
virtue of the adoption of the Plan, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company
expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b)
No Rights As Stockholder.
Subject to the provisions of the applicable Award, no Participant or Designated
Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares.
(c)
Effective Date and Term of Plan.
The Plan shall become effective on the date the Plan is approved by the
Company's stockholders (the "
Effective Date
"). No Awards shall be granted under the Plan after the expiration of 10 years from the Effective
Date, but Awards previously granted may extend beyond that date.
(d)
Amendment of Plan.
The Board may amend, suspend or terminate the Plan or any portion thereof at any time
provided that (i) to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall
become exercisable, realizable or vested, as applicable to such Award, unless and until the Company's stockholders approve such amendment in the manner required by Section 162(m);
(ii) no amendment that would require stockholder approval under the rules of NASDAQ may be made effective unless and until the Company's stockholders approve such amendment; and (iii) if
the NASDAQ amends its corporate governance rules so that such rules no longer require stockholder approval of NASDAQ "material amendments" to equity compensation plans, then, from and after the
effective date of such amendment to the NASDAQ rules, no amendment to the Plan (A) materially increasing the number of shares authorized under the Plan (other than pursuant to
Section 4(c) or 9), (B) expanding the types of Awards that may be granted under the Plan, or (C) materially expanding the class of participants eligible to participate in the Plan
shall be effective unless and until the Company's stockholders approve such amendment. In addition, if at any time the approval of the Company's stockholders is required as to any other modification
or amendment under Section 422 of the Code or any successor
B-13
Table of Contents
provision
with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan
adopted in accordance with this Section 11(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board
determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of Participants under the Plan.
(e)
Authorization of Sub-Plans (including for Grants to non-U.S. Employees).
The Board may from time to time
establish one or more sub-plans under the Plan for purposes of satisfying applicable securities, tax or other laws of various jurisdictions. The Board shall establish such sub-plans by adopting
supplements to the Plan containing (i) such limitations on the Board's discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions
not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply
only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such
supplement.
(f)
Compliance with Section 409A of the Code.
Except as provided in individual Award agreements initially
or by amendment, if and to the extent (i) any portion of any payment, compensation or other benefit provided to a Participant pursuant to the Plan in connection with his or her employment
termination constitutes "nonqualified deferred compensation" within the meaning of Section 409A of the Code and (ii) the Participant is a specified employee as defined in
Section 409A(a)(2)(B)(i) of the Code, in each case as determined by the Company in accordance with its procedures, by which determinations the Participant (through accepting the Award) agrees
that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of "separation from service" (as
determined under Section 409A of the Code) (the "
New Payment Date
"), except as Section 409A of the Code may then permit. The aggregate of
any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump
sum on such New Payment Date, and any remaining payments will be paid on their original schedule.
The
Company makes no representations or warranty and shall have no liability to the Participant or any other person if any provisions of or payments, compensation or other benefits under
the Plan are determined to constitute nonqualified deferred compensation subject to Section 409A of the Code but do not to satisfy the conditions of that section.
(g)
Limitations on Liability.
Notwithstanding any other provisions of the Plan, no individual acting as a
director, officer, employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred
in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director,
officer, employee or agent of the Company. The Company will indemnify and hold harmless each director, officer, employee or agent of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys' fees) or liability (including any sum paid in settlement of a claim with
the Board's approval) arising out of any act or omission to act concerning the Plan unless arising out of such person's own fraud or bad faith.
(h)
Governing Law.
The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted
in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than the State
of Delaware.
B-14
Table of Contents
Appendix C
AMENDMENT TO THE
IDERA PHARMACEUTICALS, INC. 2017 EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, Idera Pharmaceuticals, Inc. (the "Company") desires to amend the Idera Pharmaceuticals, Inc. 2017 Employee Stock Purchase
Plan (the "ESPP"), in the manner set forth below (the "Amendment"); and
WHEREAS,
on April [
·
], 2019, subject to stockholder approval,
the Board of Directors of the Company approved the Amendment; and
NOW
THEREFORE, in accordance with Section 16 of the ESPP, the ESPP is hereby amended as follows:
-
1.
-
The
first paragraph of the ESPP is hereby amended by such paragraph in its entirety and substituting the following in lieu thereof is hereby amended in its entirety
to read as follows:
"The
purpose of this Plan is to provide eligible employees of Idera Pharmaceuticals, Inc. (the "Company") and certain of its subsidiaries with opportunities to purchase shares of the Company's
common stock, $0.001 par value (the "Common Stock"). Eight hundred fifty thousand (850,000) shares of Common Stock in the aggregate have been approved for this purpose, subject to any adjustment
pursuant to Section 15 hereof. This Plan is intended to qualify as an "employee stock purchase plan" as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations issued thereunder, and shall be interpreted consistent therewith."
The
Amendment shall be effective upon approval of the stockholders of the Company at the Company's 2019 annual meeting of stockholders and shall only be applicable with respect to Awards
granted after such approval. If the Amendment is not so approved at such meeting, then the amendment to the ESPP set forth herein shall be void ab initio.
Except
as herein above provided, the ESPP is hereby ratified, confirmed and approved in all respects.
C-1
Table of Contents
Appendix D
For
convenience, the following reflects the proposed changes to our 2017 Employee Stock Purchase Plan, as amended by the Amendment (Appendix C) and as more fully
described in Proposal Four. The text indicated by underline shows additions, and the text indicated by strikethrough shows deletions.
IDERA PHARMACEUTICALS, INC.
2017 EMPLOYEE STOCK PURCHASE PLAN
The
purpose of this Plan is to provide eligible employees of Idera Pharmaceuticals, Inc. (the "Company") and certain of its subsidiaries with opportunities to
purchase shares of the Company's common stock, $0.001 par value (the "Common Stock").
Five hundred thousand (500,000)
Eight hundred fifty thousand
(850,000)
shares of Common Stock in the aggregate have been approved for this purpose, subject to any adjustment pursuant to Section 15 hereof. This Plan is intended to qualify
as an "employee stock purchase plan" as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations issued thereunder, and shall be interpreted
consistent therewith.
1.
Administration
. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the "Committee"). The Board or the Committee has authority to make rules and regulations for the administration of the Plan and its
interpretation and decisions with regard thereto shall be final and conclusive.
2.
Eligibility
. All employees of the Company and all employees of any subsidiary of
the Company (as defined in Section 424(f) of the Code) designated by the Board or the Committee from time to time (a "Designated Subsidiary"), are eligible to participate in any one or more of
the offerings of Options (as defined in Section 9) to purchase Common Stock under the Plan provided that:
(a) they
are customarily employed by the Company or a Designated Subsidiary for more than 20 hours a week and for more than five months in a calendar year;
(b) they
have been employed by the Company or a Designated Subsidiary for at least three months prior to enrolling in the Plan; and
(c) they
are employees of the Company or a Designated Subsidiary on the first day of the applicable Plan Period (as defined below).
No
employee may be granted an Option hereunder if such employee, immediately after the Option is granted, owns 5% or more of the total combined voting power or value of the stock of the
Company or any subsidiary. For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of an employee, and all
stock that the employee has a contractual right to purchase shall be treated as stock owned by the employee.
The
Company retains the discretion to determine which eligible employees may participate in an offering pursuant to and consistent with Treasury Regulation Sections 1.423-2(e) and
(f).
3.
Offerings
. The Company will make one or more offerings ("Offerings") to
employees to purchase stock under this Plan. Offerings will begin on the dates determined by the Board or the Committee or the first business day thereafter (the "Offering Commencement Dates"). Each
Offering Commencement Date will begin a plan period (a "Plan Period") during which payroll deductions will be made and held for the purchase of Common Stock at the end of the Plan Period. The Board or
the Committee may, at its discretion, choose a Plan Period of twelve (12) months or less for subsequent Offerings and/or choose a different commencement date for Offerings under the Plan.
D-1
Table of Contents
4.
Participation
. An employee eligible on the Offering Commencement Date of any
Offering may participate in such Offering by completing and forwarding either a written or electronic payroll deduction authorization form to the employee's appropriate payroll office at least
14 days prior to the applicable Offering Commencement Date. The form will authorize a regular payroll deduction from the Compensation received by the employee during the Plan Period. Unless an
employee files a new form or withdraws from the Plan, his or her deductions and purchases will continue at the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money reportable on the employee's Federal Income Tax Withholding Statement, excluding overtime, shift premium, incentive or bonus awards,
allowances and reimbursements for expenses such as relocation allowances for travel expenses, income or gains associated with the grant or vesting of restricted stock, income or gains on the exercise
of Company stock options or stock appreciation rights, and similar items, whether or not shown or separately identified on the employee's Federal Income Tax Withholding Statement, but including, in
the case of salespersons, sales commissions to the extent determined by the Board or the Committee.
5.
Deductions
. The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction in any dollar amount up to a maximum of 10% of the Compensation he or she
receives during the Plan Period or such shorter period during which deductions from payroll are made. Payroll deductions may be at the rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of Compensation
with any change in compensation during the Plan Period to result in an automatic corresponding change in the dollar amount withheld. The minimum payroll deduction is such percentage of Compensation as
may be established from time to time by the Board or the Committee.
6.
Deduction Changes
. An employee may decrease or discontinue his or her payroll
deduction once during any Plan Period, by filing either a written or electronic new payroll deduction authorization form. However, an employee may not increase his or her payroll deduction during a
Plan Period. If an
employee elects to discontinue his or her payroll deductions during a Plan Period, but does not elect to withdraw his or her funds pursuant to Section 8 hereof, funds deducted prior to his or
her election to discontinue will be applied to the purchase of Common Stock on the Exercise Date (as defined below).
7.
Interest
. Interest will not be paid on any employee accounts, except to the
extent that the Board or the Committee, in its sole discretion, elects to credit employee accounts with interest at such rate as it may from time to time determine.
8.
Withdrawal of Funds
. An employee may at any time prior to the close of business
on the last business day in a Plan Period and for any reason permanently draw out the balance accumulated in the employee's account and thereby withdraw from participation in an Offering.
Partial
withdrawals are not permitted. The employee may not begin participation again during the remainder of the Plan Period during which the employee withdrew his or her balance. The
employee may participate in any subsequent Offering in accordance with terms and conditions established by the Board or the Committee.
9.
Purchase of Shares
.
(a)
Number of Shares
. On the Offering Commencement Date of each Plan Period, the
Company will grant to each eligible employee who is then a participant in the Plan an option (an "Option") to purchase on the last business day of such Plan Period (the "Exercise Date") at the
applicable purchase price (the "Option Price") up to a whole number of shares of Common Stock determined by multiplying $2,083 by the number of full months in the Plan Period and dividing the result
by the closing price (as determined below) on the Offering Commencement Date; provided, however, that no employee may be granted an Option which permits his or her rights to purchase Common Stock
under this Plan and any other employee stock purchase plan (as defined in
D-2
Table of Contents
Section 423(b)
of the Code) of the Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value of such Common Stock (determined at the date such Option is
granted) for each calendar year in which the Option is outstanding at any time.
(b)
Option Price
. The Board or the Committee shall determine the Option Price for
each Plan Period, including whether such Option Price shall be determined based on the lesser of the closing price of the Common Stock on (i) the first business day of the Plan Period or
(ii) the Exercise Date, or shall be based solely on the closing price of the Common Stock on the Exercise Date; provided, however, that such Option Price shall be at least 85% of the applicable
closing price. In the absence of a determination by the Board or the Committee, the Option Price will be 85% of the lesser of the closing price of the Common Stock on (i) the first business day
of the Plan Period and (ii) the Exercise Date. The closing price shall be (a) the closing price (for the primary trading session) on any national securities exchange on which the Common
Stock is listed or (b) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in The Wall Street Journal or another source
selected by the Board or the Committee. If no sales of Common Stock were made on such a day, the price of the Common Stock shall be the reported price for the next preceding day on which sales were
made.
(c)
Exercise of Option
. Each employee who continues to be a participant in the Plan
on the Exercise Date shall be deemed to have exercised his or her Option at the Option Price on such date and shall be deemed to have purchased from the Company the number of whole shares of Common
Stock reserved for the purpose of the Plan that his or her accumulated payroll deductions on such date will pay for, but not in excess of the maximum numbers determined in the manner set forth above.
(d)
Return of Unused Payroll Deductions
. Any balance remaining in an employee's
payroll deduction account at the end of a Plan Period will be automatically refunded to the employee, except that any balance that is less than the purchase price of one share of Common Stock will be
carried forward into the employee's payroll deduction account for the following Offering, unless the employee elects not to participate in the following Offering under the Plan, in which case the
balance in the employee's account shall be refunded.
10.
Issuance of Certificates
. Certificates representing shares of Common Stock
purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or (in the Company's
sole discretion) in the name of a brokerage firm, bank, or other nominee holder designated by the employee. The Company may, in its sole discretion and in compliance with applicable laws, authorize
the use of book entry registration of shares in lieu of issuing stock certificates.
11.
Rights on Retirement, Death or Termination of Employment
. If a participating
employee's employment ends before the last business day of a Plan Period, no payroll deduction shall be taken from any pay then due and owing to the employee and the balance in the employee's account
shall be paid to the employee. In the event of the employee's death before the last business day of a Plan Period, the Company shall, upon notification of such death, pay the balance of the employee's
account (a) to the executor or administrator of the employee's estate or (b) if no such executor or administrator has been appointed to the knowledge of the Company, to such other
person(s) as the Company may, in its discretion, designate. If, before the last business day of the Plan Period, the Designated Subsidiary by which an employee is employed ceases to be a subsidiary of
the Company, or if the employee is transferred to a subsidiary of the Company that is not a Designated Subsidiary, the employee shall be deemed to have terminated employment for the purposes of this
Plan.
12.
Optionees Not Stockholders
. Neither the granting of an Option to an employee
nor the deductions from his or her pay shall make such employee a stockholder of the shares of Common Stock covered by an Option under this Plan until he or she has purchased and received such shares.
D-3
Table of Contents
13.
Options Not Transferable
. Options under this Plan are not transferable by a
participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee's lifetime only by the employee.
14.
Application of Funds
. All funds received or held by the Company under this Plan
may be combined with other corporate funds and may be used for any corporate purpose.
15.
Adjustment for Changes in Common Stock and Certain Other Events
.
(a)
Changes in Capitalization
. In the event of any stock split, reverse stock
split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of
Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the share limitations set forth in Section 9, and
(iii) the Option Price shall be equitably adjusted to the extent determined by the Board or the Committee.
(b)
Reorganization Events
.
(1)
Definition
. A "Reorganization Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other
property or is cancelled, (b) any transfer or disposition of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange or other transaction or
(c) any liquidation or dissolution of the Company.
(2)
Consequences of a Reorganization Event on Options
. In connection with a
Reorganization Event, the Board or the Committee may take any one or more of the following actions as to outstanding Options
on such terms as the Board or the Committee determines: (i) provide that Options shall be assumed, or substantially equivalent Options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), (ii) upon written notice to employees, provide that all outstanding Options will be terminated immediately prior to the consummation of such
Reorganization Event and that all such outstanding Options will become exercisable to the extent of accumulated payroll deductions as of a date specified by the Board or the Committee in such notice,
which date shall not be less than ten (10) days preceding the effective date of the Reorganization Event, (iii) upon written notice to employees, provide that all outstanding Options
will be cancelled as of a date prior to the effective date of the Reorganization Event and that all accumulated payroll deductions will be returned to participating employees on such date,
(iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the
Reorganization Event (the "Acquisition Price"), change the last day of the Plan Period to be the date of the consummation of the Reorganization Event and make or provide for a cash payment to each
employee equal to (A) (i) the Acquisition Price times (ii) the number of shares of Common Stock that the employee's accumulated payroll deductions as of immediately prior to the
Reorganization Event could purchase at the Option Price, where the Acquisition Price is treated as the fair market value of the Common Stock on the last day of the applicable Plan Period for purposes
of determining the Option Price under Section 9(b) hereof, and where the number of shares that could be purchased is subject to the limitations set forth in Section 9(a), minus
(B) the result of multiplying such number of shares by such Option Price, (v) provide that, in connection with a liquidation or dissolution of the Company, Options shall convert into the
right to receive liquidation proceeds (net of the Option Price thereof) and (vi) any combination of the foregoing.
D-4
Table of Contents
For
purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each
share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of
the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the
Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the exercise of Options to consist solely of such number of shares of common stock of the acquiring or succeeding corporation (or an affiliate
thereof) that the Board determines to be equivalent in value (as of the date of such determination or another date specified by the Board) to the per share consideration received by holders of
outstanding shares of Common Stock as a result of the Reorganization Event.
16.
Amendment of the Plan
. The Board may at any time, and from time to time, amend
or suspend this Plan or any portion thereof, except that (a) if the approval of any such amendment by the shareholders of the Company is required by Section 423 of the Code, such
amendment shall not be effected without
such approval, and (b) in no event may any amendment be made that would cause the Plan to fail to comply with Section 423 of the Code.
17.
Insufficient Shares
. If the total number of shares of Common Stock specified in
elections to be purchased under any Offering plus the number of shares purchased under previous Offerings under this Plan exceeds the maximum number of shares issuable under this Plan, the Board or
the Committee will allot the shares then available on a pro-rata basis.
18.
Termination of the Plan
. This Plan may be terminated at any time by the Board.
Upon termination of this Plan all amounts in the accounts of participating employees shall be promptly refunded.
19.
Governmental Regulations
. The Company's obligation to sell and deliver Common
Stock under this Plan is subject to listing on a national stock exchange (to the extent the Common Stock is then so listed or quoted) and the approval of all governmental authorities required in
connection with the authorization, issuance or sale of such stock.
20.
Governing Law
. The Plan shall be governed by Delaware law except to the extent
that such law is preempted by federal law.
21.
Issuance of Shares
. Shares may be issued upon exercise of an Option from
authorized but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source.
22.
Notification upon Sale of Shares
. Each employee agrees, by entering the Plan,
to promptly give the Company notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such
shares were purchased.
23.
Grants to Employees in Foreign Jurisdictions
. The Company may, to comply with
the laws of a foreign jurisdiction, grant Options to employees of the Company or a Designated Subsidiary who are citizens or residents of such foreign jurisdiction (without regard to whether they are
also citizens of the United States or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) with terms that are less favorable (but not more favorable) than the terms of
Options granted under the Plan to employees of the Company or a Designated Subsidiary who are resident in the United States. Notwithstanding the preceding provisions of this Plan, employees of the
Company or a Designated
D-5
Table of Contents
Subsidiary
who are citizens or residents of a foreign jurisdiction (without regard to whether they are also citizens of the United States or resident aliens (within the meaning of
Section 7701(b)(1)(A) of the Code)) may be excluded from eligibility under the Plan if (a) the grant of an Option under the Plan to a citizen or resident of the foreign jurisdiction is
prohibited under the laws of such jurisdiction or (b) compliance with the laws of the foreign jurisdiction would cause the Plan to violate the requirements of Section 423 of the Code.
The Company may add one or more appendices to this Plan describing the operation of the Plan in those foreign jurisdictions in which employees are excluded from participation or granted less favorable
Options.
25.
Authorization of Sub-Plans
. The Board may from time to time establish one or
more sub-plans under the Plan with respect to one or more Designated Subsidiaries, provided that such sub-plan complies with Section 423 of the Code.
26.
Withholding
. If applicable tax laws impose a tax withholding obligation, each
affected employee shall, no later than the date of the event creating the tax liability, make provision satisfactory to the Board for payment of any taxes required by law to be withheld in connection
with any transaction related to Options granted to or shares acquired by such employee pursuant to the Plan. The Company may, to the extent permitted by law, deduct any such taxes from any payment of
any kind otherwise due to an employee.
27.
Effective Date and Approval of Shareholders
. The Plan shall take effect on
June 7, 2017 subject to approval by the shareholders of the Company as required by Section 423 of the Code, which approval must occur within twelve months of the adoption of the Plan by
the Board.
D-6
MMMMMMMMMMMM MMMMMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ Your vote matters heres how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 received by 1:00am, Eastern Time, on June 4, 2019. Online GIof ntoo welwewct.rinovneicstvoortviontge,.com/IDRA or scan delete QR code and control # the QR code login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.investorvote.com/IDRA Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + 1. Election of Directors For Withhold For Withhold 01 - Mark Goldberg, M.D. 02 - Carol A. Schafer ForAgainst Abstain ForAgainst Abstain 2. Approval of the advisory vote on executive compensation 3. Approval of amendment to 2013 Share Incentive Plan 4. Approval of amendment to 2017 Employee Stock Purchase Plan 5. Ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019 Please sign this proxy exactly as your name appears hereon. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign. If a corporation or partnership, this signature should be that of an authorized officer who should state his or her title. Date (mm/dd/yyyy) Please print date below. Signature 1 Please keep signature within the box. Signature 2 Please keep signature within the box. MMMMMMM C 1234567890 J N T 1 7 9 3 8 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 2 4 C V 4 031Y3B MMMMMMMMM B Authorized Signatures This section must be completed for your vote to count. Please date and sign below. A Proposals The Board of Directors recommends a Vote FOR the nominees listed below and FOR Proposals 2, 3, 4 and 5. 2019 Annual Meeting Proxy Card1234 5678 9012 345
IDERA PHARMACEUTICALS, INC. ANNUAL MEETING OF STOCKHOLDERS Tuesday, June 4, 2019 8:30 a.m. Idera Pharmaceuticals, Inc. 505 Eagleview Boulevard Suite 212 Exton, PA 19341 q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Idera Pharmaceuticals, Inc. 505 Eagleview Boulevard Suite 212 Exton, PA 19341 This proxy is solicited by the Board of Directors for use at the Annual Meeting of Stockholders on June 4, 2019. The undersigned hereby appoints Mr. Vincent J. Milano and Mr. Bryant D. Lim, and each of them, with full power of substitution, to vote, as designated below, all the shares of Idera Pharmaceuticals, Inc. common stock held of record by the undersigned at the close of business on April 18, 2019, at the 2019 annual meeting of stockholders, to be held June 4, 2019, and at any and all adjournments or postponements thereof. The undersigned hereby revokes any and all earlier dated proxies with respect to the annual meeting. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned. If no direction is made, this proxy will be voted FOR each of the nominees for election as a Class III member of the Board of Directors, FOR the approval of the advisory vote on executive compensation, FOR approval of an amendment to the 2013 Share Incentive Plan, FOR approval of an amendment to the 2017 Employee Stock Purchase Plan, and FOR ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. If any other business is presented at the annual meeting, including matters incidental to the conduct of the meeting or otherwise, this proxy will be voted by those named in this proxy in their best judgment. At the present time, the board of directors knows of no other business to be presented at the meeting. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED AS THE BOARD RECOMMENDS. See reverse for voting instructions. Change of Address Please print new address below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. + C Non-Voting Items Proxy Idera Pharmaceuticals, Inc. Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/IDRA