UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Securities Exchange Act of 1934
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ANTHERA PHARMACEUTICALS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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25801
Industrial Boulevard, Suite B
Hayward,
California 94545
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
July 9,
2010
The Annual
Meeting of Stockholders of Anthera Pharmaceuticals, Inc. will be
held on Friday, July 9, 2010 at
11:00 a.m. Pacific Daylight Time, at the offices of
Goodwin Procter LLP, 135 Commonwealth Drive, Menlo Park,
California, 94025, for the following purposes:
1. To
elect two Class I directors, as nominated by the Board of
Directors, to hold office until the 2013 Annual Meeting of
Stockholders or until their successors are duly elected and
qualified;
2. To
approve the Company’s Amended and Restated 2010 Stock
Option and Incentive Plan, which amends the Company’s
existing plan to increase the number of shares authorized for
issuance thereunder by 200,000 shares;
3. To
approve the Company’s 2010 Employee Stock Purchase Plan;
4. To
ratify the appointment of Deloitte & Touche LLP as the
independent registered public accounting firm of the Company for
its fiscal year ending December 31, 2010; and
5. To
transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Proposal 1
relates solely to the election of two Class I directors
nominated by the Board of Directors and does not include any
other matters relating to the election of directors, including
without limitation, the election of directors nominated by any
stockholder of the Company.
The Board of
Directors has fixed the close of business on May 28, 2010
as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting of
Stockholders, or at any adjournments of the Annual Meeting of
Stockholders.
In order to
ensure your representation at the Annual Meeting of
Stockholders, you are requested to submit your proxy over the
Internet, by telephone or by signing and dating the enclosed
proxy as promptly as possible and returning it in the enclosed
envelope (to which no postage need be affixed if mailed in the
United States). If you attend the Annual Meeting of Stockholders
and file with the Secretary of the Company an instrument
revoking your proxy or a duly executed proxy bearing a later
date, your proxy will not be used.
All
stockholders are cordially invited to attend the Annual Meeting
of Stockholders.
By Order of
the Board of Directors
Anthera
Pharmaceuticals, Inc.
Bradley A.
Bugdanowitz
Secretary
Hayward,
California
June 7, 2010
Your vote
is important, whether or not you expect to attend the Annual
Meeting of Stockholders. You are urged to vote either via the
Internet or telephone, or to mark, sign and date and promptly
return the proxy in the stamped return envelope provided with
such materials. Voting promptly will help avoid the additional
expense of further solicitation to assure a quorum at the
meeting.
TABLE OF CONTENTS
ANTHERA
PHARMACEUTICALS, INC.
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
JULY
9, 2010
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
This proxy
statement is furnished in connection with the solicitation of
proxies for use prior to or at the Annual Meeting of
Stockholders (the “Annual Meeting”) of Anthera
Pharmaceuticals, Inc. (the “Company”), a Delaware
corporation, to be held at 11:00 a.m. local time on Friday,
July 9, 2010 and at any adjournments or postponements
thereof for the following purposes:
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To elect two
Class I directors, as nominated by the Board of Directors,
to hold office until the 2013 Annual Meeting of Stockholders or
until their successors are duly elected and qualified;
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To approve
the Company’s Amended and Restated 2010 Stock Option and
Incentive Plan, which amends the Company’s existing plan to
increase the number of shares authorized for issuance thereunder
by 200,000 shares;
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To approve
the Company’s 2010 Employee Stock Purchase Plan;
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To ratify
the appointment of Deloitte & Touche LLP as the
independent registered public accounting firm of the Company for
its fiscal year ending December 31, 2010; and
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To transact
such other business as may properly come before the meeting or
any adjournment or postponement thereof.
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The Annual
Meeting will be held at the offices of Goodwin Procter LLP, 135
Commonwealth Drive, Menlo Park, California 94025. The proxy
statement and accompanying form of proxy will be mailed to
stockholders on or about June 11, 2010.
Important
Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on July 9, 2010
This
proxy statement and the Company’s 2009 Annual Report are
available electronically at www.proxyvote.com.
Solicitation
This
solicitation is made on behalf of the Board of Directors. We
will bear the costs of preparing, mailing, online processing and
other costs of the proxy solicitation made by our Board of
Directors. Certain of our officers and employees may solicit the
submission of proxies authorizing the voting of shares in
accordance with the Board of Directors’ recommendations.
Such solicitations may be made by telephone, facsimile
transmission or personal solicitation. No additional
compensation will be paid to such officers, directors or regular
employees for such services. We will reimburse banks, brokerage
firms and other custodians, nominees and fiduciaries for
reasonable
out-of-pocket
expenses incurred by them in sending proxy material to
stockholders.
Voting
Rights and Outstanding Shares
Only holders
of record of our common stock as of the close of business on
May 28, 2010 are entitled to receive notice of, and to vote
at, the Annual Meeting. Each holder of common stock shall be
entitled to one vote for each share held on all matters to be
voted upon at the Annual Meeting. At the close of business on
May 28, 2010, there were 22,312,870 shares of common
stock issued and outstanding, which were held by approximately
275 holders of record.
A quorum of
stockholders is necessary to take action at the Annual Meeting.
Stockholders representing a majority of the outstanding shares
of our common stock (present in person or represented by proxy)
will constitute a quorum. We will appoint election inspectors
for the meeting to determine whether or not a quorum is present
and to tabulate votes cast by proxy or in person at the Annual
Meeting. Abstentions, withheld votes and broker non-votes (which
occur when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular matter because
such broker, bank or other nominee does not have discretionary
authority to vote on that matter and has not received voting
instructions from the beneficial owner) are counted as present
for purposes of determining the presence of a quorum for the
transaction of business at the Annual Meeting.
Votes
Required for Each Proposal
To elect our
directors and approve the other proposals being considered at
the Annual Meeting, the voting requirements are as follows:
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Discretionary
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Proposal
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Vote
Required
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Voting
Permitted?
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Election of Directors
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Plurality
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No
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Approval of Amended and Restated 2010 Stock Option and Incentive
Plan
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Majority
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No
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Approval of 2010 Employee Stock Purchase Plan
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Majority
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No
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Ratification of Deloitte & Touche LLP
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Majority
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Yes
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“Discretionary
Voting Permitted”
means
that brokers will have discretionary voting authority with
respect to shares held in street name for their clients, even if
the broker does not receive voting instructions from their
client.
“Majority”
means
a majority of the votes properly cast for and against such
matter.
“Plurality”
means
a plurality of the votes properly cast on the election of
directors.
The vote
required and method of calculation for the proposals to be
considered at the Annual Meeting are as follows:
Proposal One —
Election of
Directors.
If
a quorum is present, the two director nominees receiving the
highest number of votes, in person or by proxy, will be elected
as directors. You may vote “FOR” both nominees,
“WITHHOLD” for both nominees or “WITHHOLD”
for one nominee by specifying the name of such nominee on your
proxy card. Withheld votes and broker non-votes will have no
effect on the outcome of the election of directors.
All Other
Proposals — Approval of the Amended and Restated 2010
Stock Option and Incentive Plan, Approval of the 2010 Employee
Stock Purchase Plan and Ratification of Deloitte &
Touche LLP as independent registered public
accountants.
Approval
of all proposals (other than the election of directors) requires
the affirmative vote of a majority of the votes properly cast
for and against such matter. You may vote “FOR,”
“AGAINST” or “ABSTAIN” from voting on these
proposals. If you abstain from voting on any of these matters,
your shares will not be counted as “votes cast” with
respect to such matter, and the abstention will have no effect
on the proposal. Broker non-votes will not be counted as
“votes cast” and will therefore have no effect on the
proposals.
We request
that you vote your shares by proxy following the methods as
instructed by the notice: over the Internet, by telephone or by
mail. If you choose to vote by mail, your shares will be voted
in accordance with
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your voting
instructions if the proxy card is received prior to or at the
meeting. If you sign and return your proxy card but do not give
voting instructions, your shares will be voted FOR (1) the
election of the Company’s nominees as directors;
(2) the approval of the Amended and Restated 2010 Stock
Option and Incentive Plan; (3) the approval of the 2010
Employee Stock Purchase Plan; (4) the ratification of the
appointment of Deloitte & Touche LLP as the
independent registered public accounting firm for the Company
for the fiscal year ending December 31, 2010; and
(5) as the proxy holders deem advisable, in their
discretion, on other matters that may properly come before the
Annual Meeting.
Voting by
Proxy Over the Internet or by Telephone
Stockholders
whose shares are registered in their own names may vote by proxy
by mail, over the Internet or by telephone. Instructions for
voting by proxy over the Internet or by telephone are set forth
on the notice of proxy materials. The Internet and telephone
voting facilities will close at 11:59 p.m. Eastern Time on
Thursday, July 8, 2010. The notice will also provide
instructions on how you can elect to receive future proxy
materials electronically or in printed form by mail. If you
choose to receive future proxy materials electronically, you
will receive an email next year with instructions containing a
link to the proxy materials and a link to the proxy voting site.
Your election to receive proxy materials electronically or in
printed form by mail will remain in effect until you terminate
such election.
If your
shares are held in street name, the voting instruction form sent
to you by your broker, bank or other nominee should indicate
whether the institution has a process for beneficial holders to
provide voting instructions over the Internet or by telephone. A
number of banks and brokerage firms participate in a program
that also permits stockholders whose shares are held in street
name to direct their vote over the Internet or by telephone. If
your bank or brokerage firm gives you this opportunity, the
voting instructions from the bank or brokerage firm that
accompany this proxy statement will tell you how to use the
Internet or telephone to direct the vote of shares held in your
account. If your voting instruction form does not include
Internet or telephone information, please complete and return
the voting instruction form in the self-addressed, postage-paid
envelope provided by your broker. Stockholders who vote by proxy
over the Internet or by telephone need not return a proxy card
or voting instruction form by mail, but may incur costs, such as
usage charges, from telephone companies or Internet service
providers.
Revocability
of Proxies
Any proxy
may be revoked at any time before it is exercised by filing an
instrument revoking it with the Company’s Secretary or by
submitting a duly executed proxy bearing a later date prior to
the time of the Annual Meeting. Stockholders who have voted by
proxy over the Internet or by telephone or have executed and
returned a proxy and who then attend the Annual Meeting and
desire to vote in person are requested to notify the Secretary
in writing prior to the time of the Annual Meeting. We request
that all such written notices of revocation to the Company be
addressed to Bradley A. Bugdanowitz, Secretary,
c/o Anthera
Pharmaceuticals, Inc., at the address of our principal executive
offices at 25801 Industrial Boulevard, Suite B, Hayward,
California 94545. Our telephone number is
(510) 856-5600.
Stockholders may also revoke their proxy by entering a new vote
over the Internet or by telephone.
Stockholder
Proposals to be Presented at the Next Annual Meeting
Any
stockholder who meets the requirements of the proxy rules under
the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), may submit proposals to the Board of
Directors to be presented at the 2011 annual meeting. Such
proposals must comply with the requirements of
Rule 14a-8
under the Exchange Act and be submitted in writing by notice
delivered or mailed by first-class United States mail,
postage prepaid, to our Secretary at our principal executive
offices at the address set forth above no later than
February 11, 2011 in order to be considered for inclusion
in the proxy materials to be disseminated by the Board of
Directors for such annual meeting.
Our Amended
and Restated Bylaws also provide for separate notice procedures
to recommend a person for nomination as a director or to propose
business to be considered by stockholders at a meeting. To be
considered
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timely under
these provisions, the stockholder’s notice must be received
by our Secretary at our principal executive offices at the
address set forth above no earlier than March 11, 2011 and
no later than April 10, 2011. Our Amended and Restated
Bylaws also specify requirements as to the form and content of a
stockholder’s notice.
The Board of
Directors, a designated committee thereof or the chairman of the
meeting may refuse to acknowledge the introduction of any
stockholder proposal if it is not made in compliance with the
applicable notice provisions.
PROPOSAL 1
ELECTION
OF DIRECTORS
General
Our
certificate of incorporation provides for a Board of Directors
that is divided into three classes. The term for each class is
three years, staggered over time. This year, the term of the
directors in Class I, Messrs. Santel and Thompson,
expires. Accordingly, two directors will be elected at the
Annual Meeting. Our Board of Directors is currently comprised of
eight members. If both of the nominees are elected at the Annual
Meeting of Stockholders, the composition of our Board will be as
follows: Class I — Messrs. Santel and
Thompson; Class II — Ms. Bianchi and
Drs. Healy and Leheny; and Class III —
Dr. Henney and Messrs. Spiegelman and Truex.
In the
absence of instructions to the contrary, the persons named as
proxy holders in the accompanying proxy intend to vote in favor
of the election of the two nominees designated below to serve
until the 2013 Annual Meeting of Stockholders and until their
respective successors shall have been duly elected and
qualified. Both of the nominees are currently directors. The
Board of Directors expects that each of the nominees will be
available to serve as a director, but if any such nominee should
become unavailable or unwilling to stand for election, it is
intended that the shares represented by the proxy will be voted
for such substitute nominee as may be designated by the Board of
Directors. The biographies of our directors and their ages as of
June 1, 2010 are set forth below.
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Name
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Age
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Position
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Paul F. Truex
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Chief Executive Officer, President and Director
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Christopher S. Henney, Ph.D.
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Chairman of the Board of Directors
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Annette Bianchi
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Director
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James I. Healy, M.D., Ph.D.
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Director
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A. Rachel Leheny, Ph.D.
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Director
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Donald J. Santel
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Director
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Daniel K. Spiegelman
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Director
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David E. Thompson
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Director
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Nominees
for Director
Class I:
Each of the
persons listed below is nominated for election to Class I
of the Board of Directors to serve a three-year term ending at
the 2013 annual meeting of stockholders and until his successor
is elected and qualified.
The Board of Directors recommends
that you vote FOR each of the following nominees
.
Donald J.
Santel.
Mr. Santel has served as a member of our Board of Directors
since October 2007. From February 2000 until January 2007,
Mr. Santel held various positions in and was a member of
the board of directors of CoTherix, Inc., a pharmaceutical
company he co-founded. From October 2003 to August 2004,
Mr. Santel served as President and Chief Operating Officer
of CoTherix and from August 2004 until January 2007,
Mr. Santel served as Chief Executive Officer. From June
2008 through June 2009, Mr. Santel served as a consultant
and from June 2009 until the present, Mr. Santel has served
as the Chief Executive Officer of Hyperion Therapeutics, Inc., a
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pharmaceutical
company. Mr. Santel holds a B.S.E. in biomedical
engineering from Purdue University and an M.S. in electrical
engineering from the University of Minnesota.
Based on
Mr. Santel’s executive experience and service on other
boards of directors in the biotechnology and pharmaceutical
industries, the Board of Directors believes Mr. Santel has
the appropriate set of skills to serve as a member of our Board.
David E.
Thompson.
Mr. Thompson has served as a member of our Board of
Directors since November 2005. Mr. Thompson served as Vice
President of Corporate Strategy Business Development for Eli
Lilly and Company from January 2001 until his retirement in July
2005. Thereafter, he was a partner at VantagePoint Venture
Partners from 2006 through 2008. Mr. Thompson holds a B.S.
and an M.B.A. from Michigan State University.
The Board of
Directors believes Mr. Thompson is suited to serve on our
Board due to his substantial investing experience and prior
experience working in the pharmaceutical industry.
Continuing
Directors
Class II:
Currently Serving Until the 2011 Annual Meeting
Annette
Bianchi.
Ms. Bianchi has served as a member of our Board of
Directors since August 2006. Ms. Bianchi has served as a
Managing Director at VantagePoint Venture Partners, a venture
capital firm, since 2004. From 1999 to 2004, Ms. Bianchi
served as a Managing Director at Pacific Venture Group, a
dedicated health care fund. From 1992 to 1999, Ms. Bianchi
served as a General Partner at Weiss, Peck & Greer
Venture Partners, a venture capital firm. From 1985 to 1992,
Ms. Bianchi served as an associate and a General Partner of
Burr, Egan, Deleage & Co., a venture capital firm.
From 2005 through 2008, Ms. Bianchi served as a director of
Conceptus Inc. Ms. Bianchi holds a B.S.E. and an M.S.E. in
Biomedical Engineering from the University of Pennsylvania and
an M.B.A. from The Wharton School of the University of
Pennsylvania.
The Board of
Directors has determined that Ms. Bianchi’s
substantial experience regarding investing in companies in the
health care industry and her education in biomedical engineering
give her the appropriate set of skills to serve as a member of
our Board.
James I.
Healy, M.D., Ph.D.
Dr. Healy has served as a member of our Board of Directors
since August 2006. Dr. Healy is a Managing Partner of
Sofinnova Management VI, LLC, the general partner of Sofinnova
Venture Partners VI, L.P., a fund managed by Sofinnova Ventures,
Inc., a venture capital firm, a position he has held since June
2000. Prior to Sofinnova, Dr. Healy began his private
equity career at Sanderling Ventures, and has been an early
investor and board member of numerous biopharmaceutical
companies. Dr. Healy holds a B.A. in molecular biology and
a B.A. in Scandinavian studies from the University of California
at Berkeley, an M.D. from Stanford University School of Medicine
and a Ph.D. in immunology from Stanford University.
Dr. Healy is a director of InterMune, Inc. and Amarin
Corporation plc, both biopharmaceutical companies.
Based on
Dr. Healy’s extensive experience as a director of
numerous biopharmaceutical companies and his medical training,
the Board of Directors has determined that Dr. Healy
possesses the necessary attributes to serve on our Board.
A. Rachel
Leheny, Ph.D.
Dr. Leheny has served as a member of our Board of Directors
since August 2008. Dr. Leheny is (i) a Managing
Director of Caxton Advantage Venture Partners, L.P., which is
the General Partner of Caxton Advantage Life Sciences Fund,
L.P., a life-sciences venture capital fund that she co-founded
in 2006 and (ii) a member of Advantage Life Sciences
Partners LLC, the Managing General Partner of Caxton Advantage
Venture Partners, L.P. Prior to that, from April 2000 to June
2002, she was head of the biotechnology research team at Lehman
Brothers. Before Lehman, from April 1998 to April 2000,
Dr. Leheny headed the biotechnology research team at UBS
Warburg and before that, from April 1993 to April 1998, worked
at Hambrecht & Quist, most recently as Managing
Director and Senior Analyst. Dr. Leheny holds an A.B. in
chemistry from Harvard and a Ph.D. from Columbia University. She
did post-doctoral work at the University of California at
Berkeley, where she was a National Institutes of Health fellow
and lecturer.
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Due to
Dr. Leheny’s vast experience with respect to the life
sciences industry, both from investment and educational
standpoints, the Board of Directors believes that
Dr. Leheny has skills enabling her to contribute
meaningfully to our Board and our Company.
Class III:
Currently Serving Until the 2012 Annual Meeting
Paul F.
Truex.
Mr. Truex has served as our President and Chief Executive
Officer since our inception in September 2004 and as a member of
our Board of Directors since November 2004. Prior to founding
Anthera, Mr. Truex served as a Director, President and
Chief Executive Officer of Peninsula Pharmaceuticals, Inc., a
biopharmaceutical company, from the commencement of its
operations in October 2001. Prior to Peninsula, Mr. Truex
was Vice President of Commercial Development for Vicuron, Inc.
from April 2000 to September 2001. From July 1997 to April 2000,
Mr. Truex held various positions at Eli Lilly and Company.
Mr. Truex holds an M.B.A. in marketing and finance from
Indiana University and a B.A. in economics from the University
of Waterloo. Mr. Truex is a director of Trius Therapeutics,
Inc. and Eiger Biopharmaceuticals, Inc.
The Board of
Directors has concluded that Mr. Truex should serve on our
Board based on his deep knowledge of our Company gained from his
positions as President and Chief Executive Officer, as well as
his substantial experience in the pharmaceutical industry.
Christopher
S.
Henney, Ph.D.
Dr. Henney has served as the Chairman of our Board of
Directors since August 2008 and has been a member of our Board
of Directors since April 2005. Dr. Henney served as
Chairman and Chief Executive Officer of Dendreon Corporation, a
biotechnology company he co-founded, from 1995 until his
retirement in July 2004. Dr. Henney was previously a
founder of Immunex Corp. and Icos Corp. Dr. Henney holds a
B.Sc. with honors in medical biochemistry, a Ph.D. in
experimental pathology and a D.Sc. for contributions to the
field of immunology, all from the University of Birmingham,
England. Dr. Henney served as a director of AVI BioPharma
Inc. from March 2009 until June 2010 and is currently the
Chairman and a director of Oncothyreon, Inc. and is
vice-chairman and a director of Cyclacel Pharmaceuticals, Inc.
The Board of
Directors has determined that Dr. Henney is a valuable
addition to our Board based upon his long history with the
Company and his extensive experience in the biotechnology
industry.
Daniel K.
Spiegelman.
Mr. Spiegelman has served as a member of our Board of
Directors since February 2010. Currently, Mr. Spiegelman
provides management and financial consulting services to
biotechnology companies. From January 1998 to May 2009,
Mr. Spiegelman served as Senior Vice President and Chief
Financial Officer of CV Therapeutics, Inc., a biopharmaceutical
company that was acquired by Gilead Sciences, Inc. in April
2009. From July 1991 to January 1998, Mr. Spiegelman served
at Genentech, Inc., most recently as Treasurer.
Mr. Spiegelman also serves on the board of directors of
Affymax, Inc., Cyclacel Pharmaceuticals, Inc., Omeros
Corporation and Oncothyreon, Inc., all of which are
publicly-traded biopharmaceutical companies. Mr. Spiegelman
also previously served on the board of directors of Xcyte
Therapies, Inc. from 2003 through 2006, a publicly-traded
company, until Cyclacel acquired Xcyte via reverse merger in
2006. Mr. Spiegelman holds a B.A. in economics from
Stanford University and an M.B.A. from the Stanford Graduate
School of Business.
Due to
Mr. Spiegelman’s experience in serving as a director
of multiple publicly-traded biopharmaceutical companies, as well
as his prior employment at various pharmaceutical companies, our
Board of Directors has concluded that Mr. Spiegelman
possesses the necessary attributes to serve on our Board.
There are no
family relationships between any of our directors or executive
officers.
Board of
Directors’ Role in Risk Management
The Board of
Directors has overall responsibility for the oversight of the
Company’s risk management process, which is designed to
support the achievement of organizational objectives, including
strategic objectives, to improve long-term organizational
performance and enhance shareholder value. Risk management
includes not only understanding company specific risks and the
steps management implements to manage those risks, but also what
level of risk is acceptable and appropriate for the Company.
Management is responsible for establishing our
6
business
strategy, identifying and assessing the related risks and
implementing appropriate risk management practices. The Board of
Directors reviews our business strategy and management’s
assessment of the related risk, and discusses with management
the appropriate level of risk for the Company. For example, the
Board of Directors meets with management at least quarterly to
review, advise and direct management with respect to strategic
business risks, litigation risks and risks related to the
Company’s acquisition strategy, among others. The Board
also delegates oversight to Board committees to oversee selected
elements of risk as set forth below.
The Board of
Directors has delegated
day-to-day
responsibility for administering and interpreting the
Company’s Code of Business Conduct and Ethics to the
Company’s Chief Financial Officer as compliance officer.
As part of
its oversight of the Company’s financial reporting process
and audits of the Company’s financial statements, our Audit
Committee is responsible for reviewing financial risk exposures,
including monitoring the quality and integrity of the
Company’s financial statements, the effectiveness of
internal controls over financial reporting, compliance with
legal or regulatory requirements, the performance of the
internal audit function and the performance and independence of
the Company’s independent registered public accounting
firm, among other responsibilities as set forth in the Audit
Committee Charter. The Audit Committee receives periodic
internal controls and related assessments from the
Company’s finance department and an annual attestation
report on internal control over financial reporting from the
Company’s independent registered public accounting firm. In
addition, our Audit Committee ensures that the Company’s
business is conducted with the highest standards of ethical
conduct in compliance with applicable laws and regulations by
monitoring our Code of Business Conduct and Ethics Policy and
our Employee Feedback Hotline, and the Audit Committee discusses
other risk assessment and risk management policies of the
Company periodically with management.
Our
Compensation Committee participates in the design of
compensation structures that create incentives that encourage a
level of risk-taking behavior consistent with the Company’s
business strategy.
Our
Nominating and Corporate Governance Committee oversees
governance-related risks by developing and recommending to the
Board working with management to establish corporate governance
guidelines applicable to the Company, making recommendations
regarding director nominees and membership on Board committees
and overseeing the annual evaluation of the Board and management.
Board of
Directors and Committees of the Board
During 2009,
the Board of Directors held a total of 18 meetings. All
directors attended at least 75% of the total number of Board
meetings and meetings of Board committees on which the director
served during the time he or she served on the Board or such
committees.
The Board of
Directors has determined each of the following directors is an
“independent director” as such term is defined in
NASDAQ Marketplace Rule 5605(a)(2): Messrs. Santel,
Spiegelman and Thompson, Ms. Bianchi and Drs. Henney,
Healy and Leheny.
The Board of
Directors has a standing Audit Committee, Compensation Committee
and Nominating and Corporate Governance Committee. Each of our
Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee is composed entirely of
independent directors in accordance with current Nasdaq listing
standards. Furthermore, our Audit Committee meets the enhanced
independence standards established by the Sarbanes-Oxley Act of
2002 and related rulemaking of the Securities and Exchange
Commission (the “SEC”) that apply to companies that
have recently completed an initial public offering. The Board of
Directors has further determined that Daniel K. Spiegelman, a
member of the Audit Committee of the Board of Directors, is an
“Audit Committee Financial Expert,” as such term is
defined in Item 407(d)(5) of
Regulation S-K
promulgated by the SEC. Copies of our Audit Committee,
Nominating and Corporate Governance Committee and Compensation
Committee charters and our corporate governance guidelines are
available, free of charge, on our website at
http://www.anthera.com.
Audit
Committee.
The
Audit Committee appoints, approves the compensation of, and
assesses the independence of our independent registered public
accounting firm and pre-approves auditing and permissible
7
non-audit
services, and the terms of such services, to be provided by our
independent registered public accounting firm. The Audit
Committee is also responsible for reviewing and discussing with
management and the independent registered public accounting firm
our annual and quarterly financial statements and related
disclosures and preparing the report required by the rules of
the SEC to be included in our annual proxy statement. The Audit
Committee also coordinates the oversight and reviews the
adequacy of our internal controls over financial reporting and
establishes policies and procedures for the receipt and
retention of accounting-related complaints and concerns.
Currently, the Audit Committee is comprised of
Mr. Spiegelman (Chair), Mr. Santel and Dr. Healy.
During 2009, the Audit Committee held one meeting.
Compensation
Committee.
The
Compensation Committee annually reviews and approves our goals
and objectives relevant to compensation of our Chief Executive
Officer, evaluates our Chief Executive Officer in light of such
goals and determines the compensation of our Chief Executive
Officer. The Compensation Committee also reviews and approves
the compensation of all of our other officers, oversees and
administers our incentive-based compensation and equity plans
and reviews and makes recommendations to our Board of Directors
with respect to director compensation. The Compensation
Committee also produces an annual report on executive
compensation for inclusion in our proxy statement. Currently,
the Compensation Committee is comprised of Mr. Thompson
(Chair), Mr. Santel and Dr. Leheny. During 2009, the
Compensation Committee held four meetings.
Nominating
and Corporate Governance
Committee.
The
Nominating and Corporate Governance Committee is responsible for
developing and recommending to our Board of Directors
individuals to be nominated as directors and committee members.
This includes establishing procedures for identifying and
evaluating director candidates (including nominees recommended
by stockholders). The Nominating and Corporate Governance
Committee is also responsible for developing and recommending to
our Board of Directors corporate governance guidelines, as well
as overseeing the evaluation of our Board of Directors,
committees of the Board and management. Currently, the
Nominating and Corporate Governance Committee is comprised of
Dr. Henney (Chair), Ms. Bianchi and Mr. Thompson.
During 2009, the Nominating and Corporate Governance Committee
held one meeting.
Board
Leadership
The
positions of Chairman of the Board and Chief Executive Officer
are presently separated and have historically been separated at
Anthera. Separating these positions allows our Chief Executive
Officer to focus on our
day-to-day
business, while allowing the Chairman of the Board to lead the
Board of Directors in its fundamental role of providing advice
to and independent oversight of management. Our Board of
Directors recognizes the time, effort, and energy that the Chief
Executive Officer is required to devote to his position in the
current business environment, as well as the commitment required
to serve as our Chairman, particularly as the Board of
Directors’ oversight responsibilities continue to grow. Our
Board of Directors also believes that this structure ensures a
greater role for the independent directors in the oversight of
our Company and active participation of the independent
directors in setting agendas and establishing priorities and
procedures for the work of our Board of Directors. Our Board of
Directors believes its administration of its risk oversight
function has not affected its leadership structure.
While our
bylaws and corporate governance guidelines do not require that
our Chairman and Chief Executive Officer positions be separate,
our Board of Directors believes that having separate positions
and having an independent outside director serve as Chairman is
the appropriate leadership structure for us at this time and
demonstrates our commitment to good corporate governance. Our
separated Chairman and Chief Executive Officer positions are
augmented by the independence of seven of our eight directors,
and our three fully independent Board committees that provide
appropriate oversight in the areas described above. At executive
sessions of independent directors, these directors speak
candidly on any matter of interest, without the Chief Executive
Officer or other executives present. The independent directors
met two times in 2009 without management present. We believe
this structure provides consistent and effective oversight of
our management and the Company.
Director
Nominations
The director
qualifications developed to date focus on what our Board
believes to be essential competencies to effectively serve on
the Board of Directors. The Nominating and Corporate Governance
Committee must reassess
8
such
criteria annually and submit any proposed changes to the Board
of Directors for approval. Presently, at a minimum, the
Nominating and Corporate Governance Committee must be satisfied
that each nominee it recommends has the highest personal and
professional integrity, demonstrates exceptional ability and
judgment and shall be most effective, in conjunction with the
other nominees to the Board of Directors, in collectively
serving the long-term interests of the stockholders.
In addition
to those minimum qualifications, the Nominating and Corporate
Governance Committee shall recommend that our Board of Directors
select persons for nomination to help ensure that:
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a majority
of our Board is “independent” in accordance with
Nasdaq standards;
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each of the
Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee be comprised entirely of
independent directors; and
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at least one
member of the Audit Committee shall have the experience,
education and other qualifications necessary to qualify as an
“audit committee financial expert” as defined by the
rules of the SEC.
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In addition
to other standards the Nominating and Corporate Governance
Committee may deem appropriate from time to time for the overall
structure and compensation of the Board of Directors, the
Nominating and Corporate Governance Committee may consider the
following factors when recommending that our Board select
persons for nomination:
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whether a
nominee has direct experience in the pharmaceuticals industry or
in the markets in which the Company operates;
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whether the
nominee, if elected, assists in achieving a mix of Board members
that represents a diversity of background and experience.
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Although the
Nominating and Corporate Governance Committee may consider
whether nominees assist in achieving a mix of Board members that
represents a diversity of background and experience, which is
not only limited to race, gender or national origin, we have no
formal policy regarding board diversity.
The
Nominating and Corporate Governance Committee adheres to the
following process for identifying and evaluating nominees for
the Board of Directors. First, it solicits recommendations for
nominees from non-employee directors, our Chief Executive
Officer, other executive officers, third-party search firms or
any other source it deems appropriate. The Nominating and
Corporate Governance Committee then reviews and evaluates the
qualifications of proposed nominees and conducts inquiries it
deems appropriate; all proposed nominees are evaluated in the
same manner, regardless of who initially recommended such
nominee. In reviewing and evaluating proposed nominees, the
Nominating and Corporate Governance Committee may consider, in
addition to the minimum qualifications and other criteria for
Board membership approved by our Board from time to time, all
facts and circumstances that it deems appropriate or advisable,
including, among other things, the skills of the proposed
nominee, his or her depth and breadth of business experience or
other background characteristics, his or her independence and
the needs of the Board.
If the
Nominating and Corporate Governance Committee decides to retain
a third-party search firm to identify proposed nominees, it has
sole authority to retain and terminate such firm and to approve
any such firm’s fees and other retention terms.
Each of the
nominees for election as director at the 2010 Annual Meeting is
recommended by the Nominating and Corporate Governance Committee
and each nominee is presently a director and stands for
re-election by the stockholders. From time to time, the Company
may pay fees to third-party search firms to assist in
identifying and evaluating potential nominees, although no such
fees have been paid in connection with nominations to be acted
upon at the 2010 Annual Meeting.
Pursuant to
our bylaws, stockholders who wish to nominate persons for
election to the Board of Directors at an annual meeting must be
a stockholder of record at the time of giving the notice,
entitled to vote at the meeting, present (in person or by proxy)
at the meeting and must comply with the notice procedures in our
bylaws. A
9
stockholder’s
notice of nomination to be made at an annual meeting must be
delivered to our principal executive offices not less than
90 days nor more than 120 days before the anniversary
date of the immediately preceding annual meeting. However, if an
annual meeting is more than 30 days before or more than
60 days after such anniversary date, the notice must be
delivered no later than the 90th day prior to such annual
meeting or, if later, the 10th day following the day on
which the first public announcement of the date of such annual
meeting was made. Notwithstanding the foregoing, with respect to
the 2010 Annual Meeting, a stockholder’s notice shall be
timely if delivered to our principal executive offices not later
than the close of business on June 17, 2010. A
stockholder’s notice of nomination may not be made at a
special meeting unless such special meeting is held in lieu of
an annual meeting. The stockholder’s notice must include
the following information for the person making the nomination:
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name and
address;
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the class
and number of shares of the Company owned beneficially or of
record;
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disclosure
regarding any derivative, swap or other transactions which give
the nominating person economic risk similar to ownership of
shares of the Company or provide the opportunity to profit from
an increase in the price of value of shares of the Company;
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any proxy,
agreement, arrangement, understanding or relationship that
confers a right to vote any shares of the Company;
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any
agreement, arrangement, understanding or relationship engaged in
for the purpose of acquiring, holding, disposing or voting of
any shares of any class or series of capital stock of the
Company;
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any rights
to dividends on the shares that are separate from the underlying
shares;
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any
performance related fees that the nominating person is entitled
to based on any increase or decrease in the value of any shares
of the Company;
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a
description of all agreements, arrangements or understandings by
and between the proposing stockholder and another person
relating to the proposed business (including an identification
of each party to such agreement, arrangement or understanding
and the names, addresses and class and number of shares owned
beneficially or of record of other stockholders known by the
proposing stockholder support such proposed business;
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a statement
whether or not the proposing stockholder will deliver a proxy
statement and form of proxy to holders of, in the case of a
business proposal, at least the percentage of voting power of
all shares of capital stock required to approve the proposal or,
in the case of director nominations, at least the percentage of
voting power of all of the shares of capital stock reasonably
believed by the proposing stockholder to be sufficient to elect
the nominee; and
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any other
information relating to the nominating person that would be
required to be disclosed in a proxy statement filed with the SEC.
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With respect
to proposed director nominees, the stockholder’s notice
must include all information required to be disclosed in a proxy
statement in connection with a contested election of directors
or otherwise required pursuant to Regulation 14A under the
Exchange Act (including such person’s written consent to
being named in the proxy statement as a nominee and to serving
as a director if elected).
For matters
other than the election of directors, the stockholder’s
notice must also include a brief description of the business
desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material
interest in such business of the stockholder(s) proposing the
business.
The
stockholder’s notice must be updated and supplemented, if
necessary, so that the information required to be provided in
the notice is true and correct as of the record date for the
meeting and as of the date that is ten business days prior to
the meeting.
10
The Board of
Directors, a designated committee thereof or the chairman of the
meeting will determine if the procedures in the bylaws have been
followed, and if not, declare that the proposal or nomination be
disregarded. The nominee must be willing to provide any other
information reasonably requested by the Nominating and Corporate
Governance Committee in connection with its evaluation of the
nominee’s independence.
Stockholder
Communications with the Board of Directors
Stockholders
may send correspondence to the Board of Directors
c/o the
Secretary at our principal executive offices at the address set
forth above. The Secretary will review all correspondence
addressed to the Board, or any individual Board member, for any
inappropriate correspondence and correspondence more suitably
directed to management. However, the Secretary will summarize
all correspondence not forwarded to the Board and make the
correspondence available to the Board for its review at the
Board’s request. The Secretary will forward stockholder
communications to the Board prior to the next regularly
scheduled meeting of the Board of Directors following the
receipt of the communication.
Director
Attendance at Annual Meetings
Directors
are encouraged to attend the Annual Meeting of Stockholders. We
did not hold an annual stockholder meeting for our fiscal year
ended December 31, 2009.
Compensation
Committee Interlocks and Insider Participation
None of the
members of the Compensation Committee is or has at any time
during the past fiscal year been an officer or employee of the
Company. None of the members of the Compensation Committee has
formerly been an officer of the Company. None of our executive
officers serve or in the past fiscal year has served as a member
of the board of directors or compensation committee of any other
entity that has one or more executive officers serving as a
member of our Board of Directors or Compensation Committee.
Director
Compensation
In June
2008, the Board of Directors, upon the recommendation of our
Compensation Committee, adopted a formal compensation program
for the Chairman of our Board of Directors and our independent
directors who were not affiliated with any of our investors.
Pursuant to this program, the chairman of our Board of
Directors, Dr. Henney, received a $20,000 annual retainer
fee plus an additional $60,000 as consideration for his services
as Chairman. Pursuant to this program, two of our directors,
Mr. Santel and Mr. Thompson, received a $20,000 annual
retainer fee, as well as $2,000 for each board meeting attended
in person ($1,000 for meetings attended by telephone conference).
Under the
director compensation program effective prior to January 2010,
each non-employee director initially received (i) a
nonqualified stock option to purchase 14,602 shares of our
common stock upon election and (ii) each year thereafter an
additional nonqualified stock option to purchase
5,841 shares of our common stock. One quarter of the shares
issuable pursuant to the initial nonqualified stock option
vested upon the completion of one year of continuous service by
such director following the date of commencement of the vesting
of such option; the remaining three quarters of the shares
issuable pursuant to each such option vested in equal monthly
installments over a period of three years until the date that is
the fourth anniversary of the date of the option grant. The
shares issuable pursuant to the annual nonqualified stock option
vested in equal monthly installments over a period of four
years. All of these options have an exercise price equal to the
fair market value of our common stock on the date of the grant.
The option numbers set forth above take into account our
1-for-1.712
reverse stock split of our common stock effected on
February 22, 2010.
In January
2010, the Board of Directors approved changes to the current
director compensation program, which apply to all non-employee
directors. Each non-employee director receives a $40,000 annual
retainer fee instead of per-meeting fees. In consideration for
their services, the Chairman of our Board of Directors receives
an
11
additional
$40,000, the chairman of our Audit Committee receives an
additional $15,000 and the chairman of our Compensation
Committee receives an additional $10,000, each on an annual
basis.
In addition,
since the completion of our initial public offering, each new
non-employee director receives a non-qualified stock option to
purchase 25,000 shares of our common stock upon joining the
Board, which vests over a four-year period from the date of
grant. In addition, each non-employee director receives a
non-qualified stock option to purchase 12,000 shares of our
common stock each year, which vests over a one-year period from
the date of grant. Any new Chairman of our Board of Directors
would receive a non-qualified stock option to purchase
45,000 shares of our common stock upon election to the
Board, which would vest over a four-year period from the date of
grant. Our Chairman also receives a non-qualified stock option
to purchase 15,000 shares of our common stock each year,
which vests over a one-year period from the date of grant.
All members
of our Board of Directors are eligible to receive full
reimbursement for travel expenses arising from their attendance
of our board meetings.
Director
Compensation Table — 2009
The
following table sets forth information with respect to the
compensation earned by our non-employee directors during the
fiscal year ended December 31, 2009.
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Fees
Earned
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Option
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or
Paid
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Awards
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Name
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in
Cash ($)
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($)(1)
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Total ($)
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Christopher S. Henney, Ph.D. (Chairman)
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$
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80,000
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$
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5,875
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(2)
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$
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85,875
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Annette Bianchi
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—
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$
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5,875
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(3)
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$
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5,875
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James I. Healy, M.D., Ph.D.
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—
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$
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5,875
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$
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5,875
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A. Rachel Leheny, Ph.D
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—
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$
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14,688
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(4)
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$
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14,688
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Donald J. Santel
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$
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35,000
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$
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5,875
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(5)
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$
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40,875
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Daniel K. Spiegelman(6)
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—
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—
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—
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David E. Thompson
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$
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34,000
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$
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5,875
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(7)
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$
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39,875
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(1)
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This column
reflects the aggregate grant date fair value of equity awards
granted in 2009 and calculated in accordance with FASB
ASC 718, excluding the effect of estimated forfeitures. See
Note 8 to our financial statements (for the years ended
December 31, 2007, 2008 and 2009, included as part of our
Registration Statement on Form S-1) for a discussion of the
assumptions made in determining the valuation of option awards.
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(2)
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Dr. Henney
held 40,887 shares underlying stock options as of
December 31, 2009.
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(3)
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Ms. Bianchi
held 20,443 shares underlying stock options as of
December 31, 2009.
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(4)
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Dr. Leheny
held 14,602 shares underlying stock options as of
December 31, 2009.
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(5)
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Mr. Santel
held 20,443 shares underlying stock options as of
December 31, 2009.
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(6)
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Mr. Spiegelman
joined our Board of Directors on February 2, 2010.
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(7)
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Mr. Thompson
held 17,523 shares underlying stock options as of
December 31, 2009.
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Required
Vote
The two
nominees receiving the highest number of affirmative votes of
all the votes properly cast shall be elected as directors to
serve until the 2013 Annual Meeting of Stockholders or until
their successors have been duly elected and qualified.
Recommendation
of the Board of Directors
The Board
of Directors recommends that the stockholders vote FOR the
election of each of the nominees listed above.
12
PROPOSAL 2
APPROVAL
OF AMENDED AND RESTATED 2010 STOCK OPTION AND INCENTIVE
PLAN
Proposal
The Board of
Directors believes that stock options and other stock-based
incentive awards can play an important role in the success of
the Company by encouraging and enabling the employees, officers,
non-employee directors and other key persons of the Company and
its subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its
business to acquire a proprietary interest in the Company. The
Board of Directors anticipates that providing such persons with
a direct stake in the Company will assure a closer
identification of the interests of such individuals with those
of the Company and its stockholders, thereby stimulating their
efforts on the Company’s behalf and strengthening their
desire to remain with the Company.
On
May 20, 2010, the Board of Directors approved an Amended
and Restated 2010 Stock Option and Incentive Plan (the
“2010 Plan”), subject to stockholder approval, to
increase the aggregate number of shares initially available for
grant under the 2010 Plan by 200,000 shares to
433,644 shares of common stock, plus an additional
35,670 shares of common stock that were available under the
2005 Equity Incentive Plan (the “2005 Plan”) as of
May 20, 2010; no shares of common stock have been returned
under the 2005 Plan following May 20, 2010. Options to
purchase 25,000 shares of common stock under the 2010 Plan
were granted to one of our directors in March 2010 in connection
with joining our Board of Directors. Accordingly, the maximum
number of shares available for awards as of May 28, 2010 is
444,314. This amendment and restatement was designed to enhance
the flexibility of the Compensation Committee in granting stock
options and other awards to our officers, employees,
non-employee directors and other key persons and to ensure that
the Company can continue to grant stock options and other awards
to such persons at levels determined to be appropriate by the
Compensation Committee. A copy of the 2010 Plan is attached as
Appendix A
to this Proxy Statement and is
incorporated herein by reference.
Based solely
on the closing price of our common stock as reported by the
NASDAQ Global Market on May 28, 2010 and the maximum number
of shares that would have been available for awards as of such
date taking into account the proposed increase described herein,
the maximum aggregate market value of the common stock that
could potentially be issued under the 2010 Plan is approximately
$2.6 million. The shares we issue under the 2010 Plan will
be authorized but unissued shares or shares that we reacquire.
The shares of common stock underlying any awards that are
forfeited, cancelled, held back upon exercise or settlement of
an award to satisfy the exercise price or tax withholding,
reacquired by the Company prior to vesting, satisfied without
any issuance of stock, expire or are otherwise terminated (other
than by exercise) under the 2010 Plan are added back to the
shares of common stock available for issuance under the 2010
Plan.
Qualified
Performance-Based Compensation under Code
Section 162(m)
To ensure
that certain awards granted under the 2010 Plan to a
“Covered Employee” (as defined in the Internal Revenue
Code of 1986 (the “Code”)) qualify as
“performance-based compensation” under
Section 162(m) of the Code, the 2010 Plan provides that the
Compensation Committee may require that the vesting of such
awards be conditioned on the satisfaction of performance
criteria that may include any or all of the following:
(1) achievement of key clinical milestones;
(2) earnings before interest, taxes, depreciation and
amortization; (3) net income (loss) (either before or after
interest, taxes, depreciation
and/or
amortization); (4) changes in the market price of the
stock; (5) economic value added; (6) sales or revenue;
(7) acquisitions or strategic transactions;
(8) operating income (loss); (9) cash flow (including,
but not limited to, operating cash flow and free cash flow);
(10) return on capital, assets, equity, or investment;
(11) stockholder returns; (12) return on sales;
(13) gross or net profit levels; (14) productivity;
(15) expense; (16) margins; (17) operating
efficiency; (18) customer satisfaction; (19) working
capital; (20) earnings (loss) per share of common stock;
(21) sales or market shares; and (22) number of
customers, any of which may be measured either in absolute terms
or as compared to any incremental increase or as compared to
results of a peer group. The Compensation Committee will select
the particular performance criteria within 90 days
following the commencement of a performance cycle. Subject to
adjustments for stock splits and similar events, the maximum
award granted to any one individual that is intended to qualify
as “performance-based compensation” under
Section 162(m) of the Code will not exceed
116,822 shares of common stock for any performance cycle
and options or stock appreciation rights with respect
13
to no more
than 116,822 shares of common stock may be granted to any
one individual during any calendar year period. If a
performance-based award is payable in cash, it cannot exceed
$2 million for any performance cycle.
Summary
of the 2010 Plan
The
following description of certain features of the 2010 Plan is
intended to be a summary only. The summary is qualified in its
entirety by the full text of the 2010 Plan that is attached
hereto as
Appendix A
.
Plan
Administration.
The
2010 Plan is administered by the Compensation Committee. The
Compensation Committee has full power to select, from among the
individuals eligible for awards, the individuals to whom awards
will be granted, to make any combination of awards to
participants, and to determine the specific terms and conditions
of each award, subject to the provisions of the 2010 Plan. The
Compensation Committee may delegate to our Chief Executive
Officer the authority to grant stock options to employees who
are not subject to the reporting and other provisions of
Section 16 of the Exchange Act and not subject to
Section 162(m) of the Code, subject to certain limitations
and guidelines.
Eligibility.
Persons
eligible to participate in the 2010 Plan will be those full or
part-time officers, employees, non-employee directors and other
key persons (including consultants and prospective officers) of
the Company and its subsidiaries as selected from time to time
by the Compensation Committee in its discretion. Approximately
28 individuals are currently eligible to participate in the 2010
Plan, which includes 10 officers, 11 employees who are not
officers, and 7 non-employee directors.
Plan
Limits.
Taking
into account the proposed increase described herein,
433,644 shares are initially available for issuance under
the 2010 Plan. Additionally, as of January 1, 2011 and each
January 1 thereafter, the number of shares reserved and
available for issuance under the 2010 Plan will automatically
increase by 4% of the outstanding number of shares of common
stock on the immediately preceding December 31. The maximum
award of stock options or stock appreciation rights granted to
any one individual will not exceed 116,822 shares of common
stock (subject to adjustment for stock splits and similar
events) for any calendar year period. If any award of restricted
stock, restricted stock units or performance shares granted to
an individual is intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, then
the maximum award shall not exceed 116,822 shares of common
stock (subject to adjustment for stock splits and similar
events) to any one such individual in any performance cycle. If
any cash-based award is intended to qualify as
“performance-based compensation” under
Section 162(m) of the Code, then the maximum award to be
paid in cash in any performance cycle may not exceed
$2 million. In addition, no more than the lesser of
(i) the number of shares reserved and available for
issuance under the Plan or (ii) 1,460,280 shares will
be issued in the form of incentive stock options.
Stock
Options.
The
2010 Plan permits the granting of (1) options to purchase
common stock intended to qualify as incentive stock options
under Section 422 of the Code and (2) options that do
not so qualify. Options granted under the 2010 Plan will be
non-qualified options if they fail to qualify as incentive
options or exceed the annual limit on incentive stock options.
Incentive stock options may only be granted to employees of the
Company and its subsidiaries. Non-qualified options may be
granted to any persons eligible to receive incentive options and
to non-employee directors and key persons. The option exercise
price of each option will be determined by the Compensation
Committee but may not be less than 100% of the fair market value
of the common stock on the date of grant. Fair market value for
this purpose will be the last reported sale price of the shares
of common stock on the NASDAQ on the date of grant. The exercise
price of an option may be reduced after the date of the option
grant.
The term of
each option will be fixed by the Compensation Committee and may
not exceed ten years from the date of grant. The Compensation
Committee will determine at what time or times each option may
be exercised. Options may be made exercisable in installments
and the exercisability of options may be accelerated by the
Compensation Committee. In general, unless otherwise permitted
by the Compensation Committee, no option granted under the 2010
Plan is transferable by the optionee other than by will or by
the laws of descent and distribution, and options may be
exercised during the optionee’s lifetime only by the
optionee, or by the optionee’s legal representative or
guardian in the case of the optionee’s incapacity.
14
Upon
exercise of options, the option exercise price must be paid in
full either in cash, by certified or bank check or other
instrument acceptable to the Compensation Committee or by
delivery (or attestation to the ownership) of shares of common
stock that are beneficially owned by the optionee for at least
six months or were purchased in the open market. Subject to
applicable law, the exercise price may also be delivered to the
Company by a broker pursuant to irrevocable instructions to the
broker from the optionee. In addition, the Compensation
Committee may permit non-qualified options to be exercised using
a net exercise feature which reduces the number of shares issued
to the optionee by the number of shares with a fair market value
equal to the exercise price.
To qualify
as incentive options, options must meet additional federal tax
requirements, including a $100,000 limit on the value of shares
subject to incentive options that first become exercisable by a
participant in any one calendar year.
Stock
Appreciation
Rights.
The
Compensation Committee may award stock appreciation rights
subject to such conditions and restrictions as the Compensation
Committee may determine. Stock appreciation rights entitle the
recipient to shares of common stock equal to the value of the
appreciation in the stock price over the exercise price. The
exercise price is the fair market value of the common stock on
the date of grant.
Restricted
Stock.
The
Compensation Committee may award shares of common stock to
participants subject to such conditions and restrictions as the
Compensation Committee may determine. These conditions and
restrictions may include the achievement of certain performance
goals (as summarized above)
and/or
continued employment with us through a specified restricted
period.
Restricted
Stock
Units.
The
Compensation Committee may award restricted stock units to any
participants. Restricted stock units are ultimately payable in
the form of shares of common stock and may be subject to such
conditions and restrictions as the Compensation Committee may
determine. These conditions and restrictions may include the
achievement of certain performance goals (as summarized above)
and/or
continued employment with the Company through a specified
vesting period. In the Compensation Committee’s sole
discretion, it may permit a participant to make an advance
election to receive a portion of his or her future cash
compensation otherwise due in the form of a restricted stock
unit award, subject to the participant’s compliance with
the procedures established by the Compensation Committee and
requirements of Section 409A of the Code. During the
deferral period, the deferred stock awards may be credited with
dividend equivalent rights.
Unrestricted
Stock
Awards.
The
Compensation Committee may also grant shares of common stock
which are free from any restrictions under the 2010 Plan.
Unrestricted stock may be granted to any participant in
recognition of past services or other valid consideration and
may be issued in lieu of cash compensation due to such
participant.
Cash-Based
Awards.
The
Compensation Committee may grant cash bonuses under the 2010
Plan to participants. The cash bonuses may be subject to the
achievement of certain performance goals (as summarized above).
Performance
Share
Awards.
The
Compensation Committee may grant performance share awards to any
participant which entitle the recipient to receive shares of
common stock upon the achievement of certain performance goals
(as summarized above) and such other conditions as the
Compensation Committee shall determine.
Dividend
Equivalent
Rights.
The
Compensation Committee may grant dividend equivalent rights to
participants which entitle the recipient to receive credits for
dividends that would be paid if the recipient had held specified
shares of common stock. Dividend equivalent rights may be
granted as a component of another award (other than a stock
option or stock appreciation right) or as a freestanding award.
Dividend equivalent rights may be settled in cash, shares of
common stock or a combination thereof, in a single installment
or installments, as specified in the award.
Change of
Control
Provisions.
The
2010 Plan provides that upon the effectiveness of a “sale
event” as defined in the 2010 Plan, except as otherwise
provided by the Compensation Committee in the award agreement,
all stock options and stock appreciation rights will
automatically terminate, unless the parties to the sale event
agree
15
that such
awards will be assumed or continued by the successor entity. In
the event of such termination, participants holding options and
stock appreciation rights will be permitted to exercise such
options and stock appreciation rights prior to the sale event.
In addition, in the case of a sale event in which the
Company’s stockholders will receive cash consideration, the
Company may make or provide for a cash payment to participants
holding options and stock appreciation rights equal to the
difference between the per share cash consideration and the
exercise price of the options or stock appreciation rights.
Adjustments
for Stock Dividends, Stock Splits,
Etc.
The
2010 Plan requires the Compensation Committee to make
appropriate adjustments to the number of shares of common stock
that are subject to the 2010 Plan, to certain limits in the 2010
Plan, and to any outstanding awards to reflect stock dividends,
stock splits, extraordinary cash dividends and similar events.
Tax
Withholding.
Participants
in the 2010 Plan are responsible for the payment of any federal,
state or local taxes that the Company is required by law to
withhold upon the exercise of options or stock appreciation
rights or vesting of other awards. Subject to approval by the
Compensation Committee, participants may elect to have the
minimum tax withholding obligations satisfied by authorizing the
Company to withhold shares of common stock to be issued pursuant
to the exercise or vesting.
Amendments
and
Termination.
The
Board may at any time amend or discontinue the 2010 Plan and the
Compensation Committee may at any time amend or cancel any
outstanding award for the purpose of satisfying changes in the
law or for any other lawful purpose. However, no such action may
adversely affect any rights under any outstanding award without
the holder’s consent. To the extent required under the
rules of the NASDAQ, any amendments that materially change the
terms of the 2010 Plan will be subject to approval by our
stockholders. However, the Compensation Committee is expressly
permitted to reprice outstanding options and stock appreciation
rights without obtaining stockholder approval. Amendments shall
also be subject to approval by our stockholders if and to the
extent determined by the Compensation Committee to be required
by the Code to preserve the qualified status of incentive
options or to ensure that compensation earned under the 2010
Plan qualifies as performance-based compensation under
Section 162(m) of the Code.
Effective
Date of the 2010
Plan.
The
Board adopted the 2010 Plan on May 20, 2010 and it will
become effective upon being approved by our stockholders. Awards
of incentive options may be granted under the 2010 Plan until
the date that that is 10 years from the date of Board
approval. No other awards may be granted under the 2010 Plan
after the date that is 10 years from the date of
stockholder approval.
New Plan
Benefits
Because the
grant of awards under the 2010 Plan is within the discretion of
the Compensation Committee, the Company cannot determine the
dollar value or number of shares of common stock that will in
the future be received by or allocated to any participant in the
2010 Plan. Accordingly, in lieu of providing information
regarding benefits that will be received under the 2010 Plan,
the following table provides information concerning the benefits
that were received by the following persons and groups during
2009: each named executive officer; all current executive
16
officers, as
a group; all current directors who are not executive officers,
as a group; and all employees who are not executive officers, as
a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options
|
|
|
|
Grant
Date Fair
|
|
|
|
Name and
Position in 2009
|
|
Value(1)
|
|
Number (#)
|
|
|
|
Paul F. Truex, President, Chief Executive Officer and Director
|
|
$
|
88,125
|
|
|
|
87,616
|
|
|
Christopher P. Lowe, Chief Financial Officer and Vice President
of Administration
|
|
$
|
23,500
|
|
|
|
23,364
|
|
|
James E. Pennington, M.D., Executive Vice President and
Chief Medical Officer
|
|
$
|
29,375
|
|
|
|
29,205
|
|
|
Colin Hislop, M.D., Senior Vice President, Cardiovascular
Products
|
|
$
|
28,795
|
|
|
|
28,621
|
|
|
Debra Odink, Ph.D., Vice President, Pharmaceutical Research
and Development
|
|
$
|
29,375
|
|
|
|
29,205
|
|
|
Stephen Lau, Vice President, Corporate and Business Development
|
|
$
|
16,162
|
|
|
|
16,062
|
|
|
All current executive officers, as a group
|
|
$
|
215,332
|
|
|
|
214,073
|
|
|
All current directors who are not executive officers, as a group
|
|
$
|
38,188
|
|
|
|
37,966
|
|
|
All current employees who are not executive officers, as a group
|
|
$
|
137,825
|
|
|
|
136,965
|
|
|
|
|
|
|
(1)
|
|
The grant
date fair value of each equity award is computed in accordance
with FASB ASC Topic 718, excluding the effect of estimated
forfeitures. See Note 8 to our financial statements (for
the years ended December 31, 2007, 2008 and 2009, included
as part of our Registration Statement on Form S-1).
|
Tax
Aspects Under the Code
The
following is a summary of the principal federal income tax
consequences of certain transactions under the 2010 Plan. It
does not describe all federal tax consequences under the 2010
Plan, nor does it describe state or local tax consequences.
The
advice set forth below was not intended or written to be used,
and it cannot be used, by any taxpayer for the purpose of
avoiding United States federal tax penalties that may be imposed
on the taxpayer. The advice was written to support the promotion
or marketing of the transaction(s) or matter(s) addressed
herein. Each taxpayer should seek advice based upon the
taxpayer’s particular circumstances from an independent tax
advisor. The foregoing language is intended to satisfy the
requirements under the regulations in Section 10.35 of
Circular 230.
Incentive
Options.
No
taxable income is generally realized by the optionee upon the
grant or exercise of an incentive option. If shares of common
stock issued to an optionee pursuant to the exercise of an
incentive option are sold or transferred after two years from
the date of grant and after one year from the date of exercise,
then (i) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) will
be taxed to the optionee as a long-term capital gain, and any
loss sustained will be a long-term capital loss, and
(ii) the Company will not be entitled to any deduction for
federal income tax purposes. The exercise of an incentive option
will give rise to an item of tax preference that may result in
alternative minimum tax liability for the optionee.
If shares of
common stock acquired upon the exercise of an incentive option
are disposed of prior to the expiration of the two-year and
one-year holding periods described above (a “disqualifying
disposition”), generally (i) the optionee will realize
ordinary income in the year of disposition in an amount equal to
the excess (if any) of the fair market value of the shares of
common stock at exercise (or, if less, the amount realized on a
sale of such shares of common stock) over the option price
thereof, and (ii) we will be entitled to deduct such
amount. Special rules will apply where all or a portion of the
exercise price of the incentive option is paid by tendering
shares of common stock.
If an
incentive option is exercised at a time when it no longer
qualifies for the tax treatment described above, the option is
treated as a non-qualified option. Generally, an incentive
option will not be eligible for the tax
17
treatment
described above if it is exercised more than three months
following termination of employment (or one year in the case of
termination of employment by reason of disability). In the case
of termination of employment by reason of death, the three-month
rule does not apply.
Non-Qualified
Options.
No
income is realized by the optionee at the time the option is
granted. Generally (i) at exercise, ordinary income is
realized by the optionee in an amount equal to the difference
between the option price and the fair market value of the shares
of common stock on the date of exercise, and we receive a tax
deduction for the same amount, and (ii) at disposition,
appreciation or depreciation after the date of exercise is
treated as either short-term or long-term capital gain or loss
depending on how long the shares of common stock have been held.
Special rules will apply where all or a portion of the exercise
price of the non-qualified option is paid by tendering shares of
common stock. Upon exercise, the optionee will also be subject
to Social Security taxes on the excess of the fair market value
over the exercise price of the option.
Other
Awards.
The
Company generally will be entitled to a tax deduction in
connection with an award under the 2010 Plan in an amount equal
to the ordinary income realized by the participant at the time
the participant recognizes such income. Participants typically
are subject to income tax and recognize such tax at the time
that an award is exercised, vests or becomes non-forfeitable,
unless the award provides for a further deferral.
Parachute
Payments.
The
vesting of any portion of an option or other award that is
accelerated due to the occurrence of a change in control (such
as a sale event) may cause a portion of the payments with
respect to such accelerated awards to be treated as
“parachute payments” as defined in the Code. Any such
parachute payments may be non-deductible to the Company, in
whole or in part, and may subject the recipient to a
non-deductible 20% federal excise tax on all or a portion of
such payment (in addition to other taxes ordinarily payable).
Limitation
on
Deductions.
Under
Section 162(m) of the Code, the Company’s deduction
for certain awards under the 2010 Plan may be limited to the
extent that the Chief Executive Officer or other executive
officer whose compensation is required to be reported in the
summary compensation table (other than the Principal Financial
Officer) receives compensation in excess of $1 million a
year (other than performance-based compensation that otherwise
meets the requirements of Section 162(m) of the Code). The
2010 Plan is structured to allow certain awards to qualify as
performance-based compensation.
Equity
Compensation Plan Information
The
following table provides information regarding our equity
compensation plan in effect as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
Available
for
|
|
|
|
Number
of
|
|
|
|
Future
Issuance
|
|
|
|
Securities
|
|
|
|
Under
Equity
|
|
|
|
to be
Issued
|
|
|
|
Compensation
|
|
|
|
Upon
Exercise of
|
|
Weighted
Average
|
|
Plan
(Excluding
|
|
|
|
Outstanding
|
|
Exercise
Price of
|
|
Securities
|
|
|
|
Options,
Warrants
|
|
Outstanding
Options,
|
|
Referenced
in
|
|
Plan
Category
|
|
and
Rights
|
|
Warrants
and Rights
|
|
Column
(a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
Equity compensation plans approved by security holders: 2005
Equity Incentive Plan(1)
|
|
|
1,323,776
|
|
|
$
|
0.92
|
|
|
|
19,571
|
|
|
Equity compensation plans not approved by security holders:
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Total
|
|
|
1,323,776
|
|
|
$
|
0.92
|
|
|
|
19,571
|
|
|
|
|
|
|
(1)
|
|
The 2005
Equity Incentive Plan (the “2005 Plan”) was adopted in
January 2005 and a total of 2,175,817 shares of our common
stock were reserved for issuance thereunder.
|
18
Required
Vote
The approval
of the Amended and Restated 2010 Stock Option and Incentive Plan
requires the affirmative vote of a majority of the votes cast on
the proposal at the Annual Meeting.
Recommendation
of the Board of Directors
The Board
of Directors recommends that the stockholders vote FOR the
approval of the Amended and Restated 2010 Stock Option and
Incentive Plan.
PROPOSAL 3
APPROVAL
OF THE ANTHERA PHARMACEUTICALS, INC.
2010
EMPLOYEE STOCK PURCHASE PLAN
Proposal
The Board of
Directors has adopted the Anthera Pharmaceuticals, Inc. 2010
Employee Stock Purchase Plan (the “2010 ESPP”),
subject to stockholder approval, and has reserved
100,000 shares of common stock for issuance thereunder plus
on January 1, 2011 and each January 1 thereafter, the
number of shares of stock reserved and available for issuance
under the Plan shall be cumulatively increased by the lesser of
(i) one percent (1%) of the number of shares of common
stock issued and outstanding on the immediately preceding
December 31 or (ii) 250,000 shares of common stock.
Under the 2010 ESPP, eligible employees of the Company and
certain designated subsidiaries of the Company may authorize the
Company to deduct amounts from their compensation, which amounts
are used to enable the employees to purchase shares of the
Company’s common stock. The purpose of the 2010 ESPP is to
attract and retain key personnel, and encourage stock ownership
by the Company’s employees.
The 2010
ESPP is a broad-based employee stock purchase plan under
Section 423 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the “Code”).
The shares
that are proposed to be reserved under the 2010 ESPP have an
aggregate value of approximately $0.6 million based on the
closing price of the common stock as reported on the NASDAQ
Global Market on May 28, 2010.
Summary
of the 2010 ESPP
The
following description of certain features of the 2010 ESPP is
intended to be a summary only. The summary is qualified in its
entirety by the full text of the 2010 ESPP that is attached
hereto as
Appendix B
.
The 2010
ESPP is administered by the person or persons appointed by the
Company’s Board of Directors. The 2010 ESPP provides that
all employees of the Company and any designated subsidiaries of
the Company who work at least 20 hours per week are
eligible to participate in the 2010 ESPP, except for persons who
are deemed under Section 423(b)(3) of the Code to own five
percent (5%) or more of the voting stock of the Company.
Participation by any eligible employee is voluntary. The number
of employees potentially eligible to participate in the 2010
ESPP is approximately 20 persons.
The 2010
ESPP provides for two “offering periods” within each
year, and the first is expected to commence on September 1,
2010 and will end on December 31, 2010. Thereafter,
offering periods will commence on the first business day
occurring on or after each January 1 and ending on the last
business day occurring on or before the following June 30,
and the second commencing on the first business day occurring on
or after each July 1 and ending on the last business day
occurring on or before the following December 31. Eligible
employees may elect to become participants in the 2010 ESPP by
enrolling prior to each semi-annual date to purchase shares
under the 2010 ESPP. Shares are purchased through the
accumulation of payroll deductions of not less than one percent
(1%) nor more than ten percent (10%) of each participant’s
compensation. The maximum number of shares of common stock that
19
can be
purchased under the 2010 ESPP during any one calendar year is
that number having a fair market value of $25,000 on the first
day of the purchase period pursuant to which the shares are
purchased. The number of shares to be purchased with respect to
any purchase period will be the lesser of (a) the number of
shares determined by dividing the participant’s balance in
the plan account on the last day of the purchase period by the
purchase price per share for the stock,
(b) 5,000 shares, and (c) such other lesser
maximum number of shares as shall have been established by the
administrator in advance of the offering. The purchase price per
share will be 85% of the fair market value of the common stock
as of the first date or the ending date of the applicable
semi-annual purchase period, whichever is less.
A
participant’s right to purchase shares during a purchase
period under the 2010 ESPP is not transferable by the
participant except by will or by the laws of descent and
distribution. Employees may cease their participation in the
offering at any time during the offering period, and
participation automatically ceases on termination of employment
with the Company.
The number
of shares that are reserved for issuance under the 2010 ESPP is
subject to adjustment for stock splits and similar events. The
proceeds received by the Company from exercise under the 2010
ESPP will be used for the general purposes of the Company.
Shares issued under the 2010 ESPP may be authorized but unissued
shares or shares reacquired by the Company and held in its
treasury.
The 2010
ESPP shall remain in full force and effect until suspended or
discontinued by the Board of Directors. The Board of Directors
may, at any time, terminate the 2010 ESPP; provided that the
2010 ESPP shall automatically terminate in accordance with its
terms as of the tenth anniversary of its adoption by the Board
of Directors. The Board of Directors may at any time, and from
time to time, amend the 2010 ESPP in any respect,
except
that without the approval within 12 months of such
Board action by the stockholders, no amendment may be made
increasing the number of shares approved for the 2010 ESPP or
making any other change that would require stockholder approval
in order for the 2010 ESPP, as amended, to qualify as an
“employee stock purchase plan” under
Section 423(b) of the Code.
Tax
Aspects Under the Code
The
advice set forth below was not intended or written to be used,
and it cannot be used, by any taxpayer for the purpose of
avoiding United States federal tax penalties that may be imposed
on the taxpayer. The advice was written to support the promotion
or marketing of the transaction(s) or matter(s) addressed
herein. Each taxpayer should seek advice based upon the
taxpayer’s particular circumstances from an independent tax
advisor. The foregoing language is intended to satisfy the
requirements under the regulations in Section 10.35 of
Circular 230.
The 2010
ESPP is intended to qualify as an “employee stock purchase
plan” as defined in Section 423(b) of the Code, which
provides that an employee participating in the plan is not
required to pay any federal income tax when joining the 2010
ESPP or when purchasing the shares of common stock at the end of
an offering. The employee is, however, required to pay federal
income tax on the difference, if any, between the price at which
he or she sells the shares and the price he or she paid for them.
If shares
acquired under the 2010 ESPP are sold more than two years after
the first day of the purchase period pursuant to which the
shares were purchased, the employee will generally recognize
ordinary income for the year in which the sale occurs equal to
the lesser of (a) fifteen percent (15%) of the fair market
value of the common stock on the first day of the offering
period pursuant to which the shares were purchased or
(b) the excess of the amount actually received for the
shares over the amount paid. No taxable income results if the
proceeds of the sale are equal to or less than the price paid
for the shares. In addition, the employee may recognize
long-term capital gain or loss in an amount equal to the
difference between the proceeds of the sale and the
employee’s basis in the shares (
i.e.
, the
employee’s purchase price plus the amount taxed to the
employee as ordinary income). The employee will receive
long-term capital gain or loss treatment if he or she has held
the shares for at least 12 months. No deduction is allowed
to the Company.
20
If shares
acquired under the 2010 ESPP are sold within two years of the
first day of the purchase period pursuant to which the shares
were purchased, the employee will recognize ordinary income
equal to the difference between the fair market value of the
shares on the last day of the offering and the employee’s
purchase price. This amount is reportable as ordinary income
even if no profit was realized on the sale of shares or the
shares were sold at a loss. Long-term or short-term (depending
on the holding period for the shares) capital gain or loss will
be recognized in an amount equal to the difference between the
proceeds of sale and the employee’s basis in the shares.
The amount reportable as ordinary income from a sale made within
two years of the first day of the purchase period pursuant to
which the shares were purchased will generally be allowed as a
tax deduction to the Company.
New 2010
ESPP Plan Benefits
Since
participation in the 2010 ESPP is voluntary, the benefits or
amounts that will be received by or allocated to any individual
or group of individuals under the 2010 ESPP are not determinable.
Required
Vote
The approval
of the 2010 ESPP requires the affirmative vote of a majority of
the votes cast on the proposal at the Annual Meeting.
Recommendation
of the Board of Directors
The Board
of Directors unanimously recommends that stockholders vote FOR
the approval of the 2010 Employee Stock Purchase Plan.
PROPOSAL 4
RATIFICATION
OF AUDITORS
The Audit
Committee has appointed Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for
2010. Representatives of Deloitte & Touche LLP will
attend the Annual Meeting of Stockholders and will have the
opportunity to make a statement if they desire to do so. They
will also be available to respond to appropriate questions.
The
following is a summary of fees billed by Deloitte &
Touche LLP for fiscal years ended December 31, 2009 and
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Audit fees(1)
|
|
$
|
362,316
|
|
|
$
|
28,000
|
|
|
Tax fees(2)
|
|
|
—
|
|
|
|
17,190
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
362,316
|
|
|
$
|
45,190
|
|
|
|
|
|
|
(1)
|
|
Includes
fees associated with the annual audit of our financial
statements, the reviews of our interim financial statements and
the issuance of consent and comfort letters in connection with
registration statements, including filings on
Form S-1
for our initial public offering.
|
|
|
|
(2)
|
|
Includes
fees associated with federal income tax compliance, tax advice
and tax planning.
|
Audit
Committee Pre-Approval Policies
The Audit
Committee is directly responsible for the appointment, retention
and termination, and for determining the compensation, of the
Company’s independent registered public accounting firm.
The Audit Committee shall pre-approve all auditing services and
the terms thereof and non-audit services (other than non-audit
services prohibited under Section 10A(g) of the Exchange
Act or the applicable rules of the SEC or the Public Company
Accounting Oversight Board), except that pre-approval is not
required for the provision of non-audit services if the
“de minimus” provisions of
Section 10A(i)(1)(B) of the Exchange Act are satisfied. The
Audit
21
Committee
may delegate to one or more designated members of the Audit
Committee the authority to grant pre-approvals for non-audit
services, provided such approvals are presented to the Audit
Committee at a subsequent meeting. All services provided by
Deloitte & Touche LLP during fiscal years 2009 and
2008 were pre-approved by the Audit Committee in accordance with
the pre-approval policy described above.
Required
Vote
The
ratification of the selection of Deloitte & Touche LLP
requires the affirmative vote of a majority of the votes cast on
the proposal at the Annual Meeting.
Recommendation
of the Board of Directors
The Board
of Directors recommends that the stockholders vote FOR the
ratification of the appointment of Deloitte & Touche
LLP as the independent registered public accounting firm of the
Company for its fiscal year ending December 31,
2010.
EXECUTIVE
OFFICERS
The names of
the executive officers of the Company, their ages as of
June 1, 2010, and certain other information about them are
set forth below (unless set forth elsewhere in this proxy
statement).
|
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|
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|
|
|
|
Name
|
|
Age
|
|
Position
|
|
|
|
Paul F. Truex
|
|
|
41
|
|
|
Chief Executive Officer, President and Director
|
|
Christopher P. Lowe
|
|
|
42
|
|
|
Chief Financial Officer and Vice President of Administration
|
|
James E. Pennington, M.D.
|
|
|
67
|
|
|
Senior Clinical Fellow
|
|
Colin Hislop, M.D.
|
|
|
52
|
|
|
Senior Vice President and Chief Medical Officer
|
|
Debra Odink, Ph.D.
|
|
|
46
|
|
|
Senior Vice President, Pharmaceutical Research and Development
|
|
Joaquim Trias, Ph.D.
|
|
|
49
|
|
|
Senior Vice President, Preclinical Development
|
|
Stephen Lau
|
|
|
38
|
|
|
Vice President, Corporate and Business Development
|
|
Ursula Fritsch, Pharm. D
|
|
|
50
|
|
|
Vice President, Global Regulatory and Compliance
|
|
Georgina Kilfoil
|
|
|
41
|
|
|
Senior Vice President, Product Development and Clinical
Operations
|
The
biographies of our executive officers, other than
Mr. Truex, whose biography is set forth above, appear below.
Christopher
P.
Lowe.
Mr. Lowe
has served as our Chief Financial Officer and Vice President of
Administration since November 2007. Beginning in September 2005
and up until he joined the company, Mr. Lowe served as Vice
President of Finance & Administration and, beginning
in January 2006, as Chief Financial Officer of Asthmatx, Inc., a
medical technology company. Previously, Mr. Lowe was with
Peninsula Pharmaceuticals, Inc., as Corporate Controller from
June 2004 to October 2004 and Chief Accounting Officer from
October 2004 until June 2005. Mr. Lowe holds a B.S. in
business administration from California Polytechnic State
University, San Luis Obispo and an M.B.A. from Saint
Mary’s University, Texas. Mr. Lowe is a director of
Hansen Medical Corporation, a medical device company.
James E.
Pennington, M.D.
Dr. Pennington
has served as our Senior Clinical Fellow since June 2010. Prior
to that, he served as our Executive Vice President and Chief
Medical Officer since March 2007. Dr. Pennington came to
Anthera from CoTherix, Inc. where, since February 2004, he
served as Executive Vice President and Chief Medical Officer,
focusing on licensing and developing and commercializing
therapeutic products for the treatment
22
of
cardiovascular diseases. He holds a B.A. in General Science from
the University of Oregon and an M.D. from the University of
Oregon School of Medicine and is board certified in internal
medicine and infectious disease.
Colin
Hislop, M.D.
Dr. Hislop
has served as our Senior Vice President and Chief Medical
Officer since June 2010. Prior to that, he served as our Senior
Vice President of Cardiovascular Products since November 2005
and also served as a consultant to the company from July 2005
through November 2005. From October 2004 until June 2005,
Dr. Hislop was Vice President, Clinical Development for
Peninsula Pharmaceuticals, Inc. where he oversaw three global
development programs for Peninsula’s anti-infective product
portfolio. From September 2001 until September 2004,
Dr. Hislop served as Vice President of Clinical Development
at CV Therapeutics, Inc., a biopharmaceutical company.
Dr. Hislop holds a B.Sc. in medical biochemistry from the
University of Surrey, and a degree in medicine from the
University of London.
Debra
Odink, Ph.D.
Dr. Odink
was promoted to Senior Vice President of Pharmaceutical Research
and Development in June 2010. Prior to that, she served as our
Vice President of Pharmaceutical Research and Development since
December 2005. From September 2002 until July 2005,
Dr. Odink served as Vice President of Pharmaceutical
Chemistry and Product Development at Peninsula Pharmaceuticals,
Inc., a biopharmaceutical company, where she was responsible for
manufacturing and product development strategies for assets
licensed to Peninsula. Dr. Odink holds a B.S. in chemistry
from California State University, Stanislaus and a Ph.D. in
inorganic chemistry from the University of California at Davis.
Joaquim
Trias, Ph.D.
Dr. Trias
has served as our Senior Vice President of Preclinical
Development since December 2004. From July 1996 until July 2004,
Dr. Trias was Vice President of Drug Discovery Research at
Vicuron Pharmaceuticals Inc. where he directed internal
discovery projects, from concept to clinical candidate, and
participated in its clinical development programs.
Dr. Trias holds a B.S. in Biology and a Ph.D. in
microbiology from the University of Barcelona and completed his
training at the University of California at Berkeley.
Stephen
Lau.
Mr. Lau
has served as our Vice President of Corporate and Business
Development since February 2008. From October 2003 until
February 2008, Mr. Lau managed and negotiated in- and
out-licensing opportunities at Amgen Inc., a biopharmaceutical
company. From March 2001 until September 2003, Mr. Lau was
an investment banker at Adams, Harkness & Hill. Prior
to that, Mr. Lau was a management consultant at Strategic
Decisions Group and Deloitte Consulting. Mr. Lau holds a
B.A. in microbiology and an M.S. in immunology from the
University of California at Davis, and a Master’s degree in
health care management from Harvard University.
Ursula
Fritsch,
Pharm.D.
Dr. Fritsch
has served as our Vice President, Global Regulatory and
Compliance since April 2005. Prior to joining the company, from
2003 to 2005, Dr. Fritsch was Senior Director of Regulatory
Affairs at Peninsula Pharmaceuticals, Inc., where she oversaw
both early and late stage regulatory strategy and operations for
their antibiotic portfolio. Prior to Peninsula, Dr. Fritsch
held various management positions and oversaw several new drug
application approvals at Genentech, Inc. and Oclassen
Pharmaceuticals, Inc. and was head of regulatory at Onyx
Pharmaceuticals, Inc. Dr. Fritsch holds a B.A. from the
University of Nebraska and a Pharm. D. from Creighton University.
Georgina
Kilfoil.
Ms. Kilfoil
has served as our Senior Vice President, Product Development and
Clinical Operations since March 23, 2010. Prior to joining
us, Ms. Kilfoil was the Vice President, Alliances and
Project Management of Peninsula Pharmaceuticals, Inc. from 2004
to 2005. From August 2000 to December 2003, Ms. Kilfoil was
a project management consultant with InClin, Inc., a consulting
company. Ms. Kilfoil holds a B.S. in pharmacology from the
University of Bristol, United Kingdom and an M.B.A. from the
Australian Graduate School of Management, Sydney, Australia.
COMPENSATION
DISCUSSION AND ANALYSIS
This section
discusses our executive compensation policies and arrangements
as they relate to our named executive officers who are listed in
the compensation tables set forth below. The following
discussion should be read together with the compensation tables
and related disclosures set forth below.
23
Background
and Objectives
We are a
biopharmaceutical company focused on developing and
commercializing products to treat serious diseases associated
with inflammation, including cardiovascular and autoimmune
diseases. The success of development companies is significantly
influenced by the quality and motivation of their work forces.
As a result, we face significant competition for executives and
other talented employees from numerous pharmaceutical research
and development companies in the San Francisco Bay Area.
With this in mind, we strive to provide what we believe is a
competitive total compensation package to our executive officers
through a combination of base salary, short-term cash incentives
and long-term equity compensation, in addition to broad-based
employee benefits programs, in order to closely align the
interests of our executive officers with those of our
stockholders, to attract talented individuals to manage and
operate all aspects of our business, to reward these individuals
fairly and to retain those individuals who meet our high
expectations and support the achievement of our business
objectives.
Role of
Compensation Committee and Executive Officers
Our
executive compensation program is administered by our
Compensation Committee of our Board of Directors. Our
Compensation Committee is responsible for overseeing our
executive compensation policies, plans and programs, reviewing
our achievements as a company and the achievements of our
individual officers, recommending to our Board of Directors the
type and level of compensation for our named executive officers
and our directors. The primary goal of our Compensation
Committee is to closely align the interests of our named
executive officers with those of our stockholders. To achieve
this goal, our Compensation Committee relies on compensation
that is designed to attract and retain executives whose
abilities are critical to our long-term success, that motivates
individuals to perform at their highest level and that rewards
achievement.
The annual
responsibilities of our compensation committee include the
following:
|
|
|
|
|
|
•
|
reviewing
and approving corporate goals and objectives relevant to the
compensation of our Chief Executive Officer;
|
|
|
|
|
•
|
evaluating
the performance of our Chief Executive Officer in light of such
corporate goals and objectives and determining the compensation
of our Chief Executive Officer; and
|
|
|
|
|
•
|
reviewing
and approving the level of equity awards, annual salary and
bonuses for our named executive officers and other employees.
|
In reviewing
and approving these matters, our Compensation Committee
considers such matters as it deems appropriate, including our
financial and operating performance, the alignment of interests
of our executive officers and our stockholders and our ability
to attract and retain qualified individuals. For executive
compensation decisions, including decisions relating to the
grant of stock options and other equity awards to our named
executive officers, our Compensation Committee typically
considers the recommendations of Mr. Truex, our Chief
Executive Officer. Mr. Truex also generally participates in
our Compensation Committee’s deliberations about executive
compensation matters. However, Mr. Truex does not
participate in the deliberation or determination of his own
compensation.
Our
Compensation Committee has not established any formal policies
or guidelines for allocating compensation between current and
long-term equity compensation, or between cash and non-cash
compensation. In determining the amount and mix of compensation
elements and whether each element provides the correct
incentives and rewards for performance consistent with our
short-term and long-term goals and objectives, our compensation
committee relies on its judgment about each individual’s
performance in a rapidly changing business environment rather
than adopting a formulaic approach to compensatory decisions
that are too narrowly responsive to short-term changes in
business performance. In making determinations about
performance, our Compensation Committee does not solely rely on
formal goals or metrics, but rather takes into account input
from appropriate members of management with respect to an
individual’s performance, as well as its own observations.
24
Role of
Compensation Consultant
Our
Compensation Committee has the authority under its charter to
engage the services of any consulting firm or other outside
advisor to assist it. In late 2007, our Compensation Committee
engaged J. Thelander Consulting, an independent consulting firm
selected by our Compensation Committee, to review the
compensation of our named executive officers and other key
employees. J. Thelander Consulting compared the base salary,
bonus and equity awards offered to these employees with
aggregated data from 193 pre-IPO companies in the biotechnology,
medical device, IT/software, cleantech and health care space.
These 193 companies were selected because they were at a
similar stage of development as we are and the majority of such
companies were also based on the west coast and had levels of
funding ranging from $15 million to $70 million.
Accordingly, our Compensation Committee determined that these
companies represented the types of companies with which we
compete for executive employees. Based on our goal of attracting
and retaining talented individuals to serve as executive
officers in a competitive market, J. Thelander Consulting
recommended targeting the 75th percentile of base salary,
bonus and equity compensation offered by this group of
companies. J. Thelander Consulting recommended targeting the
75th percentile of compensation at comparable companies in
order to attract above-average executives, since attracting and
retaining top talent is important to a smaller company like
ours. To that end, J. Thelander Consulting recommended that we
increase our offered base salary and bonus compensation for
executive officers, and maintain the current level of offered
equity compensation. Our Compensation Committee considered the
recommendations and determined that the current compensation
packages for our executive officers were sufficient in light of
current market conditions, input from management and the desire
to allocate resources to our clinical development study instead.
J. Thelander
Consulting also reviewed the change in control and severance
benefits we had in place at the time for our executives, which
included all of our named executive officers. J. Thelander
Consulting recommended that we maintain our current benefit
levels for cash severance and health benefits, which are
12 months’ cash severance and benefits continuation
for our Chief Executive Officer and six months’ cash
severance and benefits continuation for our other executive
officers, but provide for 100% acceleration of equity awards
vesting in connection with the termination of employment of our
executive officers in certain circumstances. At the time of J.
Thelander Consulting’s review, our change of control and
severance benefits provided acceleration of 12 months of
equity award vesting for our Chief Executive Officer and Chief
Medical Officer and six months of equity award vesting for our
other executive officers. Our Compensation Committee considered
the recommendations and determined that the existing change of
control and severance provisions for our executive officers were
adequate to provide security to our executive officers whose
leadership and experience would be crucial to maximize
stockholder value during the course of ordinary business.
In September
2009, our Compensation Committee engaged J. Thelander Consulting
to review and provide comparative data on the base salary, bonus
and equity compensation of (i) chief executive officers of
private biotechnology companies with funding levels between $50
to $70 million and (ii) chief executive officers and
other executive officers of publicly traded biotechnology
companies with a market capitalization between $220 to
$375 million. J. Thelander Consulting also provided a
review of the board compensation of such publicly traded
biotechnology companies. Our Compensation Committee reviewed the
report by J. Thelander Consulting, but has not yet made a
determination on any changes to our executive compensation.
J. Thelander
Consulting was retained by and reported directly to our
Compensation Committee.
Compensation
Elements
Base
Salary.
The
base salaries of our named executive officers are primarily
established based on the scope of their responsibilities and
performance, taking into account the J. Thelander Consulting
comparable company data and based upon our Compensation
Committee’s understanding of compensation paid to similarly
situated executives, and adjusted as necessary to recruit or
retain specific individuals. In making determinations about the
performance of our named executive officers, our Compensation
Committee takes into account corporate goals, which are set
annually by our Compensation Committee and generally include
milestones related to our preclinical and clinical studies and
fundraising, as well as informal individual goals, which are
position-specific and are
25
communicated
to the named executive officer over the course of the year. In
2008, our corporate goals focused on clinical development of our
product candidates, including achieving full enrollment in our
Phase 2b clinical study and receiving advice from the FDA on a
Special Protocol Assessment for a Phase 3 clinical study
protocol for
A-002,
while
our 2009 corporate goals focused on the continued clinical
development of our product candidates, including completion of
our Phase 2b clinical study for
A-002.
We typically
review the base salaries of our named executive officers
annually. We may also increase the base salary of an executive
officer at other times if a change in the scope of the
executive’s responsibilities, such as promotion, justifies
such consideration. Although we do not target a specific
percentile range, we believe that a competitive base salary
relative to the companies with which we compete for executives
is a necessary element of any compensation program that is
designed to attract and retain talented and experienced
executives. We also believe that attractive base salaries can
motivate and reward executives for their overall performance.
Base salaries are established in part based on experience,
skills and expected contributions of our executives and our
executives’ performance during the prior year.
As part of
its annual evaluation of salaries in 2008 for our named
executive officers, our Board of Directors elected to maintain
salaries for Mr. Truex and our other named executive
officers at then-current levels. This determination was based on
the recommendation of our Compensation Committee that such base
salary provided adequate fixed income as compared to comparable
company data and our Compensation Committee’s own
understanding of compensation at other pre-IPO companies in
comparable industries, based in part on their respective
experience on the Board of Directors of such companies, as well
as management’s view that base salaries should generally
stay at the same level.
In February
2009, upon our Compensation Committee’s recommendation, our
Board of Directors approved temporary reduction in cash
compensation of approximately 14% on average for all of our
employees, including our named executive officers, which
compensation reduction was reinstated in August 2009. This
measure was taken in connection with the redeployment of
resources to our research and development activities and the
elimination of four positions in light of the financing and
economic environment. In connection with this salary reduction,
Mr. Truex was granted special authority by our Board of
Directors to allocate in his sole discretion options to purchase
an aggregate of 26,285 shares to individuals, including our
named executive officers, who had demonstrated high achievement
toward our goals.
On
April 21, 2010, as part of its annual review of
compensation, the Board of Directors, upon the recommendation of
the Compensation Committee, approved annual base salary
adjustments for Company employees, including certain of the
Company’s named executive officers, which became effective
on May 1, 2010. The adjusted base salaries for such named
executive officers are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Annual
|
|
Annual
Base Salary
|
|
Named
Executive Officer
|
|
Base
Salary
|
|
Effective
May 1, 2010
|
|
|
|
Paul F. Truex,
President and Chief Executive Officer
|
|
$
|
300,000
|
|
|
$
|
425,000
|
|
|
Christopher P. Lowe,
Chief Financial Officer and Vice President of Administration
|
|
$
|
250,000
|
|
|
$
|
300,000
|
|
|
James E. Pennington,
M.D., Senior Clinical Fellow
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
Colin Hislop,
M.D., Senior Vice President and Chief Medical Officer
|
|
$
|
270,000
|
|
|
$
|
320,000
|
|
|
Debra Odink,
Ph.D., Senior Vice President, Pharmaceutical Research and
Development
|
|
$
|
200,000
|
|
|
$
|
225,000
|
|
|
Stephen Lau,
Vice President, Corporate and Business Development
|
|
$
|
200,000
|
|
|
$
|
210,000
|
|
26
In
connection with Dr. Odink’s promotion to Senior Vice
President, Pharmaceutical Research and Development in June 2010,
her annual base salary was increased from $225,000 to $250,000.
Cash
Bonuses.
As
of December 31, 2009, we did not have a formal cash
incentive program. While we have paid cash bonuses based on the
achievement of approved operational milestones in the past, we
did not establish a formal cash incentive program, nor did we
pay any bonuses based on corporate goals in 2008. Our
Compensation Committee has not made a determination or approved
the payment of any bonuses based on corporate goals in 2009. Our
2008 and 2009 corporate goals were informal, but focused on the
achievement of the following: in 2008, (1) developing and
implementing an adjusted clinical development plan for our
product candidates based on changes in market conditions and
regulatory guidance and (2) obtaining additional financing;
and in 2009, (1) continued clinical development of our
product candidates, and (2) obtaining additional financing.
For 2008, our Compensation Committee made the decision not to
pay annual bonuses based on the need to manage expenses and
allocate resources to our clinical development programs, and did
not formally evaluate whether our 2008 corporate goals had been
achieved. We did not have additional individual performance
goals for our named executive officers in 2008 or 2009. Our
Compensation Committee has the authority to award discretionary
performance-based cash bonuses to our executive officers and
certain non-executive employees. Our Compensation Committee
considers awarding such discretionary bonuses in the event of
extraordinary short-term efforts and achievements by our
executives and employees, as recommended by management. No such
discretionary bonuses were awarded in 2008. In 2009,
discretionary bonuses were awarded to certain of our employees,
including Dr. Hislop, Dr. Odink and Mr. Lau, in
recognition of their efforts in connection with certain business
development efforts.
On
March 24, 2010, the Board of Directors adopted the
Company’s Executive Incentive Bonus Plan (the “Bonus
Plan”), which applies to certain key executives (the
“Executives”) that are recommended by the Compensation
Committee and selected by the Board. The Bonus Plan provides for
bonus payments based upon the attainment of performance targets
established by the Board and related to financial and
operational metrics with respect to the Company or any of its
subsidiaries (the “Performance Goals”), which would
include the achievement of clinical study or operational
milestones, results of clinical studies and achievement of
specified financial metrics or objectives. Any bonuses paid
under the Bonus Plan shall be based upon objectively
determinable bonus formulas that tie such bonuses to one or more
performance targets relating to the Performance Goals. The bonus
formulas shall be adopted in each performance period by the
Board and communicated to each Executive. No bonuses shall be
paid under the Bonus Plan unless and until the Board makes a
determination with respect to the attainment of the performance
objectives. Notwithstanding the foregoing, the Company may
adjust bonuses payable under the Bonus Plan based on achievement
of individual performance goals or pay bonuses (including,
without limitation, discretionary bonuses) to Executives under
the Bonus Plan based upon such other terms and conditions as the
Board may in its discretion determine.
Each
Executive shall have a targeted bonus opportunity set for each
performance period. The maximum bonus payable to an Executive
under the Bonus Plan is 125% of the Executive’s bonus
opportunity. The Performance Goals will be measured at the end
of each fiscal year after the Company’s financial reports
have been published or such other appropriate time as the Board
shall determine. If the Performance Goals are met, payments will
be made within 30 days thereafter, and if met for the
previous fiscal year, not later than March 31. An Executive
must be employed by the Company as of the payment date in order
to receive a bonus payment, provided that the Board may make
exceptions to this requirement, in its sole discretion,
including, without limitation, in the case of an
Executive’s termination of employment, retirement, death or
disability.
Equity
Incentive
Compensation.
We
generally grant stock options to our employees, including our
named executive officers, in connection with their initial
employment with us. We also typically grant stock options on an
annual basis as part of annual performance reviews of our
employees. Our Compensation Committee has established grant
guidelines for our employees, other than our Chief Executive
Officer, based on an employee’s position. These guidelines
specify a range of equity grant amounts, expressed as a
percentage of our common stock outstanding on a fully-diluted
basis, which range from 0.02% to 2.75%, depending on position.
27
Grant
guidelines for our named executive officers, other than our
Chief Executive Officer, range from 0.25% to 2.75%, and ranges
for each position are as follows:
|
|
|
|
|
|
|
Principal
Position
|
|
Grant
Guidelines
|
|
|
|
Chief Financial Officer
|
|
|
1.25% - 2.5
|
%
|
|
Chief Medical Officer
|
|
|
1.25% - 2.5
|
%
|
|
Senior Vice President, Clinical/Medical
|
|
|
1.0% - 2.0
|
%
|
|
Vice President, Non-Clinical/Pre-Clinical
|
|
|
0.25% - 1.0
|
%
|
Our
Compensation Committee has not established grant guidelines for
our Chief Executive Officer and any grants made are at the
discretion of our Board of Directors.
Each of our
named executive officers has either purchased restricted shares
of common stock or received stock options to purchase shares of
common stock in connection with their initial employment with
us. We grant equity incentive compensation to our executive
officers because we believe doing so will motivate our
executives by aligning their interests more closely with the
interests of our stockholders. Certain employees, including
Mr. Truex, were granted restricted stock in 2004 and 2005
because we believed that it was appropriate for our initial key
employees to have an immediate equity stake, and because we
believed owning restricted stock would more closely align the
interests of the recipient with those of our stockholders. Now
that we are a more mature company, we believe it is generally
more appropriate to grant options to employees, as is the
general practice at other companies with which we compete for
talent, although we may continue to grant restricted stock or
grant other types of equity awards when we deem it appropriate
and in our stockholders’ best interests.
In
connection with their initial employment, each of our named
executive officers was granted stock options to purchase shares
of our common stock, for an aggregate of 362,147 shares at
an exercise price equal to the fair value of such shares at the
dates of grant, which ranged from $0.14 to $1.34 per share. The
options held by each named executive officer are subject to
vesting in order to encourage each named executive officer to
remain with us for several years, and subject to the other
provisions of their respective option agreements, which are
described below.
Equity
incentive grants to our named executive officers and other
employees are currently made at the discretion of our Board of
Directors with the recommendation of our Compensation Committee
out of our 2005 Equity Incentive Plan, or 2005 Equity Plan. In
determining equity incentive grants, the compensation committee
considers the grant guidelines it has established for each
position, along with the equity incentives already provided to
an employee. Our compensation committee also considers
individual performance, based on an informal evaluation of the
individual’s contribution to our corporate goals (which
generally include milestones related to our preclinical and
clinical studies and fundraising) and input received from
management.
Our 2008
corporate goals included:
|
|
|
|
|
|
•
|
initiation
of our Phase 2b FRANCIS study;
|
|
|
|
|
•
|
developing a
regulatory path for our cardiovascular program;
|
|
|
|
|
•
|
continued
enrollment of patients in our IMPACTS study on the schedule
prescribed by the clinical study protocol; and
|
|
|
|
|
•
|
obtaining
financing sufficient to fund the above goals.
|
Our 2009
corporate goals included:
|
|
|
|
|
|
•
|
completion
of our Phase 2b FRANCIS study;
|
|
|
|
|
•
|
completion
of the technology transfer of
A-623
from
Amgen;
|
|
|
|
|
•
|
successful
evaluation by a DSMB of the safety profile of
A-001; and
|
|
|
|
|
•
|
obtaining
financing sufficient to fund the above goals.
|
28
Under the
2005 Equity Plan, we may grant equity incentive awards in the
form of stock options, restricted stock awards or stock
appreciation rights. In 2008, our Board of Directors granted
options to purchase a total of 327,973 shares of common
stock to our employees, directors and consultants, including
options to purchase a total of 224,882 shares of common
stock to our named executive officers, all at an exercise price
of $1.34 per share, which represented the fair value of our
common stock on the dates of grant, as determined by our Board
of Directors. In 2009, our Board of Directors granted options to
purchase a total of 405,358 shares of common stock to our
employees, directors and consultants, including options to
purchase a total of 214,073 shares of common stock to our
named executive officers, at exercise prices of $1.51 and $7.70
per share, which represented the fair value of our common stock
on the dates of grant, as determined by our Board of Directors.
In exercising its discretion to determine the amount of each
grant for recommendation to our Board of Directors, the
Compensation Committee generally takes into account each
individual’s contributions towards the achievement of our
annual corporate goals; however, in 2008, no named executive
officers received grants of equity awards, other than
Mr. Lowe and Mr. Lau, whose grants of 122,663 and
102,219 options to purchase shares of our common stock,
respectively, were made in connection with their initial
employment. Furthermore, in 2009, upon the Compensation
Committee’s recommendation, our Board of Directors approved
grants of equity awards to employees, including our named
executive officers, who received a temporary reduction in cash
compensation as discussed above and whose performance supported
our 2008 corporate goals. Mr. Truex, Mr. Lowe,
Dr. Pennington, Dr. Hislop, Dr. Odink and
Mr. Lau each received grants of equity awards based upon
the management team’s contributions to our 2008 corporate
goals on a relative scale dependent on such named executive
officer’s job function and responsibility. The amount of
each grant was based upon industry data as well as such named
executive officer’s current level of equity awards. In
addition, as discussed above in connection with the salary
reduction, Mr. Truex was granted special authority by our
Board of Directors to allocate in his sole discretion options to
purchase shares of our common stock to individuals who had
demonstrated high achievement toward our corporate goals, which
individuals included our named executive officers.
Dr. Hislop and Mr. Lau each received grants of equity
awards in April 2009, which grants were based on
Dr. Hislop’s contributions to our FRANCIS study and
Mr. Lau’s contributions to our business development
activities. All of these grants were made to further motivate
the recipients by aligning their interests more closely with our
stockholders over the next several years by providing them with
an equity interest in the company.
The exercise
price of each stock option granted under our 2005 Equity Plan is
based on the fair value of our common stock on the date of
grant. Historically, the fair value of our common stock for
purposes of determining the exercise price of stock options has
been determined by our Board of Directors based on its analysis
of a number of factors including, among others, the total
company valuation implied by our rounds of financing, the market
value of similarly situated public companies, our anticipated
future risks and opportunities, the rights and preferences of
our preferred stock and the discounts customarily applicable to
common stock of privately-held companies. We engaged independent
valuation firms to assess the fair value of our common stock
during 2006, 2007 and 2008. Based on several factors considered
by our Board of Directors, including the valuation reports
prepared by such firms, we determined the fair value of our
common stock or option grants made in February and April 2009 to
be $1.51 per share, and for options grants made in 2008 to be
$1.34 per share. Based on several factors considered by our
Board of Directors, we determined the fair value of our option
grants made in October 2009 to be $7.70 per share. Following our
initial public offering, all stock options continue to be
granted with an exercise price equal to the fair value of our
common stock on the date of grant, but fair value is defined as
the closing market price of a share of our common stock on the
date of grant. We do not currently have any program, plan or
practice of setting the exercise price based on a date or price
other than the fair value of our common stock on the grant date.
Stock option
awards provide our named executive officers and other employees
with the right to purchase shares of our common stock at a fixed
exercise price, subject to their continued employment. Stock
options are earned on the basis of continued service and
generally vest over four years, beginning with vesting as to 25%
of the award on the one-year anniversary of the date of grant,
and pro-rata vesting monthly thereafter. Our stock options may
also be exercised prior to the award vesting in full, subject to
our right of repurchase pursuant to the 2005 Equity Plan. In
addition, we have also granted options to purchase smaller
amounts of stock, typically fewer than 10,000 shares, which
are immediately vested to recognize employee contributions,
including those of our named
29
executive
officers. Furthermore, we generally grant incentive stock
options to employees up to the statutory limit, then
non-statutory options thereafter and non-statutory options to
non-employees. See the section entitled
“— Potential Payments Upon Termination or Change
in Control” for a discussion of the change in control
provisions related to stock options.
While we
have only granted restricted stock awards to certain of our
initial key employees, we have the authority to do so under our
2005 Equity Plan and our 2010 Stock Option and Incentive Plan,
or 2010 Equity Plan. Restricted stock awards provide our named
executive officers and other employees with the ability to
purchase shares of our common stock at a fixed purchase price at
the time of grant by entering into a restricted stock purchase
agreement. Similar to stock options, shares of restricted stock
are earned on the basis of continued service and generally vest
over four years, beginning with vesting as to 25% of the award
on the one year anniversary of the date of grant and pro-rata
vesting quarterly thereafter. See the section below entitled
“— Potential Payments Upon Change in Control and
Termination” for a discussion of the change in control
provisions related to restricted stock.
We adopted
an equity award grant policy that formalizes how we grant
equity-based awards to officers and employees. Under our equity
award grant policy, all grants must be approved by our Board of
Directors or Compensation Committee. All stock options will be
awarded with an exercise price equal to the fair value of our
common stock and calculated based on our closing market price on
the last trading day of the quarter in which the grant is
approved.
Other
Compensation.
We
currently maintain broad-based benefits that are provided to all
employees, including health insurance, life and disability
insurance, dental insurance and a 401(k) plan.
As discussed
below in “— Severance and Change in Control
Agreements” and in “— Potential Payments
Upon Change in Control and Termination,” we have, for all
named executive officers (other than Dr. Pennington),
agreements providing certain benefits upon termination of their
employment in relation to a change in control, including the
acceleration of vesting of restricted stock and options. Our
goal in providing severance and change in control benefits is to
offer sufficient cash continuity protection such that our
executives will focus their full time and attention on the
requirements of the business rather than the potential
implications for their respective positions. We prefer to have
certainty regarding the potential severance amounts payable to
the named executive officers under certain circumstances, rather
than negotiating severance at the time that a named executive
officer’s employment terminates. We have also determined
that accelerated vesting provisions in connection with a
termination following a change of control are appropriate
because they will encourage our restricted stock and option
holders, including our named executive officers, to stay focused
in such circumstances, rather than the potential implications
for them.
All of our
named executive officers, except for Dr. Pennington, are
party to severance agreements that provide benefits upon
termination of employment in connection with a change of
control. In addition, in December 2007, our Compensation
Committee recommended and our Board of Directors agreed that
Mr. Lowe, our chief financial officer, should be offered
the same change of control severance benefit levels as our chief
executive officer, in light of his role in the company.
Tax and
Accounting Treatment of
Compensation.
Section 162(m)
of the Internal Revenue Code places a limit of $1.0 million
per person on the amount of compensation that we may deduct in
any one year with respect to each of our named executive
officers other than the chief financial officer. There is an
exemption from the $1.0 million limitation for
performance-based compensation that meets certain requirements.
Grants of stock options and stock appreciation rights under our
2010 Equity Plan are intended to qualify for the exemption.
Restricted stock awards and restricted stock unit awards under
our 2010 Equity Plan, as well as performance cash awards, may
qualify for the exemption if certain additional requirements are
satisfied. To maintain flexibility in compensating officers in a
manner designed to promote varying corporate goals, our
Compensation Committee has not adopted a policy requiring all
compensation to be deductible. Although tax deductions for some
amounts that we pay to our named executive officers as
compensation may be limited by section 162(m), that
limitation does not result in the current payment of increased
federal income taxes by us due to our significant net operating
loss carry-forwards. Our Compensation Committee may approve
compensation or changes to plans, programs or awards that may
cause the
30
compensation
or awards to exceed the limitation under section 162(m) if
it determines that such action is appropriate and in our best
interests.
We account
for equity compensation paid to our employees under the rules of
FASB ASC 718, which requires us to estimate and record an
expense for each award of equity compensation over the service
period of the award. Accounting rules also require us to record
cash compensation as an expense at the time the obligation is
incurred.
COMPENSATION
OF EXECUTIVE OFFICERS
Summary
Compensation Table
The
following table summarizes the compensation that we paid to our
Chief Executive Officer, Chief Financial Officer and each of our
four other most highly compensated executive officers during the
years ended December 31, 2009 and 2008. We refer to these
officers in this proxy statement as our named executive officers.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position as of
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Total
|
|
December 31,
2009 and December 31, 2008
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)
|
|
|
|
Paul F. Truex
|
|
|
2009
|
|
|
$
|
281,837
|
|
|
|
—
|
|
|
$
|
88,125
|
|
|
$
|
369,962
|
|
|
President, Chief
|
|
|
2008
|
|
|
$
|
300,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
300,000
|
|
|
Executive Officer, and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher P. Lowe
|
|
|
2009
|
|
|
$
|
241,174
|
|
|
|
—
|
|
|
$
|
23,500
|
|
|
$
|
264,674
|
|
|
Chief Financial Officer and
|
|
|
2008
|
|
|
$
|
250,000
|
|
|
|
—
|
|
|
$
|
117,411
|
|
|
$
|
367,411
|
|
|
Vice President of Administration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. Pennington, M.D.
|
|
|
2009
|
|
|
$
|
228,845
|
|
|
|
—
|
|
|
$
|
29,375
|
|
|
$
|
258,220
|
|
|
Executive Vice President and
|
|
|
2008
|
|
|
$
|
290,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
290,000
|
|
|
Chief Medical Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colin Hislop, M.D.
|
|
|
2009
|
|
|
$
|
259,621
|
|
|
$
|
1,247
|
|
|
$
|
8,795
|
|
|
$
|
289,663
|
|
|
Senior Vice President,
|
|
|
2008
|
|
|
$
|
270,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
270,000
|
|
|
Cardiovascular Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debra Odink, Ph.D.
|
|
|
2009
|
|
|
$
|
158,580
|
|
|
$
|
3,996
|
|
|
$
|
29,375
|
|
|
$
|
191,951
|
|
|
Vice President, Pharmaceutical
|
|
|
2008
|
|
|
$
|
200,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
200,000
|
|
|
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Lau
|
|
|
2009
|
|
|
$
|
189,621
|
|
|
$
|
1,682
|
|
|
$
|
16,162
|
|
|
$
|
207,465
|
|
|
Vice President, Corporate
|
|
|
2008
|
|
|
$
|
180,303
|
|
|
|
—
|
|
|
$
|
97,843
|
|
|
$
|
278,146
|
|
|
and Business Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
This column
reflects the aggregate grant date fair value of equity awards
granted in 2009 or 2008 and calculated in accordance with FASB
ASC 718, excluding the effect of estimated forfeitures. See
Note 8 to our financial statements (for the years ended
December 31, 2007, 2008 and 2009, included as part of our
Registration Statement on
Form S-1)
for a discussion of the assumptions made in determining the
valuation of option awards.
|
31
Grants of
Plan-Based Awards
The
following table sets forth certain information with respect to
awards under our equity and non-equity incentive plans made by
us to our named executive officers and stock options awarded to
our named executive officers for the year ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
Grant
Date
|
|
|
|
|
|
Number
of
|
|
Exercise
or
|
|
Fair
Value of
|
|
|
|
|
|
Securities
|
|
Base
Price of
|
|
Stock
and
|
|
|
|
|
|
Underlying
|
|
Option
|
|
Option
|
|
Name
|
|
Grant
Date
|
|
Options(1)
|
|
Awards
($/sh)
|
|
Awards
($)(2)
|
|
|
|
Paul F. Truex
|
|
|
2/18/2009
|
|
|
|
66,376
|
|
|
$
|
1.51
|
|
|
$
|
66,761
|
|
|
|
|
|
2/18/2009
|
|
|
|
21,240
|
|
|
$
|
1.51
|
|
|
$
|
21,364
|
|
|
Christopher P. Lowe
|
|
|
2/18/2009
|
|
|
|
23,364
|
|
|
$
|
1.51
|
|
|
$
|
23,500
|
|
|
James E. Pennington, M.D.
|
|
|
2/18/2009
|
|
|
|
29,205
|
|
|
$
|
1.51
|
|
|
$
|
29,375
|
|
|
Colin Hislop, M.D.
|
|
|
2/18/2009
|
|
|
|
23,364
|
|
|
$
|
1.51
|
|
|
$
|
23,500
|
|
|
|
|
|
4/15/2009
|
(3)
|
|
|
5,257
|
|
|
$
|
1.51
|
|
|
$
|
5,295
|
|
|
Debra Odink, Ph.D.
|
|
|
2/18/2009
|
|
|
|
29,205
|
|
|
$
|
1.51
|
|
|
$
|
29,375
|
|
|
Stephen Lau
|
|
|
2/18/2009
|
|
|
|
11,682
|
|
|
$
|
1.51
|
|
|
$
|
11,750
|
|
|
|
|
|
4/15/2009
|
(3)
|
|
|
4,380
|
|
|
$
|
1.51
|
|
|
$
|
4,412
|
|
|
|
|
|
|
(1)
|
|
Unless
otherwise noted in the footnotes, these options vest in equal
monthly installments over four years. The vesting commencement
date of these grants is August 12, 2008.
|
|
|
|
(2)
|
|
The grant
date fair value of each equity award is computed in accordance
with FASB ASC 718, excluding the effect of estimated
forfeitures. See Note 8 to our financial statements (for
the years ended December 31, 2007, 2008 and 2009, included
as part of our Registration Statement on
Form S-1)
for a discussion of the assumptions made in determining the
valuation of option awards.
|
|
|
|
(3)
|
|
These
options vest immediately on the grant date.
|
32
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth certain information with respect to
outstanding equity awards as of December 31, 2009 with
respect to our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of
|
|
|
|
Number
of
|
|
Number
of
|
|
|
|
|
|
Number
|
|
Shares
or
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of
Shares
|
|
Units
of
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
or
Units
|
|
Stock
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
of
Stock
|
|
That
Have
|
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Expiration
|
|
That
Have
|
|
Not
|
|
Name
|
|
Exercisable (#)
|
|
Unexercisable
(#)*
|
|
Price ($)
|
|
Date
|
|
Not
Vested (#)(1)
|
|
Vested
($)(2)
|
|
|
|
Paul F. Truex
|
|
|
21,417
|
|
|
|
1,947
|
(3)
|
|
$
|
0.14
|
|
|
|
4/6/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
362,826
|
|
|
|
—
|
|
|
$
|
0.26
|
|
|
|
1/23/2017
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
44,252
|
|
|
|
22,124
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
14,161
|
|
|
|
7,079
|
(5)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
Christopher P. Lowe
|
|
|
2,920
|
(12)
|
|
|
—
|
|
|
$
|
0.14
|
|
|
|
3/6/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
39,004
|
|
|
|
35,882
|
(6)
|
|
$
|
1.34
|
|
|
|
2/21/2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
24,884
|
|
|
|
22,893
|
(7)
|
|
$
|
1.34
|
|
|
|
2/21/2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
15,540
|
|
|
|
7,824
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
James E. Pennington, M.D.
|
|
|
26,103
|
|
|
|
11,864
|
(8)
|
|
$
|
0.26
|
|
|
|
10/24/2017
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
19,471
|
|
|
|
9,734
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32,857
|
|
|
$
|
252,999
|
|
|
Colin Hislop, M.D.
|
|
|
145,130
|
|
|
|
—
|
|
|
$
|
0.26
|
|
|
|
1/23/2017
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
15,577
|
|
|
|
7,787
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
5,257
|
|
|
|
—
|
|
|
$
|
1.51
|
|
|
|
4/15/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
Debra Odink, Ph.D.
|
|
|
19,471
|
|
|
|
9,734
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2009
|
|
|
|
—
|
|
|
|
—
|
|
|
Stephen Lau
|
|
|
34,323
|
|
|
|
40,563
|
(9)
|
|
$
|
1.34
|
|
|
|
2/21/2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12,528
|
|
|
|
14,805
|
(10)
|
|
$
|
1.34
|
|
|
|
2/21/2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
7,786
|
|
|
|
3,896
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4,380
|
(11)
|
|
|
—
|
|
|
$
|
1.51
|
|
|
|
4/15/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
*
|
|
Unless
otherwise noted in the footnotes, these options vest over four
years as follows: 25% of the shares vest one year following the
vesting commencement date, with the remaining 75% vesting in
equal monthly installments over the next three years. All
unvested options contain an early exercise feature subject to
the Company’s right of repurchase pursuant to the 2005
Equity Plan.
|
|
|
|
(1)
|
|
The number
in this column represents shares of unvested stock options that
were acquired upon exercise of stock options prior to the stock
option vesting in full and which remain subject to the
Company’s right of repurchase as of December 31, 2009.
|
|
|
|
(2)
|
|
The fair
value of our common stock as of December 31, 2009 was $7.70
per share.
|
|
|
|
(3)
|
|
The vesting
commencement date of this incentive stock option is
April 6, 2006.
|
|
|
|
(4)
|
|
This
incentive stock option vests in equal monthly installments over
four years commencing on August 12, 2008.
|
|
|
|
(5)
|
|
This
non-statutory stock option vests in equal monthly installments
over four years commencing on August 12, 2008.
|
|
|
|
(6)
|
|
The vesting
commencement date of this incentive stock option is
November 26, 2007.
|
|
|
|
(7)
|
|
The vesting
commencement date of this non-statutory stock option is
November 26, 2007.
|
|
|
|
(8)
|
|
The vesting
commencement date of this incentive stock option is
March 19, 2007.
|
|
|
|
(9)
|
|
The vesting
commencement date of this incentive stock option is
February 7, 2008.
|
|
|
|
(10)
|
|
The vesting
commencement date of this non-statutory stock option is
February 7, 2008.
|
|
|
|
(11)
|
|
This
incentive stock option vested immediately on grant date.
|
|
|
|
(12)
|
|
These
options were granted to Mr. Lowe on March 6, 2006 in
his capacity as a consultant to the Company and vested
immediately on the grant date.
|
33
Option
Exercises and Stock Vested
Stock
Vested — 2009
The
following table sets forth certain information with respect to
the stock vested during the year ended December 31, 2009
with respect to our named executive officers. There were no
exercised stock options during the year ended December 31,
2009 with respect to our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards
|
|
|
|
Number
|
|
|
|
|
|
of
Shares
|
|
Value
|
|
|
|
Acquired
on
|
|
Realized
on
|
|
Name
|
|
Vesting (#)
|
|
Vesting
($)(3)
|
|
|
|
Paul F. Truex
|
|
|
—
|
|
|
|
—
|
|
|
Christopher P. Lowe
|
|
|
—
|
|
|
|
—
|
|
|
James E. Pennington, M.D.
|
|
|
26,285
|
(1)
|
|
|
195,560
|
|
|
Colin Hislop, M.D.
|
|
|
—
|
|
|
|
—
|
|
|
Debra Odink, Ph.D.
|
|
|
18,141
|
(2)
|
|
|
134,969
|
|
|
Stephen Lau
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
On
April 23, 2007, Dr. Pennington exercised
105,140 shares underlying a stock option award prior to the
award vesting in full. During the year ended December 31,
2009, the Company’s right of repurchase lapsed with respect
to the number of shares in this column.
|
|
|
|
(2)
|
|
On
October 19, 2007, Dr. Odink exercised
72,565 shares underlying a stock option award prior to the
award vesting in full. During the year ended December 31,
2009, the Company’s right of repurchase lapsed with respect
to the number of shares in this column.
|
|
|
|
(3)
|
|
This column
reflects the intrinsic value realized for shares vested in 2009,
which represents the difference between the fair value of our
common stock as of December 31, 2009 and the exercise price
of the stock option.
|
Stock and
Benefit Plans
2005
Equity Incentive Plan
Our 2005
Equity Plan was adopted by our board of directors and approved
by our stockholders in April 2005. We have reserved
2,175,817 shares of our common stock for the issuance of
awards under the 2005 Equity Plan.
Our 2005
Equity Plan is administered by our board of directors, which has
the authority to delegate full power and authority to a
committee of the board. Our board of directors or any committee
delegated by our board of directors has the power to select the
individuals to whom awards will be granted, to make any
combination of awards to participants, to accelerate the
exercisability or vesting of any award, to provide substitute
awards and to determine the specific terms and conditions of
each award, subject to the provisions of the 2005 Equity Plan.
The 2005
Equity Plan permits us to make grants of incentive stock
options, non-qualified stock options, restricted stock awards
and stock appreciation rights to employees, directors and
consultants. Stock options granted under the 2005 Equity Plan
have a maximum term of 10 years from the date of grant and
incentive stock options have an exercise price of no less than
the fair market value of our common stock on the date of grant.
Upon a sale event in which all awards are not assumed or
substituted by the successor entity, the vesting of awards under
the 2005 Equity Plan shall be accelerated in full prior to the
sale event and all stock options issued thereunder will
terminate.
All stock
option awards that are granted to our named executive officers
are covered by a stock option agreement. Except as noted above,
under the stock option agreements, 25% of the shares vest on the
first anniversary of the grant date and the remaining shares
vest monthly over the following three years. Our board of
directors may accelerate the vesting schedule in its discretion.
We did not engage in any option repricing or other modification
to any of our outstanding equity awards during the fiscal year
ended December 31, 2009.
Our board of
directors has determined not to grant any further awards under
the 2005 Equity Plan after the completion of our initial public
offering. We have adopted the 2010 Equity Plan to be effective
upon the consummation of an initial public offering, under which
we expect to make all future awards.
34
Amended
and Restated 2010 Stock Option and Incentive Plan
Please refer
to “Proposal 2 — Approval of Amended and
Restated 2010 Stock Option and Incentive Plan” for a
summary of the material terms of the 2010 Plan.
401(k)
Savings Plan
We have
established a 401(k) plan to allow our employees to save on a
tax-favorable basis for their retirement. We do not match any
contributions made by any employees, including our named
executive officers, pursuant to the plan.
Pension
Benefits
None of our
named executive officers participate in or have account balances
in pension benefit plans sponsored by us.
Nonqualified
Defined Contribution and Other Nonqualified Defined Compensation
Plans
None of our
named executive officers participate in or have account balances
in non-qualified defined contribution plans or other deferred
compensation plans maintained by us.
Severance
and Change in Control Arrangements
We consider
it essential to the best interests of our stockholders to foster
the continuous employment of our key management personnel. In
this regard, we recognize that the possibility of a change in
control may exist and that the uncertainty and questions that it
may raise among management could result in the departure or
distraction of management personnel to the detriment of the
Company and our stockholders. In order to reinforce and
encourage the continued attention and dedication of certain key
members of management, we have entered into several change in
control agreements and severance agreements with certain of our
executive officers.
In these
agreements, the definition of “change in control”
generally means the occurrence, in a single transaction or in a
series of related transactions of any one or more of the
following events, subject to specified events: (a) any
Exchange Act Person (defined in the change in control agreements
generally as any natural person, entity, or group not including
the Company or any subsidiaries) becomes the owner of securities
representing more than 50% of the combined voting power of our
then outstanding securities; (b) a merger, consolidation or
similar transaction involving the Company is consummated and
immediately after the consummation of such merger,
consolidation, or similar transaction, our stockholders
immediately prior thereto do not own either outstanding voting
securities representing more than 50% of the combined
outstanding voting power of the surviving entity or more than
50% of the combined outstanding voting power of the parent of
the surviving entity in such merger, consolidation, or similar
transaction; or (c) a sale, lease, license or other
disposition of all or substantially all of our consolidated
assets is consummated.
In these
agreements, “cause” means: (a) gross negligence
or willful misconduct in the performance of duties that is not
cured within 30 days of written notice, where such gross
negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the Company;
(b) repeated unexplained or unjustified absence; (c) a
material and willful violation of any federal or state law;
(d) commission of any act of fraud with respect to the
Company; or (e) commission of an act of moral turpitude or
conviction of or entry of a plea of nolo contendere to a felony.
“Constructive
termination”
means
an officer’s resignation within 180 days of the
occurrence of any of the following events without the
officer’s prior written consent, provided the officer
provides notice within 90 days of the first occurrence of
such event and such event remains uncured 30 days after
delivery of the written notice: (a) a material diminution
of such officer’s duties, responsibilities or authority;
(b) a material diminution of base compensation; or
(c) a material change in the geographic location at which
the officer provides services to us.
Paul
F. Truex
On
October 15, 2009, we entered into an amended and restated
change in control agreement with Mr. Truex. Upon the
occurrence of a change in control or within 12 months
thereafter, if we terminate Mr. Truex’s employment for
any reason other than for cause or if there is a constructive
termination, in either case, Mr. Truex is entitled to
receive as severance compensation 100% of his then-current base
salary for a period of up to 12 months and
35
payment of
continuation coverage premiums for health, dental, and vision
benefits for Mr. Truex and his covered dependents, if any,
for a period of 12 months pursuant to COBRA. In addition,
Mr. Truex is entitled to receive
(i) 12 months’ accelerated vesting of any
unvested options to purchase our common stock and (ii) the
immediate lapsing of any vesting restrictions on any restricted
stock awards as of the date of termination.
Christopher
P. Lowe
On
October 12, 2009, we entered into an amended and restated
change in control agreement with Mr. Lowe. Upon the
occurrence of a change in control or within 12 months
thereafter, if we terminate Mr. Lowe’s employment for
any reason other than for cause or if there is a constructive
termination, in either case, Mr. Lowe is entitled to
receive as severance compensation 100% of his then-current base
salary for a period of up to 12 months and payment of
continuation coverage premiums for health, dental, and vision
benefits for Mr. Lowe and his covered dependents, if any,
for a period of 12 months pursuant to COBRA. In addition,
Mr. Lowe is entitled to receive
(i) 12 months’ accelerated vesting of any
unvested options to purchase our common stock and (ii) the
immediate lapsing of any vesting restrictions on any restricted
stock awards as of the date of termination.
James
E. Pennington, M.D.
On
October 15, 2009, we entered into an amended and restated
severance benefits agreement with Dr. Pennington, which
provides certain benefits upon the termination of employment. If
we terminate Dr. Pennington’s employment for any
reason other than for cause or if there is a constructive
termination, in either case, Dr. Pennington is entitled to
receive as severance compensation 100% of his then-current base
salary and payment of continuation coverage premiums for health,
dental, and vision benefits for Dr. Pennington and his
covered dependents, if any, for a period of 12 months
pursuant to COBRA. In addition, Dr. Pennington is entitled
to receive: (i) 12 months’ accelerated vesting of
his unvested options to purchase our common stock and
(ii) the immediate lapsing of any vesting restrictions on
any restricted stock awards as of the date of termination. This
agreement was terminated on May 1, 2010, and
Dr. Pennington is therefore no longer entitled to the
severance benefits thereunder.
On
June 2, 2010, we entered into an employment agreement with
Dr. Pennington, which replaces the amended and restated
severance benefits agreement entered into on October 15,
2009. The employment agreement provides that, as of May 1,
2010, and for a period of one year thereafter,
Dr. Pennington will serve as our Senior Clinical Fellow.
Dr. Pennington’s annual base salary will remain
unchanged and any unvested portions of
Dr. Pennington’s outstanding option grants shall be
modified in that they shall vest (and the repurchase option with
respect to any early exercised option grants shall lapse) over
twelve months from May 1, 2010.
In addition,
should we terminate Dr. Pennington’s employment prior
to May 1, 2011 for any reason other than for cause or if
there is a constructive termination, then Dr. Pennington is
entitled to receive his base salary and COBRA premiums for
health benefits to the same extent as if he had remained
employed through May 1, 2011. Additionally, upon such
termination of employment, all unvested shares to purchase our
common stock pursuant to stock options shall become vested and
any vesting restrictions on any restricted stock awards that
Dr. Pennington holds as of the date of such termination of
employment shall lapse.
Colin
Hislop, M.D.
On
October 15, 2009, we entered into an amended and restated
change in control agreement with Dr. Hislop. Upon the
occurrence of a change in control or within 12 months
thereafter, if we terminate Dr. Hislop’s employment
for any reason other than for cause or if there is a
constructive termination, in either case, Dr. Hislop is
entitled to receive as severance compensation 100% of his
then-current base salary for a period of up to six months and
payment of continuation coverage premiums for health, dental,
and vision benefits for Dr. Hislop and his covered
dependents, if any, for a period of six months pursuant to
COBRA. In addition, Dr. Hislop is entitled to receive
(i) six months’ accelerated vesting of any unvested
options to purchase our common stock and (ii) the immediate
lapsing of any vesting restrictions on any restricted stock
awards as of the date of termination.
36
Debra
Odink, Ph.D.
On
October 15, 2009, we entered into an amended and restated
change in control agreement with Dr. Odink. Upon the
occurrence of a change in control or within 12 months
thereafter, if we terminate Dr. Odink’s employment for
any reason other than for cause or if there is a constructive
termination, in either case, Dr. Odink is entitled to
receive as severance compensation 100% of her then-current base
salary for a period of up to six months and payment of
continuation coverage premiums for health, dental, and vision
benefits for Dr. Odink and her covered dependents, if any,
for a period of six months pursuant to COBRA. In addition,
Dr. Odink is entitled to receive (i) six months’
accelerated vesting of any unvested options to purchase our
common stock and (ii) the immediate lapsing of any vesting
restrictions on any restricted stock awards as of the date of
termination.
Stephen
Lau
On
October 16, 2009, we entered into an amended and restated
change in control agreement with Mr. Lau. Upon the
occurrence of a change in control or within 12 months
thereafter, if we terminate Mr. Lau’s employment for
any reason other than for cause or if there is a constructive
termination, in either case, Mr. Lau is entitled to receive
as severance compensation 100% of his then-current base salary
for a period of up to six months and payment of continuation
coverage premiums for health, dental, and vision benefits for
Mr. Lau and his covered dependents, if any, for a period of
six months pursuant to COBRA. In addition, Mr. Lau is
entitled to receive (i) six months’ accelerated
vesting of any unvested options to purchase our common stock and
(ii) the immediate lapsing of any vesting restrictions on
any restricted stock awards as of the date of termination.
All payments
and benefits are conditioned on the executive’s execution
and non-revocation of a general release agreement at the time of
termination. All payments due upon termination (as discussed in
this entire section) may be delayed up to six months from the
termination date if necessary to avoid adverse tax treatment
under Section 409A of the Internal Revenue Code.
Potential
Payments Upon Change in Control and Termination
The tables
below reflect potential payments and benefits available for each
of our named executive officers upon termination in connection
with a change in control or termination, assuming the date of
occurrence is December 31, 2009. See section entitled
“— Severance and Change in Control
Agreements” above.
Named
Executive Officer Benefits and Payments Upon
Termination(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
Termination
within
|
|
|
|
Involuntary
|
|
One Year
of Change
|
|
Name
|
|
Termination(2)
|
|
in
Control(3)
|
|
|
|
Paul F. Truex
|
|
|
—
|
|
|
$
|
310,630
|
|
|
Christopher P. Lowe
|
|
|
—
|
|
|
$
|
259,483
|
|
|
James E. Pennington, M.D.
|
|
$
|
297,385
|
|
|
$
|
297,385
|
|
|
Colin Hislop, M.D.
|
|
|
—
|
|
|
$
|
139,792
|
|
|
Debra Odink, Ph.D.
|
|
|
—
|
|
|
$
|
104,663
|
|
|
Stephen Lau
|
|
|
—
|
|
|
$
|
105,207
|
|
|
|
|
|
|
(1)
|
|
Assumes
triggering event effective as of December 31, 2009. Upon a
voluntary termination or termination for cause, each named
executive officer would receive any earned but unpaid base
salary and unpaid vacation accrued until December 31, 2009.
These payments would be available to all employees upon
termination.
|
|
|
|
(2)
|
|
Includes
continuation of base salary determined as of December 31,
2009 and health, dental and vision benefits for 12 months
for Dr. Pennington.
|
|
|
|
(3)
|
|
Includes
continuation of base salary determined as of December 31,
2009 and health, dental and vision benefits for 12 months
for Mr. Truex, Mr. Lowe and Dr. Pennington. All
other named executive officers receive six months’
continuation of base salary and benefits.
|
37
Acceleration
of Vesting of Options upon Termination(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares of
|
|
Number of
Shares of
|
|
|
|
Accelerated
Stock and Value
|
|
Accelerated
Stock and Value
|
|
|
|
upon
Involuntary
|
|
upon
Involuntary
|
|
|
|
Termination
and in
|
|
Termination
and not in
|
|
|
|
Connection
with a
|
|
Connection
with a
|
|
Name
|
|
Change in
Control(2)
|
|
Change in
Control(3)
|
|
|
|
Paul F. Truex
|
|
$
|
163,751
|
(4)
|
|
|
—
|
|
|
Christopher P. Lowe
|
|
$
|
423,753
|
(5)
|
|
|
—
|
|
|
James E. Pennington, M.D.
|
|
$
|
537,151
|
(6)
|
|
$
|
537,151
|
(6)
|
|
Colin Hislop, M.D.
|
|
$
|
18,235
|
(7)
|
|
|
—
|
|
|
Debra Odink, Ph.D.
|
|
$
|
22,794
|
(8)
|
|
|
|
|
|
Stephen Lau
|
|
$
|
170,875
|
(9)
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
Assumes
triggering event effective as of December 31, 2009 and
excludes vested stock held as of such date. There was no public
market for our common stock in 2009. We have estimated the
market value of the accelerated option shares based on the
difference between our initial public offering price of $7.00
per share and the exercise price of such accelerated options.
|
|
|
|
(2)
|
|
Includes
acceleration of options for 12 months for Mr. Truex,
Mr. Lowe and Dr. Pennington. All other named executive
officers have six months’ acceleration of options.
|
|
|
|
(3)
|
|
Includes
acceleration of options for 12 months for
Dr. Pennington.
|
|
|
|
(4)
|
|
12,897 of
Mr. Truex’s options would accelerate upon involuntary
termination and in connection with a change of control.
|
|
|
|
(5)
|
|
33,510 of
Mr. Lowe’s options would accelerate upon involuntary
termination and in connection with a change of control.
|
|
|
|
(6)
|
|
39,426 of
Dr. Pennington’s options would accelerate upon
involuntary termination, including 26,285 shares with
respect to which the Company’s right of repurchase would
lapse, which shares were acquired by Dr. Pennington upon
exercise of options containing an early exercise feature.
|
|
|
|
(7)
|
|
1,460 of
Dr. Hislop’s options would accelerate upon involuntary
termination and in connection with a change of control.
|
|
|
|
(8)
|
|
1,825 of
Dr. Odink’s options would accelerate upon involuntary
termination and in connection with a change of control.
|
|
|
|
(9)
|
|
13,507 of
Mr. Lau’s options would accelerate upon involuntary
termination and in connection with a change of control.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Since
January 1, 2009, we have engaged in the following
transactions with our directors, executive officers, holders of
more than 5% of our voting securities, each of whom we refer to
as a Beneficial Owner, or any member of the immediate family of
any of the foregoing persons. The following discussion reflects
a 1-to-1.712 reverse split of our common stock effected on
February 22, 2010, but does not give effect to the
conversion of our preferred stock into shares of common stock in
connection with our initial public offering.
Private
Placements of Securities
2009
Note and Warrant Financing
In July and
September 2009, we sold convertible promissory notes, or the
2009 notes, that are secured by a first priority security
interest in all of our assets, and warrants, or the 2009
warrants, to purchase shares of our equity securities to certain
of our existing investors for an aggregate purchase price of
$10.0 million. We refer to these transactions collectively
as our 2009 note and warrant financing. The 2009 notes accrue
interest at a rate of 8% per
38
annum and
have a maturity date of the earliest of (i) July 17,
2010, (ii) the date of the sale of all or substantially all
of our equity interests or assets or (iii) an event of
default pursuant to the terms of the 2009 notes. The 2009 notes
are automatically convertible into the securities that are sold
in our next equity financing at a 25% discount to the price to
which such securities are sold to other investors, or they are
alternatively convertible into shares of our
Series B-2
convertible preferred stock in connection with a change of
control of the Company. Each 2009 warrant is exercisable for the
security into which each 2009 note is converted, at the price at
which that security is sold to other investors. Depending on
when the 2009 notes are converted, each 2009 warrant may be
exercisable for a number of shares equal to the quotient
obtained by dividing (x) (i) 25% of the principal amount of
the accompanying 2009 notes, in the event the conversion occurs
prior to April 1, 2010, or (ii) 50% of the principal
amount of the accompanying 2009 notes, in the event the
conversion occurs on or after April 1, 2010, by
(y) the purchase price of the securities into which the
note is ultimately converted. In addition, if a sale of all or
substantially all of our equity interests or assets should occur
prior to our next equity financing and any 2009 note has not
been converted, we are obligated to pay such 2009 note holder an
amount equal to the accrued interest and two times the
outstanding principal amount on such note in conjunction with
the closing of such sale. The 2009 notes converted into shares
of common stock in connection with our initial public offering,
and thus no principal or interest payments were ever made on the
notes and no amounts remain due under such notes.
The
following table summarizes the participation in the 2009 bridge
financing by any of our current directors, executive officers,
Beneficial Owners or any member of the immediate family of any
of the foregoing persons:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Shares
Acquired
|
|
|
Shares
Underlying
|
|
|
|
|
Consideration
|
|
|
upon
Conversion
|
|
|
Outstanding
|
|
|
Name
|
|
Paid
|
|
|
of
Notes(a)
|
|
|
Warrants(b)
|
|
|
|
|
VantagePoint
|
|
$
|
4,569,675
|
(1)
|
|
|
907,345
|
|
|
|
163,200
|
|
|
Sofinnova
|
|
$
|
2,951,720
|
(2)
|
|
|
586,088
|
|
|
|
105,418
|
|
|
Pappas
|
|
$
|
770,225
|
(3)
|
|
|
152,932
|
|
|
|
27,507
|
|
|
Caxton Advantage Life Sciences Fund, L.P.
|
|
$
|
854,190
|
(4)
|
|
|
169,605
|
|
|
|
30,506
|
|
|
HBM BioCapital
|
|
$
|
854,190
|
(5)
|
|
|
169,605
|
|
|
|
30,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
10,000,000
|
|
|
|
1,985,575
|
|
|
|
357,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Numbers in
this column were calculated by dividing (x) the sum of
(i) principal and (ii) accrued interest by
(y) the conversion price of $5.25 per share.
|
|
|
|
(b)
|
|
Numbers in
this column were calculated by dividing (x) the quotient of
(i) the principal and (ii) 25% by (y) the initial
public offering price of $7.00 per share.
|
|
|
|
(1)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $1,656,051 purchased by VantagePoint Venture Partners IV
(Q), L.P. on July 17, 2009, (ii) a convertible
promissory note with a principal amount of $2,484,076 purchased
by VantagePoint Venture Partners IV (Q), L.P. on
September 9, 2009, (iii) a convertible promissory note
with a principal amount of $165,788 purchased by VantagePoint
Venture Partners IV, L.P. on July 17, 2009, (iv) a
convertible promissory note with a principal amount of $248,681
purchased by VantagePoint Venture Partners IV, L.P. on
September 9, 2009, (v) a convertible promissory note
with a principal amount of $6,031 purchased by VantagePoint
Venture Partners IV Principals Fund, L.P. on July 17,
2009 and (vi) a convertible promissory note with a
principal amount of $9,047 purchased by VantagePoint Venture
Partners IV Principals Fund, L.P. on September 9, 2009.
|
|
|
|
(2)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $1,180,688 purchased by Sofinnova Venture Partners VI, L.P.
on July 17, 2009 and (ii) a convertible promissory
note with a principal amount of $1,771,032 purchased by
Sofinnova Venture Partners VI, L.P. on September 9, 2009.
|
|
|
|
(3)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $290,058 purchased by A.M. Pappas Life Science Ventures
III, L.P. on July 17, 2009, (ii) a convertible
promissory note with a principal amount of $435,086 purchased by
A.M. Pappas Life Science Ventures III, L.P. on
September 9, 2009, (iii) a convertible promissory note
with a principal amount of $18,032 purchased by PV III CEO Fund,
L.P. on July 17, 2009 and
|
39
|
|
|
|
|
|
|
(iv) a
convertible promissory note with a principal amount of $27,049
purchased by PV III CEO Fund, L.P. on September 9, 2009.
|
|
|
|
(4)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $341,676 purchased by Caxton Advantage Life Sciences Fund,
L.P. on July 17, 2009 and (ii) a convertible
promissory note with a principal amount of $512,514 purchased by
Caxton Advantage Life Sciences Fund, L.P. on September 9,
2009.
|
|
|
|
(5)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $290,424 purchased by HBM BioCapital (EUR) L.P. on
July 17, 2009, (ii) a convertible promissory note with
a principal amount of $435,637 purchased by HBM BioCapital (EUR)
L.P. on September 9, 2009, (iii) a convertible
promissory note with a principal amount of $51,252 purchased by
HBM BioCapital (USD) L.P. on July 17, 2009 and (iv) a
convertible promissory note with a principal amount of $76,877
purchased by HBM BioCapital (USD) L.P. on September 9, 2009.
|
2009
Equity Financing
On
September 25, 2009, we entered into a stock purchase
agreement, as amended to add an additional purchaser on
November 3, 2009, with certain existing holders of our
preferred stock for the sale of shares of our common stock equal
to $20.5 million divided by the price per share at which
shares of our common stock are sold to the public in an initial
public offering, or IPO, minus any per-share underwriting
discounts, commissions or fees. We refer to this transaction as
the 2009 equity financing. Pursuant to the terms of the stock
purchase agreement, the investors deposited $20.5 million
into an escrow account for the purchase of the shares. On
December 11, 2009, we entered into a note purchase
agreement and amended escrow agreement with the investors to
release $3.4 million of the $20.5 million held in the
escrow account and issue such investors convertible promissory
notes for the released amount, which notes we refer to as the
escrow notes and which are more fully described below. The
balance of the funds, or $17.1 million, held in the escrow
account will be released simultaneously with the closing of an
IPO in which the aggregate net proceeds to us (after
underwriting discounts, commissions and fees) are at least
$50.0 million. On February 24, 2010, we amended the
stock purchase agreement and escrow agreement with such holders
to provide that the funds held in the escrow account will be
released simultaneously with the closing of an IPO in which the
aggregate net proceeds to us (after underwriting discounts,
commissions and fees) are at least $20.0 million. The funds
held in the escrow account were released in connection with the
closing of our initial public offering on March 4, 2010.
The
following table summarizes commitments made to participate in
the 2009 equity financing by any of our current directors,
executive officers, Beneficial Owners or any member of the
immediate family of any of the foregoing:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
Consideration
|
|
|
Shares
Issued
|
|
|
|
|
to be
Paid upon Closing
|
|
|
upon
Release of
|
|
|
Name
|
|
of the
2009 Equity Financing
|
|
|
Escrow
Account(a)
|
|
|
|
|
VantagePoint
|
|
$
|
7,586,035
|
(1)
|
|
|
1,152,891
|
|
|
Sofinnova
|
|
$
|
4,898,784
|
|
|
|
744,496
|
|
|
Pappas
|
|
$
|
1,279,265
|
(2)
|
|
|
194,416
|
|
|
Caxton Advantage Life Sciences Fund, L.P.
|
|
$
|
1,417,958
|
|
|
|
215,495
|
|
|
HBM BioCapital
|
|
$
|
1,417,958
|
(3)
|
|
|
215,495
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
16,600,000
|
|
|
|
2,522,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Numbers in
this column calculated by dividing the “Aggregate
Consideration to be Paid upon Closing of the 2009 Equity
Financing” by $6.58 (which equals the price per share to
the public in our initial public offering less the underwriting
discounts, commissions and fees).
|
|
|
|
(1)
|
|
Includes
approximately $6,872,948 to be paid by VantagePoint
Ventures IV (Q), L.P., approximately $688,053 to be paid by
VantagePoint Venture Partners IV, L.P. and approximately $25,034
to be paid by VantagePoint Venture Partners IV Principals
Fund, L.P.
|
40
|
|
|
|
|
(2)
|
|
Includes
approximately $1,204,428 to be paid by A.M. Pappas Life
Science Ventures III, L.P. and approximately $74,837 to be paid
by PV III CEO Fund, L.P.
|
|
|
|
(3)
|
|
Includes
approximately $1,205,264 to be paid by HBM BioCapital (EUR) L.P.
and approximately $212,694 to be paid by HBM BioCapital (USD)
L.P.
|
One
additional purchaser, Shionogi & Co., Ltd., who is not
a current director, executive officer, Beneficial Owner or a
member of the immediate family of any of the foregoing, has also
committed $0.5 million to our 2009 equity financing, and
thus received 75,987 shares upon release of the escrow
account.
2009
Escrow Notes
On
December 11, 2009, we sold convertible promissory notes, or
the escrow notes, that are secured by a first priority security
interest in all of our assets to purchase shares of our equity
securities to certain of our existing investors for an aggregate
purchase price of $3.4 million. The escrow notes accrue
interest at a rate of 8% per annum and have a maturity date of
the earlier of (i) July 17, 2010 or (ii) an event
of default pursuant to the terms of the escrow notes. The escrow
notes are automatically convertible into common stock upon the
consummation of an IPO in which the aggregate net proceeds to us
(after underwriting discounts, commissions and fees) are at
least $50.0 million, at the price per share in which shares
are sold to the public, minus any per-share underwriting
discounts, commissions or fees. However, if an IPO is not
consummated by February 28, 2010, the escrow notes become
exchangeable for exchange notes in the same principal amount
plus any accrued interest thereon, which are automatically
convertible into the securities that are sold in our next equity
financing at a 25% discount to the price in which such
securities are sold to other investors, or they are
alternatively convertible into shares of our
Series B-2
convertible preferred stock in connection with a change of
control of the Company. In addition, each exchange note that is
issued will be accompanied by a warrant, which is exercisable
for the security into which the accompanying exchange note, if
any, is converted, at the price at which that security is sold
to other investors. Depending on when the exchange notes are
converted, each warrant may be exercisable for a number of
shares equal to the quotient obtained by dividing (x)
(i) 25% of the principal amount of the accompanying
exchange notes, in the event the conversion occurs prior to
April 1, 2010, or (ii) 50% of the principal amount of
the accompanying exchange notes, in the event the conversion
occurs on or after April 1, 2010, by (y) the purchase
price of the securities into which the exchange note is
ultimately converted. Furthermore, if a sale of all or
substantially all of our equity interests or assets should occur
prior to our next equity financing and any exchange note has not
converted, we shall pay such exchange note holder an amount
equal to the accrued interest and two times the outstanding
principal amount on such note in conjunction with the closing of
such sale. On February 24, 2010, the note holders waived
their right to exchange the escrow notes for exchange notes and
warrants unless our initial public offering were not consummated
by March 31, 2010. In addition, on February 24, 2010,
we amended the note purchase agreement relating to the escrow
notes to provide that the escrow notes are automatically
convertible into common stock upon the consummation of an
initial public offering in which the aggregate net proceeds to
us (after underwriting discounts, commissions and fees) are at
least $20.0 million. The escrow notes automatically
converted into common stock upon the closing of our initial
public offering on March 4, 2010, and thus no principal or
interest payments were ever made on the notes and no amounts
remain due under such notes. Moreover, because the escrow notes
were not exchanged, no warrants were ever issued in connection
with such notes.
41
The
following table summarizes the participation in the 2009 escrow
notes by any of our current directors, executive officers,
Beneficial Owners or any member of the immediate family of any
of the foregoing persons:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Shares
Issued upon
|
|
|
|
|
Consideration
|
|
|
Conversion
|
|
|
Name
|
|
Paid
|
|
|
of Escrow
Notes(a)
|
|
|
|
|
VantagePoint
|
|
$
|
1,553,766
|
(1)
|
|
|
240,222
|
|
|
Sofinnova
|
|
$
|
1,003,366
|
|
|
|
155,127
|
|
|
Pappas
|
|
$
|
262,018
|
(2)
|
|
|
40,509
|
|
|
Caxton Advantage Life Sciences Fund, L.P.
|
|
$
|
290,425
|
|
|
|
44,901
|
|
|
HBM BioCapital
|
|
$
|
290,425
|
(3)
|
|
|
44,901
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
3,400,000
|
|
|
|
525,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Numbers in
this column calculated by dividing (x) the sum of
(i) “Aggregate Consideration to be Paid” and
(ii) accrued interest by (y) $6.58 (which equals the
price per share to the public in our initial public offering
less the underwriting discounts, commissions and fees).
|
|
|
|
(1)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $1,407,712 purchased by VantagePoint Venture Partners IV
(Q), L.P., (ii) a convertible promissory note with a
principal amount of $140,927 purchased by VantagePoint Venture
Partners IV, L.P. and (iii) a convertible promissory note
with a principal amount of $5,127 purchased by VantagePoint
Venture Partners IV Principals Fund, L.P.
|
|
|
|
(2)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $246,690 purchased by A.M. Pappas Life Science Ventures
III, L.P. and (ii) a convertible promissory note with a
principal amount of $15,328 purchased by PV III CEO Fund, L.P.
|
|
|
|
(3)
|
|
Consists of
(i) a convertible promissory note with a principal amount
of $246,861 purchased by HBM BioCapital (EUR) L.P. and
(ii) a convertible promissory note with a principal amount
of $43,564 purchased by HBM BioCapital (USD) L.P.
|
Other
Related-Party Transaction
The spouse
of Georgina Kilfoil, our Senior Vice President, Product
Development and Clinical Operations, is the Chief Executive
Officer of Inclin, Inc., or Inclin. Ms. Kilfoil was a
consultant for Inclin until joining us in March 2010. We use
Inclin’s clinical research organization services to
supplement the clinical research organization services we
receive from other providers. For the time period beginning
January 1, 2009 and ending December 31, 2010, we
expect that we will have paid Inclin approximately $500,000 for
the clinical research organization services it provides to us.
Indemnification
Agreements
We have
entered into indemnification agreements with each of our
directors and certain of our executive officers. As permitted by
the Delaware General Corporation Law, we have adopted provisions
in our amended and restated certificate of incorporation that
limit or eliminate the personal liability of our directors to us
for monetary damages for a breach of their fiduciary duty as a
director, except for liability for:
|
|
|
|
|
|
•
|
any breach
of the director’s duty of loyalty to us or our stockholders;
|
|
|
|
|
•
|
any act or
omission not in good faith or that involves intentional
misconduct or a knowing violation of law;
|
|
|
|
|
•
|
any unlawful
payments related to dividends or unlawful stock repurchases,
redemptions or other distributions; or
|
|
|
|
|
•
|
any
transaction from which the director derived an improper personal
benefit.
|
Pursuant to
our amended and restated certificate of incorporation and
amended and restated bylaws, we are obligated, to the maximum
extent permitted by Delaware law, to indemnify each of our
directors and officers
42
against
expenses (including attorneys’ fees), judgments, fines,
settlements and other amounts actually and reasonably incurred
in connection with any proceeding, arising by reason of the fact
that such person is or was an agent of the corporation. A
“director” or “officer” includes any person
who is or was a director or officer of us or as a director,
partner, trustee, officer, employee or agent of any other
corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan, foundation, association,
organization or other legal entity which such person is or was
serving at our request, but does not include the status of a
person who is serving or has served as a director, officer,
employee or agent of a constituent corporation absorbed in a
merger or consolidation transaction with the Company with
respect to such person’s activities prior to said
transaction unless specifically authorized by our Board of
Directors or our stockholders. Pursuant to our amended and
restated bylaws, we also have the power to indemnify our
employees to the extent permitted under Delaware law. Our
amended and restated bylaws provide that we shall advance
expenses to directors in connection with any proceeding in which
such director is involved because of his or her status as a
director and we may, at the discretion of our Board of
Directors, advance expenses to officers and employees in
connection with any proceeding in which such officer or employee
is involved because of his or her status as such. Our amended
and restated bylaws permit us to purchase and maintain insurance
on behalf of any person who is or was a director, officer,
employee or agent of us or, at our request, served in such a
capacity for another enterprise.
We have
entered into indemnification agreements with each of our
directors and certain of our executive officers that are, in
some cases, broader than the specific indemnification provisions
permitted by Delaware law, and that may provide additional
procedural protection. The indemnification agreements require
us, among other things, to:
|
|
|
|
|
|
•
|
indemnify
officers and directors against certain liabilities that may
arise because of their status as officers or directors; and
|
|
|
|
|
•
|
advance
expenses, as incurred, to officers and directors in connection
with a legal proceeding, subject to limited exceptions.
|
At present,
there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is
sought, nor are we aware of any threatened litigation or
proceeding that may result in claims for indemnification.
Procedures
for Approval of Related Person Transactions
The Audit
Committee shall conduct an appropriate review of all related
party transactions for potential conflict of interest situations
on an ongoing basis, and the approval of the Audit Committee
shall be required for all such transactions. The Audit Committee
may establish such policies and procedures as it deems
appropriate to facilitate such review.
43
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the
beneficial ownership of shares of our common stock by
(i) each director and each nominee to become a director,
(ii) each named executive officer, (iii) all
directors, nominees and executive officers as a group, and
(iv) each person who we know beneficially owns more than 5%
of our common stock as of April 30, 2010.
Beneficial
ownership is determined in accordance with the rules of the SEC.
These rules generally attribute beneficial ownership of
securities to persons who possess sole or shared voting power or
investment power with respect to those securities and include
shares of common stock issuable upon the exercise of stock
options that are immediately exercisable or exercisable within
60 days after April 30, 2010, but excludes unvested
stock options that contain an early exercise feature. Except as
otherwise indicated, all of the shares reflected in the table
are shares of common stock and all persons listed below have
sole voting and investment power with respect to the shares
beneficially owned by them, subject to applicable community
property laws. The information is not necessarily indicative of
beneficial ownership for any other purpose.
In computing
the number of shares of common stock beneficially owned by a
person and the percentage ownership of that person, we deemed
outstanding shares of common stock subject to options or
warrants held by that person that are currently exercisable or
exercisable within 60 days of April 30, 2010. We did
not deem these shares outstanding, however, for the purpose of
computing the percentage ownership of any other person.
Percentage
ownership calculations for beneficial ownership for each person
or entity are based on 22,305,570 shares outstanding as of
April 30, 2010. Except as otherwise indicated in the table
below, addresses of named beneficial owners are in care of
Anthera Pharmaceuticals, Inc., 25801 Industrial Blvd.,
Suite B, Hayward, California 94545.
44
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Number of
Shares
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Beneficially
|
|
|
Percent
of
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Name of
Beneficial Owner
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Owned
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Class
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5% or Greater Stockholders:
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|
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|
|
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|
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VantagePoint Venture Partners IV, L.P. and affiliated entities,
or
VantagePoint(1)
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6,460,813
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|
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28.74
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%
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|
|
|
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|
Sofinnova Venture Partners VI, L.P. and affiliated entities, or
Sofinnova(2)
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|
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4,177,621
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|
|
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18.64
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%
|
|
|
|
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Caxton Advantage Life Sciences Fund, L.P.(3)
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|
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1,207,749
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|
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5.41
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%
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|
|
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HBM BioCapital, L.P. and affiliated entities(4)
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1,521,851
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|
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6.81
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%
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|
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A.M. Pappas Life Science Ventures III, L.P. and affiliated
entities(5)
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1,159,806
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|
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5.19
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%
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|
|
|
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|
All 5% or greater stockholders as a group
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14,527,840
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|
|
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64.06
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%
|
|
|
|
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Named Executive Officers and Directors:
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|
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|
|
|
|
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|
|
|
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|
Paul F. Truex(6)
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1,143,331
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|
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5.03
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%
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|
|
|
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Christopher P. Lowe(7)
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207,259
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|
|
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*
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|
|
|
|
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James E. Pennington, M.D.(8)
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156,094
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|
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*
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Colin Hislop, M.D.(9)
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173,265
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|
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*
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Debra Odink, Ph.D.(10)
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117,224
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|
|
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*
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|
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Stephen Lau(11)
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72,524
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|
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*
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|
|
|
|
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Christopher S. Henney, Ph.D.(12)
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102,429
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|
|
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*
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|
|
|
|
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Annette Bianchi(13)
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11,499
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*
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|
|
|
|
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James I. Healy, M.D., Ph.D.(2)(14)
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4,198,064
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18.73
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%
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A. Rachel Leheny, Ph.D.(3)(15)
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1,211,095
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5.42
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%
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Donald J. Santel(16)
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12,412
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*
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Daniel K. Spiegelman(17)
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—
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—
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David E. Thompson(18)
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29,811
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|
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*
|
|
|
|
|
|
|
All named executive officers and directors as a group
(13 persons)
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7,438,577
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|
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31.89
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%
|
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|
|
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|
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*
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|
Represents
beneficial ownership of less than 1% of the shares of common
stock.
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(1)
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Includes
(i) 5,695,228 shares of common stock and
147,861 shares of common stock issuable upon exercise of
warrants, all owned of record by VantagePoint Venture
Partners IV (Q), L.P., (ii) 570,147 shares of
common stock and 14,801 shares of common stock issuable
upon exercise of warrants, all owned of record by VantagePoint
Venture Partners IV, L.P., (iii) 20,739 shares of
common stock and 538 shares of common stock issuable upon
exercise of warrants, all owned of record by VantagePoint
Venture Partners IV Principals Fund, L.P., and
(iv) options to purchase an additional 11,499 shares
of common stock that are exercisable within 60 days of
April 30, 2010 that are owned of record by Annette Bianchi,
over which VantagePoint has sole voting and investment power.
Ms. Bianchi, a director of Anthera, is a Managing Director
at VantagePoint. Alan E. Salzman, through his authority to cause
the general partner of the limited partnerships that directly
hold such shares to act, may be deemed to have voting and
investment power with respect to such shares. Mr. Salzman
disclaims beneficial ownership with respect to such shares
except to the extent of his pecuniary interest therein. The
address for VantagePoint Venture Partners is 1001 Bayhill Drive,
Suite 300, San Bruno, CA 94066.
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(2)
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Includes
4,072,203 shares of common stock and 105,418 shares of
common stock issuable upon exercise of warrants, all owned of
record by Sofinnova Venture Partners VI, L.P. Alain Azan, Eric
Buatois, Michael Powell and Dr. James I. Healy are the
managing members of the general partner of the limited
partnership that directly holds such shares, and as such, may be
deemed to share voting and investment power with respect to such
shares. Dr. Healy is a director of Anthera.
Messrs. Azan, Buatois and Powell and Dr. Healy
disclaim
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45
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beneficial
ownership, except to the extent of their proportionate pecuniary
interest in Sofinnova. The address for Sofinnova Ventures is 850
Oak Grove Ave., Menlo Park, CA 94025.
|
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(3)
|
|
Includes
(i) 1,173,896 shares of common stock and
30,506 shares of common stock issuable upon exercise of
warrants, all owned of record by Caxton Advantage Life Sciences
Fund, L.P. and (ii) options to purchase an additional
3,347 shares of common stock that are exercisable within
60 days of April 30, 2010 that are owned of record by
Dr. A. Rachel Leheny over which Caxton Advantage Life
Sciences Fund, L.P. may be deemed to hold voting power. Caxton
Advantage Venture Partners, L.P. has voting and investment power
with respect to such shares. Decisions by Caxton Advantage
Venture Partners, L.P. with respect to such shares are made by
Advantage Life Sciences Partners, LLC, the Managing General
Partner of Caxton Advantage Venture Partners, L.P., together
with the investment committee of Caxton Advantage Venture
Partners, L.P. Dr. Leheny and Eric Roberts have authority
to take action on behalf of Advantage Life Sciences Partners,
LLC as members of Advantage Life Sciences Partners, LLC. The
investment committee of Caxton Advantage Venture Partners, L.P.
as of the date hereof is comprised of (i) Mr. Roberts,
(ii) Dr. Leheny, (iii) Bruce Kovner and
(iv) Peter D’Angelo and the consent of four members is
required with respect to any decision by the Investment
Committee. Dr. Leheny is a director of Anthera, is
(i) a Managing Director of Caxton Advantage Venture
Partners, L.P., which is the General Partner of Caxton Advantage
Life Sciences Fund, L.P., a life-sciences venture capital fund
that she co-founded in 2006 and is (ii) a member of
Advantage Life Sciences Partners LLC. Mr. Roberts and
Dr. Leheny and the members of the Caxton Advantage Venture
Partners, L.P. investment committee disclaim beneficial
ownership, except to the extent of their proportionate pecuniary
interests, either directly, or indirectly through Caxton
Advantage Venture Partners, L.P. (or through any other entity
which is a limited partner in Caxton Advantage Life Sciences
Fund, L.P.), in Caxton Advantage Life Sciences Fund, L.P. The
address for Caxton Advantage Life Sciences Fund, L.P. is 500
Park Avenue, New York, NY 10022.
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(4)
|
|
Includes
(i) 1,267,645 shares of common stock and
25,930 shares of common stock issuable upon exercise of
warrants, all owned of record by HBM BioCapital (EUR) L.P. and
(ii) 223,701 shares of common stock and
4,575 shares of common stock issuable upon exercise of
warrants, all owned of record by HBM BioCapital (USD) L.P.,
collectively, the HBM BioCapital Funds. The board of directors
of HBM BioCapital Ltd., the general partner of the HBM
BioCapital Funds, has sole voting and dispositive power with
respect to such shares. The board of directors of HBM BioCapital
Ltd. consists of John Arnold, Sophia Harris, Richard Coles,
Dr. Andreas Wicki and John Urquhart, none of whom has
individual voting or investment power with respect to the
shares. The address for the HBM BioCapital Funds is
c/o HBM
BioCapital Ltd., Centennial Towers, 3rd Floor, 2454 West
Bay Road, Grand Cayman, Cayman Islands.
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|
(5)
|
|
Includes
(i) 1,066,042 shares of common stock and
25,897 shares of common stock issuable upon exercise of
warrants, all owned of record by A. M. Pappas Life Science
Ventures III, L.P. and (ii) 66,257 shares of common
stock and 1,610 shares of common stock issuable upon
exercise of warrants, all owned of record by PV III CEO Fund,
L.P. Arthur M. Pappas, in his role as chairman of the investment
committee of AMP&A Management III, LLC, the general partner
of A. M. Pappas Life Science Ventures III, L.P. and PV III CEO
Fund, L.P., has voting and investment authority over these
shares. Mr. Pappas disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest arising
therein. The address for both A. M. Pappas Life Science Ventures
III, L.P. and PV III CEO Fund, L.P. is 2520 Meridian Parkway,
Suite 400, Durham, NC 27713.
|
|
|
|
(6)
|
|
Includes
716,617 shares of common stock and options to purchase an
additional 426,714 shares of common stock that are
exercisable within 60 days of April 30, 2010, all
owned of record by Paul F. Truex.
|
|
|
|
(7)
|
|
Includes
(i) 9,637 shares of common stock owned of recorded by
Dina Gonzalez, Mr. Lowe’s spouse, (ii) options to
purchase 99,102 shares of common stock that are exercisable
within 60 days of April 30, 2010 and
17,523 shares of common stock owned of record by
Mr. Lowe and (iii) 80,997 shares of common stock
owned of record by BioVest III. Mr. Lowe has sole voting
and sole investment power with respect to the shares owned of
record by BioVest III. Mr. Lowe disclaims beneficial
ownership with respect to such shares except to the extent of
his pecuniary interest therein. The address for BioVest III
is 25801 Industrial Blvd., Suite B, Hayward, CA 94545.
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46
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|
|
|
|
(8)
|
|
Includes
105,140 shares of common stock, 19,714 shares of which
are subject to the Company’s right of repurchase, and
options to purchase an additional 50,954 shares of common
stock that are exercisable within 60 days of April 30,
2010 owned of record by Dr. Pennington.
|
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|
(9)
|
|
Includes
5,841 shares of common stock and options to purchase an
additional 167,424 shares of common stock that are
exercisable within 60 days of April 30, 2010 owned of
record by Dr. Hislop.
|
|
|
|
(10)
|
|
Includes
78,405 shares of common stock, options to purchase an
additional 21,296 shares of common stock that are
exercisable within 60 days of April 30, 2010 and
17,523 shares of common stock, all owned of record by the
Debra A. Odink Living Trust, for which Dr. Odink serves as
trustee.
|
|
|
|
(11)
|
|
Includes
options to purchase 72,524 shares of common stock that are
exercisable within 60 days of April 30, 2010 owned of
record by Mr. Lau.
|
|
|
|
(12)
|
|
Includes
(i) 55,489 shares of common stock, 16,550 shares
of which are subject to the Company’s right of repurchase,
(ii) 33,960 shares of common stock and
(iii) 12,980 shares of common stock, all owned of
record by Dr. Henney.
|
|
|
|
(13)
|
|
Includes
options to purchase 11,499 shares of common stock that are
exercisable within 60 days of April 30, 2010 owned of
record by Ms. Bianchi. VantagePoint has sole voting and
investment power with respect to these shares, and
Ms. Bianchi disclaims beneficial ownership thereof except
to the extent of her pecuniary interest in the shares of common
stock issuable upon exercise of the option.
|
|
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|
(14)
|
|
Includes
20,443 shares of common stock owned of record by
Dr. Healy, 8,944 shares of which are subject to the
Company’s right of repurchase.
|
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|
|
(15)
|
|
Includes
options to purchase 6,693 shares of common stock that are
exercisable within 60 days of April 30, 2010 owned of
record by Dr. Leheny. Caxton Advantage Life Sciences Fund,
L.P. may be deemed to hold voting power with respect to 3,347 of
these shares.
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(16)
|
|
Includes
options to purchase 12,412 shares of common stock that are
exercisable within 60 days of April 30, 2010 owned of
record by the Donald J. Santel and Kelly L. McGinnis Revocable
Living Trust.
|
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|
(17)
|
|
Mr. Spiegelman
joined our Board of Directors on February 2, 2010.
|
|
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|
(18)
|
|
Includes
20,443 shares of common stock and options to purchase an
additional 9,368 shares of common stock that are
exercisable within 60 days of April 30, 2010 owned of
record by Mr. Thompson.
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47
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Exchange Act requires our officers and directors, and
persons who own more than 10% of a registered class of our
equity securities, to file reports of ownership and changes in
ownership (Forms 3, 4 and 5) with the SEC. Officers,
directors and greater than 10% stockholders are required to
furnish us with copies of all such forms which they file.
To our
knowledge, based solely on our review of such reports or written
representations from certain reporting persons, we believe that
all of the filing requirements applicable to our officers,
directors, greater than 10% beneficial owners and other persons
subject to Section 16 of the Exchange Act were complied
with since the closing of our initial public offering on
March 4, 2010.
The
following Compensation Committee Report and Audit Committee
Report are not considered proxy solicitation materials and are
not deemed filed with the Securities and Exchange Commission.
Notwithstanding anything to the contrary set forth in any of the
Company’s filings made under the Securities Act of 1933 or
the Exchange Act that might incorporate filings made by the
Company under those statutes, the Compensation Committee Report
and Audit Committee Report shall not be incorporated by
reference into any prior filings or into any future filings made
by the Company under those statutes.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee of the Board of Directors (the
“Compensation Committee”) has furnished this report on
executive compensation. None of the members of the Compensation
Committee is currently an officer or employee of the Company and
all are “non-employee directors” for purposes of
Rule 16b-3
under the Exchange Act and “outside directors” for
purposes of Section 162(m) of the Internal Revenue Code.
The Compensation Committee is responsible for designing,
recommending to the Board of Directors for approval and
evaluating the compensation plans, policies and programs of the
Company and reviewing and approving the compensation of the
Chief Executive Officer and other officers and directors.
This report,
filed in accordance with Item 407(e)(5) of
Regulation S-K,
should be read in conjunction with the other information
relating to executive compensation which is contained elsewhere
in this proxy statement and is not repeated here.
In this
context, the Compensation Committee hereby reports as follows:
1. The
Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis section contained herein
with management.
2. Based
on the review and discussions referred to in paragraph
(1) above, the Compensation Committee recommended to the
Board of Directors, and the Board of Directors has approved,
that the Compensation Discussion and Analysis be included in
this proxy statement on Schedule 14A for filing with the
SEC.
COMPENSATION
COMMITTEE
David
E. Thompson, Chairman
A. Rachel Leheny, Ph.D.
Donald J. Santel
48
AUDIT
COMMITTEE REPORT
The Audit
Committee of the Board of Directors (the “Audit
Committee”) has furnished this report concerning the
independent audit of the Company’s financial statements.
Each member of the Audit Committee meets the enhanced
independence standards established by the Sarbanes-Oxley Act of
2002 and rulemaking of the Securities and Exchange Commission
(the “SEC”) and the NASDAQ Stock Market regulations. A
copy of the Audit Committee Charter is available on the
Company’s website at
http://www.anthera.com.
The Audit
Committee’s responsibilities include assisting the Board of
Directors regarding the oversight of the integrity of the
Company’s financial statements, the Company’s
compliance with legal and regulatory requirements, the
independent registered public accounting firm’s
qualifications and independence, and the performance of the
Company’s internal audit function and the independent
registered public accounting firm.
In
fulfilling its oversight responsibilities, the Audit Committee
reviewed and discussed the Company’s financial statements
for the fiscal year ended December 31, 2009 with the
Company’s management and Deloitte & Touche LLP,
the Company’s independent registered public accounting
firm. In addition, the Audit Committee has discussed with
Deloitte & Touche LLP, with and without management
present, their evaluation of the Company’s internal
accounting controls and overall quality of the Company’s
financial reporting. The Audit Committee also discussed with
Deloitte & Touche LLP the matters required to be
discussed by Statement on Auditing Standards No. 114, as
amended (AICPA, Professional Standards, Vol. 1, AU
Section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T. The Audit Committee also
received the written disclosures and the letter from
Deloitte & Touche LLP required by the Public Company
Accounting Oversight Board Rule 3526 and the Audit
Committee discussed the independence of Deloitte &
Touche LLP with that firm.
Based on the
Audit Committee’s review and discussions noted above, the
Audit Committee recommended to the Board of Directors, and the
Board of Directors approved, that the audited financial
statements be included in the Company’s Annual Report for
the fiscal year ended December 31, 2009.
The Audit
Committee and the Board of Directors also have recommended,
subject to stockholder approval, the selection of
Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the year
ending December 31, 2010.
AUDIT
COMMITTEE
Daniel
K. Spiegelman, Chairman
James I. Healy, M.D., Ph.D.
Donald J. Santel
HOUSEHOLDING
OF PROXY MATERIALS
We have
adopted a procedure approved by the SEC known as
“householding.” This procedure allows multiple
stockholders residing at the same address the convenience of
receiving a single copy of our Notice, annual report on
Form 10-K
and proxy materials, as applicable. This allows us to save money
by reducing the number of documents we must print and mail, and
helps protect the environment as well.
Householding
is available to both registered stockholders (i.e., those
stockholders with certificates registered in their name) and
streetname holders (i.e., those stockholders who hold their
shares through a brokerage).
Registered
Stockholders
If you are a
registered stockholder and have consented to our mailing of
proxy materials and other stockholder information only to one
account in your household, as identified by you, we will deliver
or mail a single copy of our annual report and proxy materials
for all registered stockholders residing at the same address.
Your consent will be perpetual unless you revoke it, which you
may do at any time by contacting the Householding Department of
49
Broadridge
Financial Solutions, Inc., at 51 Mercedes Way, Edgewood, NY
11717, or by calling
1-800-542-1061.
If you revoke your consent, we will begin sending you individual
copies of future mailings of these documents within 30 days
after we receive your revocation notice. If you received a
householded mailing this year, and you would like to receive
additional copies of our annual report and proxy materials,
please submit your request to Investor Relations who will
promptly deliver the requested copy.
Registered
stockholders who have not consented to householding will
continue to receive copies of annual reports and proxy materials
for each registered stockholder residing at the same address. As
a registered stockholder, you may elect to participate in
householding and receive only a single copy of annual reports or
proxy statements for all registered stockholders residing at the
same address by contacting Broadridge as outlined above.
Streetname
Holders
Stockholders
who hold their shares through a brokerage may elect to
participate in householding or revoke their consent to
participate in householding by contacting their respective
brokers.
OTHER
MATTERS
We are not
aware of any matters that may come before the meeting other than
those referred to in the Notice of Annual Meeting of
Stockholders. If any other matter shall properly come before the
Annual Meeting, however, the persons named in the accompanying
proxy intend to vote all proxies in accordance with their best
judgment.
Accompanying
this proxy statement is our Annual Report for the fiscal year
ended December 31, 2009. Copies of our Annual Report for
the fiscal year ended December 31, 2009 are available free
of charge on our website at www.anthera.com or you can request a
copy free of charge by calling Investor Relations at
510-856-5600
or sending an
e-mail
request to Investor Relations by accessing our website
(www.anthera.com), selecting the “Investors” tab and
then selecting “Investor Contact.” Please include your
contact information with the request.
By Order of
the Board of Directors
Anthera
Pharmaceuticals, Inc.
Sincerely,
Bradley A. Bugdanowitz
Secretary
Hayward,
California
June 7, 2010
50
ANTHERA PHARMACEUTICALS, INC.
ATTN: MAY LIU
25801 INDUSTRIAL BLVD.
SUITE B
HAYWARD, CA 94545
VOTE
BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern
Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your
records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically
in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to
Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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For
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Withhold
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For All
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To withhold authority to vote for any individual
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All
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All
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Except
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nominee(s), mark “For
All Except” and write the
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The Board of Directors recommends that you vote
FOR the following:
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number(s) of the nominee(s) on the line below.
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1.
Election
of Directors
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0
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01 Donald J. Santel
02 David
E. Thompson
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The Board of Directors recommends you vote FOR the following proposal(s):
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For
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Against
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Abstain
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2.
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To approve the Company’s Amended and Restated 2010 Stock Option and Incentive Plan, which amends the Company’s existing plan to increase the number of shares authorized for issuance thereunder by 200,000 shares;
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To approve the Company’s 2010 Employee Stock Purchase Plan; and
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To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2010.
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Please sign exactly as your name(s) appear(s) hereon. When signing
as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally.
All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement,
Annual Report is/are available at
www.proxyvote.com
.
ANTHERA PHARMACEUTICALS, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul F. Truex and Christopher P. Lowe proxies, and hereby authorizes each of
them to represent and vote as designated on the other side (each with the power to act without the other and with the power of substitution),
all the shares of stock of Anthera Pharmaceuticals, Inc. (the “
Company
”) standing in the name of the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of Stockholders of the Company to be held on July 9, 2010 or any adjournment or postponement
thereof.
This proxy, when properly executed, will be voted in the manner you direct. If no
direction is made, your proxy will be voted FOR the proposals described in the enclosed proxy statement and in the discretion of the proxy holders
on all other matters that may come before the meeting.
(Continued, and to be marked, dated and signed, on the other side)
Appendix A
Amended
and Restated 2010 Stock Option and Incentive Plan
A-1
ANTHERA
PHARMACEUTICALS, INC.
AMENDED
AND RESTATED 2010 STOCK OPTION AND INCENTIVE PLAN
Section 1.
GENERAL
PURPOSE OF THE PLAN; DEFINITIONS
The name of
the plan is the Anthera Pharmaceuticals, Inc. Amended and
Restated 2010 Stock Option and Incentive Plan (the
“Plan”). The purpose of the Plan is to encourage and
enable the officers, employees, Non-Employee Directors and other
key persons (including Consultants and prospective employees) of
Anthera Pharmaceuticals, Inc. (the “Company”) and its
Subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its
business to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in
the Company’s welfare will assure a closer identification
of their interests with those of the Company and its
stockholders, thereby stimulating their efforts on the
Company’s behalf and strengthening their desire to remain
with the Company.
The
following terms shall be defined as set forth below:
“Act”
means
the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
“Administrator”
means
either the Board or the compensation committee of the Board or a
similar committee performing the functions of the compensation
committee and which is comprised of not less than two
Non-Employee Directors who are independent.
“Award”
or
“Awards,”
except where referring to a
particular category of grant under the Plan, shall include
Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Units, Restricted Stock
Awards, Unrestricted Stock Awards, Cash-Based Awards,
Performance Share Awards and Dividend Equivalent Rights.
“Award
Certificate”
means
a written or electronic document setting forth the terms and
provisions applicable to an Award granted under the Plan. Each
Award Certificate is subject to the terms and conditions of the
Plan.
“Board”
means
the Board of Directors of the Company.
“Cash-Based
Award”
means
an Award entitling the recipient to receive a cash-denominated
payment.
“Code”
means
the Internal Revenue Code of 1986, as amended, and any successor
Code, and related rules, regulations and interpretations.
“Consultant”
means
any natural person that provides bona fide services to the
Company, and such services are not in connection with the offer
or sale of securities in a capital-raising transaction and do
not directly or indirectly promote or maintain a market for the
Company’s securities.
“Covered
Employee”
means
an employee who is a “Covered Employee” within the
meaning of Section 162(m) of the Code.
“Dividend
Equivalent Right”
means
an Award entitling the grantee to receive credits based on cash
dividends that would have been paid on the shares of Stock
specified in the Dividend Equivalent Right (or other award to
which it relates) if such shares had been issued to and held by
the grantee.
“Effective
Date”
means
the date on which the Plan is approved by stockholders as set
forth in Section 21.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder.
“Fair
Market Value”
of
the Stock on any given date means the fair market value of the
Stock determined in good faith by the Administrator; provided,
however, that if the Stock is admitted to quotation on the
National Association of Securities Dealers Automated Quotation
System (“NASDAQ”), NASDAQ Global Market or another
national securities exchange, the determination shall be made by
reference to market quotations. If
A-2
there are no
market quotations for such date, the determination shall be made
by reference to the last date preceding such date for which
there are market quotations.
“Incentive
Stock Option”
means
any Stock Option designated and qualified as an “incentive
stock option” as defined in Section 422 of the Code.
“Non-Employee
Director”
means
a member of the Board who is not also an employee of the Company
or any Subsidiary.
“Non-Qualified
Stock Option”
means
any Stock Option that is not an Incentive Stock Option.
“Option”
or
“Stock Option”
means any option to purchase
shares of Stock granted pursuant to Section 5.
“Performance-Based
Award”
means
any Restricted Stock Award, Restricted Stock Units, Performance
Share Award or Cash-Based Award granted to a Covered Employee
that is intended to qualify as “performance-based
compensation” under Section 162(m) of the Code and the
regulations promulgated thereunder.
“Performance
Criteria”
means
the criteria that the Administrator selects for purposes of
establishing the Performance Goal or Performance Goals for an
individual for a Performance Cycle. The Performance Criteria
(which shall be applicable to the organizational level specified
by the Administrator, including, but not limited to, the Company
or a unit, division, group, or Subsidiary of the Company) that
will be used to establish Performance Goals are limited to the
following: achievement of key clinical milestones, earnings
before interest, taxes, depreciation and amortization, net
income (loss) (either before or after interest, taxes,
depreciation
and/or
amortization), changes in the market price of the Stock,
economic value-added, sales or revenue, acquisitions or
strategic transactions, operating income (loss), cash flow
(including, but not limited to, operating cash flow and free
cash flow), return on capital, assets, equity, or investment,
stockholder returns, return on sales, gross or net profit
levels, productivity, expense, margins, operating efficiency,
customer satisfaction, working capital, earnings (loss) per
share of Stock, sales or market shares and number of customers,
any of which may be measured either in absolute terms or as
compared to any incremental increase or as compared to results
of a peer group.
“Performance
Cycle”
means
one or more periods of time, which may be of varying and
overlapping durations, as the Administrator may select, over
which the attainment of one or more Performance Criteria will be
measured for the purpose of determining a grantee’s right
to and the payment of a Restricted Stock Award, Restricted Stock
Units, Performance Share Award or Cash-Based Award. Each such
period shall not be less than 12 months.
“Performance
Goals”
means,
for a Performance Cycle, the specific goals established in
writing by the Administrator for a Performance Cycle based upon
the Performance Criteria.
“Performance
Share Award”
means
an Award entitling the recipient to acquire shares of Stock upon
the attainment of specified Performance Goals.
“Restricted
Stock Award”
means
an Award entitling the recipient to acquire, at such purchase
price (which may be zero) as determined by the Administrator,
shares of Stock subject to such restrictions and conditions as
the Administrator may determine at the time of grant.
“Restricted
Stock Units”
means
an Award of phantom stock units to a grantee.
“Sale
Event”
shall
mean (i) the sale of all or substantially all of the assets
of the Company on a consolidated basis to an unrelated person or
entity, (ii) a merger, reorganization or consolidation
pursuant to which the holders of the Company’s outstanding
voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the resulting or
successor entity (or its ultimate parent, if applicable)
immediately upon completion of such transaction, or
(iii) the sale of all of the Stock of the Company to an
unrelated person or entity.
A-3
“
Sale
Price
” means the value as determined by the
Administrator of the consideration payable, or otherwise to be
received by stockholders, per share of Stock pursuant to a Sale
Event.
“Section 409A”
means
Section 409A of the Code and the regulations and other
guidance promulgated thereunder.
“Stock”
means
the Common Stock, par value $0.001 per share, of the Company,
subject to adjustments pursuant to Section 3.
“Stock
Appreciation Right”
means
an Award entitling the recipient to receive shares of Stock
having a value equal to the excess of the Fair Market Value of
the Stock on the date of exercise over the exercise price of the
Stock Appreciation Right multiplied by the number of shares of
Stock with respect to which the Stock Appreciation Right shall
have been exercised.
“Subsidiary”
means
any corporation or other entity (other than the Company) in
which the Company has at least a 50 percent interest,
either directly or indirectly.
“Ten
Percent Owner”
means
an employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than
10 percent of the combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation.
“Unrestricted
Stock Award”
means
an Award of shares of Stock free of any restrictions.
Section 2.
ADMINISTRATION
OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND
DETERMINE AWARDS
(a)
Administration
of Plan.
The Plan shall be administered by
the Administrator.
(b)
Powers
of Administrator.
The Administrator shall
have the power and authority to grant Awards consistent with the
terms of the Plan, including the power and authority:
(i) to
select the individuals to whom Awards may from time to time be
granted;
(ii) to
determine the time or times of grant, and the extent, if any, of
Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Restricted Stock
Units, Unrestricted Stock Awards, Cash-Based Awards, Performance
Share Awards and Dividend Equivalent Rights, or any combination
of the foregoing, granted to any one or more grantees;
(iii) to
determine the number of shares of Stock to be covered by any
Award;
(iv) to
determine and modify from time to time the terms and conditions,
including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among
individual Awards and grantees, and to approve the forms of
Award Certificates;
(v) to
accelerate at any time the exercisability or vesting of all or
any portion of any Award;
(vi) subject
to the provisions of Section 5(b), to extend at any time
the period in which Stock Options may be exercised; and
(vii) at
any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts
and proceedings as it shall deem advisable; to interpret the
terms and provisions of the Plan and any Award (including
related written instruments); to make all determinations it
deems advisable for the administration of the Plan; to decide
all disputes arising in connection with the Plan; and to
otherwise supervise the administration of the Plan.
All
decisions and interpretations of the Administrator shall be
binding on all persons, including the Company and Plan grantees.
(c)
Delegation
of Authority to Grant Options
.
Subject to
applicable law, the Administrator, in its discretion, may
delegate to the Chief Executive Officer of the Company all or
part of the Administrator’s authority and duties
A-4
with respect
to the granting of Options to individuals who are (i) not
subject to the reporting and other provisions of Section 16
of the Exchange Act and (ii) not Covered Employees. Any
such delegation by the Administrator shall include a limitation
as to the amount of Options that may be granted during the
period of the delegation and shall contain guidelines as to the
determination of the exercise price and the vesting criteria.
The Administrator may revoke or amend the terms of a delegation
at any time but such action shall not invalidate any prior
actions of the Administrator’s delegate or delegates that
were consistent with the terms of the Plan.
(d)
Award
Certificate
.
Awards under the Plan shall be
evidenced by Award Certificates that set forth the terms,
conditions and limitations for each Award which may include,
without limitation, the term of an Award and the provisions
applicable in the event employment or service terminates.
(e)
Indemnification
.
Neither
the Board nor the Administrator, nor any member of either or any
delegate thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith
in connection with the Plan, and the members of the Board and
the Administrator (and any delegate thereof) shall be entitled
in all cases to indemnification and reimbursement by the Company
in respect of any claim, loss, damage or expense (including,
without limitation, reasonable attorneys’ fees) arising or
resulting therefrom to the fullest extent permitted by law
and/or
under
the Company’s articles or bylaws or any directors’ and
officers’ liability insurance coverage which may be in
effect from time to time
and/or
any
indemnification agreement between such individual and the
Company.
(f)
Foreign
Award Recipients
.
Notwithstanding any
provision of the Plan to the contrary, in order to comply with
the laws in other countries in which the Company and its
Subsidiaries may operate or have employees or other individuals
eligible for Awards, the Administrator, in its sole discretion,
shall have the power and authority to: (i) determine which
Subsidiaries shall be covered by the Plan; (ii) determine
which individuals outside the United States are eligible to
participate in the Plan; (iii) modify the terms and
conditions of any Award granted to individuals outside the
United States to comply with applicable foreign laws;
(iv) establish subplans and modify exercise procedures and
other terms and procedures, to the extent the Administrator
determines such actions to be necessary or advisable (and such
subplans
and/or
modifications shall be attached to this Plan as appendices);
provided, however, that no such subplans
and/or
modifications shall increase the share limitations contained in
Section 3(a) hereof; and (v) take any action, before
or after an Award is made, that the Administrator determines to
be necessary or advisable to obtain approval or comply with any
local governmental regulatory exemptions or approvals.
Notwithstanding the foregoing, the Administrator may not take
any actions hereunder, and no Awards shall be granted, that
would violate the Exchange Act or any other applicable United
States securities law, the Code, or any other applicable United
States governing statute or law.
Section 3.
STOCK
ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a)
Stock
Issuable
.
The maximum number of shares of
Stock reserved and available for issuance under the Plan shall
be the sum of (i) 433,644 shares, subject to
adjustment as provided in Section 3(b), (ii) the
number of shares of Stock that remain available for grants under
the Anthera Pharmaceuticals, Inc. 2005 Equity Incentive Plan
(the “2005 Plan”) as of the Effective Date,
(iii) the number of shares of Stock underlying any grants
under the 2005 Plan that are forfeited, canceled or terminated
(other than by exercise) from and after the Effective Date, and
(iv) on January 1, 2011 and each January 1 thereafter,
the number of shares of Stock reserved and available for
issuance under the Plan shall be cumulatively increased by four
percent (4%) of the number of shares of Stock issued and
outstanding on the immediately preceding December 31.
Subject to such overall limitation, the maximum aggregate number
of shares of Stock that may be issued in the form of Incentive
Stock Options shall not exceed the lesser of (i) the number
of shares reserved and available for issuance under the Plan
pursuant to the first sentence of this Section 3(a) or
(ii) 1,460,280 shares of Stock, subject in all cases
to adjustment as provided in Section 3(b). For purposes of
this limitation, the shares of Stock underlying any Awards that
are forfeited, canceled, held back upon exercise of an Option or
settlement of an Award to cover the exercise price or tax
withholding, reacquired by the Company prior to vesting,
satisfied without the issuance of Stock or otherwise terminated
(other than by exercise) shall be added back to the shares of
Stock available for issuance under the Plan. In the event the
Company repurchases shares of Stock on the open market, such
shares shall not be added to the shares of Stock available for
issuance under the Plan. Subject to such overall limitations,
shares of Stock may be issued up to such maximum
A-5
number
pursuant to any type or types of Award; provided, however, that
Stock Options or Stock Appreciation Rights with respect to no
more than 116,822 shares of Stock may be granted to any one
individual grantee during any one calendar year period. The
shares available for issuance under the Plan may be authorized
but unissued shares of Stock or shares of Stock reacquired by
the Company.
(b)
Changes
in Stock
.
Subject to Section 3(c)
hereof, if, as a result of any reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company’s capital
stock, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or additional shares
or new or different shares or other securities of the Company or
other non-cash assets are distributed with respect to such
shares of Stock or other securities, or, if, as a result of any
merger or consolidation, sale of all or substantially all of the
assets of the Company, the outstanding shares of Stock are
converted into or exchanged for securities of the Company or any
successor entity (or a parent or subsidiary thereof), the
Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for
issuance under the Plan, including the maximum number of shares
that may be issued in the form of Incentive Stock Options,
(ii) the number of Stock Options or Stock Appreciation
Rights that can be granted to any one individual grantee and the
maximum number of shares that may be granted under a
Performance-Based Award, (iii) the number and kind of
shares or other securities subject to any then outstanding
Awards under the Plan, (iv) the repurchase price, if any,
per share subject to each outstanding Restricted Stock Award,
and (v) the exercise price for each share subject to any
then outstanding Stock Options and Stock Appreciation Rights
under the Plan, without changing the aggregate exercise price
(i.e., the exercise price multiplied by the number of Stock
Options and Stock Appreciation Rights) as to which such Stock
Options and Stock Appreciation Rights remain exercisable. The
Administrator shall also make equitable or proportionate
adjustments in the number of shares subject to outstanding
Awards and the exercise price and the terms of outstanding
Awards to take into consideration cash dividends paid other than
in the ordinary course or any other extraordinary corporate
event. The adjustment by the Administrator shall be final,
binding and conclusive. No fractional shares of Stock shall be
issued under the Plan resulting from any such adjustment, but
the Administrator in its discretion may make a cash payment in
lieu of fractional shares.
(c)
Mergers
and Other Transactions
.
Except as the
Administrator may otherwise specify with respect to particular
Awards in the relevant Award Certificate, in the case of and
subject to the consummation of a Sale Event, the Plan and all
outstanding Awards granted hereunder shall terminate, unless
provision is made in connection with the Sale Event in the sole
discretion of the parties thereto for the assumption or
continuation of Awards theretofore granted by the successor
entity, or the substitution of such Awards with new Awards of
the successor entity or parent thereof, with appropriate
adjustment as to the number and kind of shares and, if
appropriate, the per share exercise prices, as such parties
shall agree (after taking into account any acceleration
hereunder). In the event of such termination, (i) the
Company shall have the option (in its sole discretion) to make
or provide for a cash payment to the grantees holding Options
and Stock Appreciation Rights, in exchange for the cancellation
thereof, in an amount equal to the difference between
(A) the Sale Price multiplied by the number of shares of
Stock subject to outstanding Options and Stock Appreciation
Rights (to the extent then exercisable (after taking into
account any acceleration hereunder) at prices not in excess of
the Sale Price) and (B) the aggregate exercise price of all
such outstanding Options and Stock Appreciation Rights; or
(ii) each grantee shall be permitted, within a specified
period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding
Options and Stock Appreciation Rights held by such grantee. The
Administrator shall also have the discretion to accelerate the
vesting of all other Awards.
(d)
Substitute
Awards
.
The Administrator may grant Awards
under the Plan in substitution for stock and stock based awards
held by employees, directors or other key persons of another
corporation in connection with the merger or consolidation of
the employing corporation with the Company or a Subsidiary or
the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct
that the substitute awards be granted on such terms and
conditions as the Administrator considers appropriate in the
circumstances. Any substitute Awards granted under the Plan
shall not count against the share limitation set forth in
Section 3(a).
A-6
Section 4.
ELIGIBILITY
Grantees
under the Plan will be such full or part-time officers and other
employees, Non-Employee Directors and key persons (including
Consultants and prospective employees) of the Company and its
Subsidiaries as are selected from time to time by the
Administrator in its sole discretion.
Section 5.
STOCK
OPTIONS
Any Stock
Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock
Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options
may be granted only to employees of the Company or any
Subsidiary that is a “subsidiary corporation” within
the meaning of Section 424(f) of the Code. To the extent
that any Option does not qualify as an Incentive Stock Option,
it shall be deemed a Non-Qualified Stock Option.
Stock
Options granted pursuant to this Section 5 shall be subject
to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms
of the Plan, as the Administrator shall deem desirable. If the
Administrator so determines, Stock Options may be granted in
lieu of cash compensation at the optionee’s election,
subject to such terms and conditions as the Administrator may
establish.
(a)
Exercise
Price
.
The exercise price per share for the
Stock covered by a Stock Option granted pursuant to this
Section 5 shall be determined by the Administrator at the
time of grant but shall not be less than 100 percent of the
Fair Market Value on the date of grant. In the case of an
Incentive Stock Option that is granted to a Ten Percent Owner,
the option price of such Incentive Stock Option shall be not
less than 110 percent of the Fair Market Value on the grant
date.
(b)
Option
Term
.
The term of each Stock Option shall be
fixed by the Administrator, but no Stock Option shall be
exercisable more than ten years after the date the Stock Option
is granted. In the case of an Incentive Stock Option that is
granted to a Ten Percent Owner, the term of such Stock Option
shall be no more than five years from the date of grant.
(c)
Exercisability;
Rights of a Stockholder
.
Stock Options shall
become exercisable at such time or times, whether or not in
installments, as shall be determined by the Administrator at or
after the grant date. The Administrator may at any time
accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only
as to shares acquired upon the exercise of a Stock Option and
not as to unexercised Stock Options.
(d)
Method
of Exercise
.
Stock Options may be exercised
in whole or in part, by giving written or electronic notice of
exercise to the Company, specifying the number of shares to be
purchased. Payment of the purchase price may be made by one or
more of the following methods to the extent provided in the
Option Award Certificate:
(i) In
cash, by certified or bank check or other instrument acceptable
to the Administrator;
(ii) Through
the delivery (or attestation to the ownership) of shares of
Stock that have been purchased by the optionee on the open
market or that have been beneficially owned by the optionee for
at least six months and that are not then subject to
restrictions under any Company plan. Such surrendered shares
shall be valued at Fair Market Value on the exercise date;
(iii) By
the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company for the purchase price;
provided that in the event the optionee chooses to pay the
purchase price as so provided, the optionee and the broker shall
comply with such procedures and enter into such agreements of
indemnity and other agreements as the Administrator shall
prescribe as a condition of such payment procedure; or
A-7
(iv) With
respect to Stock Options that are not Incentive Stock Options,
by a “net exercise” arrangement pursuant to which the
Company will reduce the number of shares of Stock issuable upon
exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate exercise price.
Payment
instruments will be received subject to collection. The transfer
to the optionee on the records of the Company or of the transfer
agent of the shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from
the optionee (or a purchaser acting in his stead in accordance
with the provisions of the Stock Option) by the Company of the
full purchase price for such shares and the fulfillment of any
other requirements contained in the Option Award Certificate or
applicable provisions of laws (including the satisfaction of any
withholding taxes that the Company is obligated to withhold with
respect to the optionee). In the event an optionee chooses to
pay the purchase price by previously-owned shares of Stock
through the attestation method, the number of shares of Stock
transferred to the optionee upon the exercise of the Stock
Option shall be net of the number of attested shares. In the
event that the Company establishes, for itself or using the
services of a third party, an automated system for the exercise
of Stock Options, such as a system using an internet website or
interactive voice response, then the paperless exercise of Stock
Options may be permitted through the use of such an automated
system.
(e)
Annual
Limit on Incentive Stock Options
.
To the
extent required for “incentive stock option” treatment
under Section 422 of the Code, the aggregate Fair Market
Value (determined as of the time of grant) of the shares of
Stock with respect to which Incentive Stock Options granted
under this Plan and any other plan of the Company or its parent
and subsidiary corporations become exercisable for the first
time by an optionee during any calendar year shall not exceed
$100,000. To the extent that any Stock Option exceeds this
limit, it shall constitute a Non-Qualified Stock Option.
Section 6.
STOCK
APPRECIATION RIGHTS
(a)
Exercise
Price of Stock Appreciation Rights
.
The
exercise price of a Stock Appreciation Right shall not be less
than 100 percent of the Fair Market Value of the Stock on
the date of grant.
(b)
Grant
and Exercise of Stock Appreciation
Rights
.
Stock Appreciation Rights may be
granted by the Administrator independently of any Stock Option
granted pursuant to Section 5 of the Plan.
(c)
Terms
and Conditions of Stock Appreciation
Rights
.
Stock Appreciation Rights shall be
subject to such terms and conditions as shall be determined from
time to time by the Administrator. The term of a Stock
Appreciation Right may not exceed ten years.
Section 7.
RESTRICTED
STOCK AWARDS
(a)
Nature
of Restricted Stock Awards
.
The Administrator
shall determine the restrictions and conditions applicable to
each Restricted Stock Award at the time of grant. Conditions may
be based on continuing employment (or other service
relationship)
and/or
achievement of pre-established performance goals and objectives.
The terms and conditions of each such Award Certificate shall be
determined by the Administrator, and such terms and conditions
may differ among individual Awards and grantees.
(b)
Rights
as a Stockholder
.
Upon the grant of the
Restricted Stock Award and payment of any applicable purchase
price, a grantee shall have the rights of a stockholder with
respect to the voting of the Restricted Stock, subject to such
conditions contained in the Restricted Stock Award Certificate.
Unless the Administrator shall otherwise determine,
(i) uncertificated Restricted Stock shall be accompanied by
a notation on the records of the Company or the transfer agent
to the effect that they are subject to forfeiture until such
Restricted Stock are vested as provided in Section 7(d)
below, and (ii) certificated Restricted Stock shall remain
in the possession of the Company until such Restricted Stock is
vested as provided in Section 7(d) below, and the grantee
shall be required, as a condition of the grant, to deliver to
the Company such instruments of transfer as the Administrator
may prescribe.
(c)
Restrictions
.
Restricted
Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically
provided herein or in the Restricted Stock Award Certificate.
Except as may otherwise be provided by the Administrator either
in the Award Certificate or, subject to Section 18 below,
in
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writing
after the Award is issued, if a grantee’s employment (or
other service relationship) with the Company and its
Subsidiaries terminates for any reason, any Restricted Stock
that has not vested at the time of termination shall
automatically and without any requirement of notice to such
grantee from or other action by or on behalf of, the Company be
deemed to have been reacquired by the Company at its original
purchase price (if any) from such grantee or such grantee’s
legal representative simultaneously with such termination of
employment (or other service relationship), and thereafter shall
cease to represent any ownership of the Company by the grantee
or rights of the grantee as a stockholder. Following such deemed
reacquisition of unvested Restricted Stock that are represented
by physical certificates, a grantee shall surrender such
certificates to the Company upon request without consideration.
(d)
Vesting
of Restricted Stock
.
The Administrator at the
time of grant shall specify the date or dates
and/or
the
attainment of pre-established performance goals, objectives and
other conditions on which the non-transferability of the
Restricted Stock and the Company’s right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates
and/or
the
attainment of such pre-established performance goals, objectives
and other conditions, the shares on which all restrictions have
lapsed shall no longer be Restricted Stock and shall be deemed
“vested.” Except as may otherwise be provided by the
Administrator either in the Award Certificate or, subject to
Section 18 below, in writing after the Award is issued, a
grantee’s rights in any shares of Restricted Stock that
have not vested shall automatically terminate upon the
grantee’s termination of employment (or other service
relationship) with the Company and its Subsidiaries and such
shares shall be subject to the provisions of Section 7(c)
above.
Section 8.
RESTRICTED
STOCK UNITS
(a)
Nature
of Restricted Stock Units
.
The Administrator
shall determine the restrictions and conditions applicable to
each Restricted Stock Unit at the time of grant. Conditions may
be based on continuing employment (or other service
relationship)
and/or
achievement of pre-established performance goals and objectives.
The terms and conditions of each such Award Certificate shall be
determined by the Administrator, and such terms and conditions
may differ among individual Awards and grantees. At the end of
the deferral period, the Restricted Stock Units, to the extent
vested, shall be settled in the form of shares of Stock. To the
extent that an award of Restricted Stock Units is subject to
Section 409A, it may contain such additional terms and
conditions as the Administrator shall determine in its sole
discretion in order for such Award to comply with the
requirements of Section 409A.
(b)
Election
to Receive Restricted Stock Units in Lieu of
Compensation
.
The Administrator may, in its
sole discretion, permit a grantee to elect to receive a portion
of future cash compensation otherwise due to such grantee in the
form of an award of Restricted Stock Units. Any such election
shall be made in writing and shall be delivered to the Company
no later than the date specified by the Administrator and in
accordance with Section 409A and such other rules and
procedures established by the Administrator. Any such future
cash compensation that the grantee elects to defer shall be
converted to a fixed number of Restricted Stock Units based on
the Fair Market Value of Stock on the date the compensation
would otherwise have been paid to the grantee if such payment
had not been deferred as provided herein. The Administrator
shall have the sole right to determine whether and under what
circumstances to permit such elections and to impose such
limitations and other terms and conditions thereon as the
Administrator deems appropriate. Any Restricted Stock Units that
are elected to be received in lieu of cash compensation shall be
fully vested.
(c)
Rights
as a Stockholder
.
A grantee shall have the
rights as a stockholder only as to shares of Stock acquired by
the grantee upon settlement of Restricted Stock Units; provided,
however, that the grantee may be credited with Dividend
Equivalent Rights with respect to the phantom stock units
underlying his Restricted Stock Units, subject to such terms and
conditions as the Administrator may determine.
(d)
Termination
.
Except
as may otherwise be provided by the Administrator either in the
Award Certificate or, subject to Section 18 below, in
writing after the Award is issued, a grantee’s right in all
Restricted Stock Units that have not vested shall automatically
terminate upon the grantee’s termination of employment (or
cessation of service relationship) with the Company and its
Subsidiaries for any reason.
Section 9.
UNRESTRICTED
STOCK AWARDS
A-9
Grant
or Sale of Unrestricted
Stock
.
The
Administrator may, in its sole discretion, grant (or sell at par
value or such higher purchase price determined by the
Administrator) an Unrestricted Stock Award under the Plan.
Unrestricted Stock Awards may be granted in respect of past
services or other valid consideration, or in lieu of cash
compensation due to such grantee.
Section 10.
CASH-BASED
AWARDS
Grant
of Cash-Based
Awards
.
The
Administrator may, in its sole discretion, grant Cash-Based
Awards to any grantee in such number or amount and upon such
terms, and subject to such conditions, as the Administrator
shall determine at the time of grant. The Administrator shall
determine the maximum duration of the Cash-Based Award, the
amount of cash to which the Cash-Based Award pertains, the
conditions upon which the Cash-Based Award shall become vested
or payable, and such other provisions as the Administrator shall
determine. Each Cash-Based Award shall specify a
cash-denominated payment amount, formula or payment ranges as
determined by the Administrator. Payment, if any, with respect
to a Cash-Based Award shall be made in accordance with the terms
of the Award and may be made in cash or in shares of Stock, as
the Administrator determines.
Section 11.
PERFORMANCE
SHARE AWARDS
(a)
Nature
of Performance Share Awards
.
The
Administrator may, in its sole discretion, grant Performance
Share Awards independent of, or in connection with, the granting
of any other Award under the Plan. The Administrator shall
determine whether and to whom Performance Share Awards shall be
granted, the Performance Goals, the periods during which
performance is to be measured, and such other limitations and
conditions as the Administrator shall determine.
(b)
Rights
as a Stockholder
.
A grantee receiving a
Performance Share Award shall have the rights of a stockholder
only as to shares actually received by the grantee under the
Plan and not with respect to shares subject to the Award but not
actually received by the grantee. A grantee shall be entitled to
receive shares of Stock under a Performance Share Award only
upon satisfaction of all conditions specified in the Performance
Share Award Certificate (or in a performance plan adopted by the
Administrator).
(c)
Termination
.
Except
as may otherwise be provided by the Administrator either in the
Award agreement or, subject to Section 18 below, in writing
after the Award is issued, a grantee’s rights in all
Performance Share Awards shall automatically terminate upon the
grantee’s termination of employment (or cessation of
service relationship) with the Company and its Subsidiaries for
any reason.
Section 12.
PERFORMANCE-BASED
AWARDS TO COVERED EMPLOYEES
(a)
Performance-Based
Awards
.
Any employee or other key person
providing services to the Company and who is selected by the
Administrator may be granted one or more Performance-Based
Awards in the form of a Restricted Stock Award, Restricted Stock
Units, Performance Share Awards or Cash-Based Award payable upon
the attainment of Performance Goals that are established by the
Administrator and relate to one or more of the Performance
Criteria, in each case on a specified date or dates or over any
period or periods determined by the Administrator. The
Administrator shall define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for any
Performance Cycle. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be
expressed in terms of overall Company performance or the
performance of a division, business unit, or an individual. The
Administrator, in its discretion, may adjust or modify the
calculation of Performance Goals for such Performance Cycle in
order to prevent the dilution or enlargement of the rights of an
individual (i) in the event of, or in anticipation of, any
unusual or extraordinary corporate item, transaction, event or
development, (ii) in recognition of, or in anticipation of,
any other unusual or nonrecurring events affecting the Company,
or the financial statements of the Company, or (iii) in
response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions
provided however, that the Administrator may not exercise such
discretion in a manner that would increase the Performance-Based
Award granted to a Covered Employee. Each Performance-Based
Award shall comply with the provisions set forth below.
(b)
Grant
of Performance-Based Awards
.
With respect to
each Performance-Based Award granted to a Covered Employee, the
Administrator shall select, within the first 90 days of a
Performance Cycle (or, if shorter,
A-10
within the
maximum period allowed under Section 162(m) of the Code)
the Performance Criteria for such grant, and the Performance
Goals with respect to each Performance Criterion (including a
threshold level of performance below which no amount will become
payable with respect to such Award). Each Performance-Based
Award will specify the amount payable, or the formula for
determining the amount payable, upon achievement of the various
applicable performance targets. The Performance Criteria
established by the Administrator may be (but need not be)
different for each Performance Cycle and different Performance
Goals may be applicable to Performance-Based Awards to different
Covered Employees.
(c)
Payment
of Performance-Based Awards
.
Following the
completion of a Performance Cycle, the Administrator shall meet
to review and certify in writing whether, and to what extent,
the Performance Goals for the Performance Cycle have been
achieved and, if so, to also calculate and certify in writing
the amount of the Performance-Based Awards earned for the
Performance Cycle. The Administrator shall then determine the
actual size of each Covered Employee’s Performance-Based
Award, and, in doing so, may reduce or eliminate the amount of
the Performance-Based Award for a Covered Employee if, in its
sole judgment, such reduction or elimination is appropriate.
(d)
Maximum
Award Payable
.
The maximum Performance-Based
Award payable to any one Covered Employee under the Plan for a
Performance Cycle is 116,822 shares of Stock (subject to
adjustment as provided in Section 3(c) hereof) or
$2 million in the case of a Performance-Based Award that is
a Cash-Based Award.
Section 13.
DIVIDEND
EQUIVALENT RIGHTS
(a)
Dividend
Equivalent Rights
.
A Dividend Equivalent
Right may be granted hereunder to any grantee as a component of
an award of Restricted Stock Units, Restricted Stock Award or
Performance Share Award or as a freestanding award. The terms
and conditions of Dividend Equivalent Rights shall be specified
in the Award Certificate. Dividend equivalents credited to the
holder of a Dividend Equivalent Right may be paid currently or
may be deemed to be reinvested in additional shares of Stock,
which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of
reinvestment or such other price as may then apply under a
dividend reinvestment plan sponsored by the Company, if any.
Dividend Equivalent Rights may be settled in cash or shares of
Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component
of an award of Restricted Stock Units, Restricted Stock Award or
Performance Share Award may provide that such Dividend
Equivalent Right shall be settled upon settlement or payment of,
or lapse of restrictions on, such other Award, and that such
Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other Award. A
Dividend Equivalent Right granted as a component of a Restricted
Stock Units, Restricted Stock Award or Performance Share Award
may also contain terms and conditions different from such other
Award.
(b)
Interest
Equivalents
.
Any Award under this Plan that
is settled in whole or in part in cash on a deferred basis may
provide in the grant for interest equivalents to be credited
with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as
may be specified by the grant.
(c)
Termination
.
Except
as may otherwise be provided by the Administrator either in the
Award Certificate or, subject to Section 18 below, in
writing after the Award is issued, a grantee’s rights in
all Dividend Equivalent Rights or interest equivalents granted
as a component of an award of Restricted Stock Units, Restricted
Stock Award or Performance Share Award that has not vested shall
automatically terminate upon the grantee’s termination of
employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.
Section 14.
TRANSFERABILITY
OF AWARDS
(a)
Transferability
.
Except
as provided in Section 14(b) below, during a grantee’s
lifetime, his or her Awards shall be exercisable only by the
grantee, or by the grantee’s legal representative or
guardian in the event of the grantee’s incapacity. No
Awards shall be sold, assigned, transferred or otherwise
encumbered or disposed of by a grantee other than by will or by
the laws of descent and distribution or pursuant to a domestic
relations order. No Awards shall be subject, in whole or in
part, to attachment, execution, or levy of any kind, and any
purported transfer in violation hereof shall be null and void.
A-11
(b)
Administrator
Action
.
Notwithstanding Section 14(a),
the Administrator, in its discretion, may provide either in the
Award Certificate regarding a given Award or by subsequent
written approval that the grantee (who is an employee or
director) may transfer his or her Awards (other than any
Incentive Stock Options or Restricted Stock Units) to his or her
immediate family members, to trusts for the benefit of such
family members, or to partnerships in which such family members
are the only partners, provided that the transferee agrees in
writing with the Company to be bound by all of the terms and
conditions of this Plan and the applicable Award. In no event
may an Award be transferred by a grantee for value.
(c)
Family
Member
.
For purposes of Section 14(b),
“family member” shall mean a grantee’s child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law,
including adoptive relationships, any person sharing the
grantee’s household (other than a tenant of the grantee), a
trust in which these persons (or the grantee) have more than
50 percent of the beneficial interest, a foundation in
which these persons (or the grantee) control the management of
assets, and any other entity in which these persons (or the
grantee) own more than 50 percent of the voting interests.
(d)
Designation
of Beneficiary
.
Each grantee to whom an Award
has been made under the Plan may designate a beneficiary or
beneficiaries to exercise any Award or receive any payment under
any Award payable on or after the grantee’s death. Any such
designation shall be on a form provided for that purpose by the
Administrator and shall not be effective until received by the
Administrator. If no beneficiary has been designated by a
deceased grantee, or if the designated beneficiaries have
predeceased the grantee, the beneficiary shall be the
grantee’s estate.
Section 15.
TAX
WITHHOLDING
(a)
Payment
by Grantee
.
Each grantee shall, no later than
the date as of which the value of an Award or of any Stock or
other amounts received thereunder first becomes includable in
the gross income of the grantee for Federal income tax purposes,
pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld by the Company
with respect to such income. The Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the
grantee. The Company’s obligation to deliver evidence of
book entry (or stock certificates) to any grantee is subject to
and conditioned on tax withholding obligations being satisfied
by the grantee.
(b)
Payment
in Stock
.
Subject to approval by the
Administrator, a grantee may elect to have the Company’s
minimum required tax withholding obligation satisfied, in whole
or in part, by authorizing the Company to withhold from shares
of Stock to be issued pursuant to any Award a number of shares
with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding
amount due.
Section 16.
SECTION 409A
AWARDS
To the
extent that any Award is determined to constitute
“nonqualified deferred compensation” within the
meaning of Section 409A (a “409A Award”), the
Award shall be subject to such additional rules and requirements
as specified by the Administrator from time to time in order to
comply with Section 409A. In this regard, if any amount
under a 409A Award is payable upon a “separation from
service” (within the meaning of Section 409A) to a
grantee who is then considered a “specified employee”
(within the meaning of Section 409A), then no such payment
shall be made prior to the date that is the earlier of
(i) six months and one day after the grantee’s
separation from service, or (ii) the grantee’s death,
but only to the extent such delay is necessary to prevent such
payment from being subject to interest, penalties
and/or
additional tax imposed pursuant to Section 409A. Further,
the settlement of any such Award may not be accelerated except
to the extent permitted by Section 409A.
Section 17.
TRANSFER,
LEAVE OF ABSENCE, ETC.
For purposes
of the Plan, the following events shall not be deemed a
termination of employment:
(a) a
transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to
another; or
A-12
(b) an
approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the
employee’s right to re-employment is guaranteed either by a
statute or by contract or under the policy pursuant to which the
leave of absence was granted or if the Administrator otherwise
so provides in writing.
Section 18.
AMENDMENTS
AND TERMINATION
The Board
may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding
Award for the purpose of satisfying changes in law or for any
other lawful purpose, but no such action shall adversely affect
rights under any outstanding Award without the holder’s
consent. The Administrator is specifically authorized to
exercise its discretion to reduce the exercise price of
outstanding Stock Options or Stock Appreciation Rights or effect
the repricing of such Awards through cancellation and re-grants.
To the extent required under the rules of any securities
exchange or market system on which the Stock is listed, to the
extent determined by the Administrator to be required by the
Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code, or to
ensure that compensation earned under Awards qualifies as
performance-based compensation under Section 162(m) of the
Code, Plan amendments shall be subject to approval by the
Company stockholders entitled to vote at a meeting of
stockholders. Nothing in this Section 18 shall limit the
Administrator’s authority to take any action permitted
pursuant to Section 3(b) or 3(c).
Section 19.
STATUS
OF PLAN
With respect
to the portion of any Award that has not been exercised and any
payments in cash, Stock or other consideration not received by a
grantee, a grantee shall have no rights greater than those of a
general creditor of the Company unless the Administrator shall
otherwise expressly determine in connection with any Award or
Awards. In its sole discretion, the Administrator may authorize
the creation of trusts or other arrangements to meet the
Company’s obligations to deliver Stock or make payments
with respect to Awards hereunder, provided that the existence of
such trusts or other arrangements is consistent with the
foregoing sentence.
Section 20.
GENERAL
PROVISIONS
(a)
No
Distribution
.
The Administrator may require
each person acquiring Stock pursuant to an Award to represent to
and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof.
(b)
Delivery
of Stock Certificates
.
Stock certificates to
grantees under this Plan shall be deemed delivered for all
purposes when the Company or a stock transfer agent of the
Company shall have mailed such certificates in the United States
mail, addressed to the grantee, at the grantee’s last known
address on file with the Company. Uncertificated Stock shall be
deemed delivered for all purposes when the Company or a Stock
transfer agent of the Company shall have given to the grantee by
electronic mail (with proof of receipt) or by United States
mail, addressed to the grantee, at the grantee’s last known
address on file with the Company, notice of issuance and
recorded the issuance in its records (which may include
electronic “book entry” records). Notwithstanding
anything herein to the contrary, the Company shall not be
required to issue or deliver any certificates evidencing shares
of Stock pursuant to the exercise of any Award, unless and until
the Administrator has determined, with advice of counsel (to the
extent the Administrator deems such advice necessary or
advisable), that the issuance and delivery of such certificates
is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of
any exchange on which the shares of Stock are listed, quoted or
traded. All Stock certificates delivered pursuant to the Plan
shall be subject to any stop-transfer orders and other
restrictions as the Administrator deems necessary or advisable
to comply with federal, state or foreign jurisdiction,
securities or other laws, rules and quotation system on which
the Stock is listed, quoted or traded. The Administrator may
place legends on any Stock certificate to reference restrictions
applicable to the Stock. In addition to the terms and conditions
provided herein, the Administrator may require that an
individual make such reasonable covenants, agreements, and
representations as the Administrator, in its discretion, deems
necessary or advisable in order to comply with any such laws,
regulations, or requirements. The Administrator shall have the
right to require any individual to comply with any timing or
other restrictions with respect to the settlement or exercise of
any Award, including a window-period limitation, as may be
imposed in the discretion of the Administrator.
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(c)
Stockholder
Rights
.
Until Stock is deemed delivered in
accordance with Section 20(b), no right to vote or receive
dividends or any other rights of a stockholder will exist with
respect to shares of Stock to be issued in connection with an
Award, notwithstanding the exercise of a Stock Option or any
other action by the grantee with respect to an Award.
(d)
Other
Compensation Arrangements; No Employment
Rights
.
Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation
arrangements, including trusts, and such arrangements may be
either generally applicable or applicable only in specific
cases. The adoption of this Plan and the grant of Awards do not
confer upon any employee any right to continued employment with
the Company or any Subsidiary.
(e)
Trading
Policy Restrictions
.
Option exercises and
other Awards under the Plan shall be subject to the
Company’s insider trading policies and procedures, as in
effect from time to time.
(f)
Forfeiture
of Awards under Sarbanes-Oxley Act
.
If the
Company is required to prepare an accounting restatement due to
the material noncompliance of the Company, as a result of
misconduct, with any financial reporting requirement under the
securities laws, then any grantee who is one of the individuals
subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse the Company for the
amount of any Award received by such individual under the Plan
during the
12-month
period following the first public issuance or filing with the
United States Securities and Exchange Commission, as the case
may be, of the financial document embodying such financial
reporting requirement.
Section 21.
EFFECTIVE
DATE OF PLAN
This Plan
shall become effective upon stockholder approval in accordance
with applicable state law, the Company’s bylaws and
certificate of incorporation, and applicable stock exchange
rules. No grants of Stock Options and other Awards may be made
hereunder after the tenth anniversary of the Effective Date and
no grants of Incentive Stock Options may be made hereunder after
the tenth anniversary of the date the Plan is approved by the
Board.
Section 22.
GOVERNING
LAW
This Plan
and all Awards and actions taken thereunder shall be governed
by, and construed in accordance with, the laws of the State of
Delaware, applied without regard to conflict of law principles.
DATE
APPROVED BY BOARD OF DIRECTORS: May 20, 2010
DATE
APPROVED BY STOCKHOLDERS:
A-14
Appendix B
2010
Employee Stock Purchase Plan
B-1
ANTHERA
PHARMACEUTICALS, INC.
2010
EMPLOYEE STOCK PURCHASE PLAN
The purpose
of the Anthera Pharmaceuticals, Inc. 2010 Employee Stock
Purchase Plan (“the Plan”) is to provide eligible
employees of Anthera Pharmaceuticals, Inc. (the
“Company”) and each Designated Subsidiary (as defined
in Section 11) with opportunities to purchase shares
of the Company’s common stock, par value $0.001 per share
(the “Common Stock”). 100,000 shares of Common
Stock have been approved and reserved for this purpose, plus on
January 1, 2011 and each January 1 thereafter, the number
of shares of Common Stock reserved and available for issuance
under the Plan shall be cumulatively increased by the lesser of
(i) 1 percent of the number of shares of Common Stock
issued and outstanding on the immediately preceding December 31
or (ii) 250,000 shares of Common Stock. The Plan is
intended to constitute an “employee stock purchase
plan” within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the
“Code”), and shall be interpreted in accordance with
that intent.
1.
Administration
.
The
Plan will be administered by the person or persons (the
“Administrator”) appointed by the Company’s Board
of Directors (the “Board”) for such purpose. The
Administrator has authority at any time to: (i) adopt,
alter and repeal such rules, guidelines and practices for the
administration of the Plan and for its own acts and proceedings
as it shall deem advisable; (ii) interpret the terms and
provisions of the Plan; (iii) make all determinations it
deems advisable for the administration of the Plan;
(iv) decide all disputes arising in connection with the
Plan; and (v) otherwise supervise the administration of the
Plan. All interpretations and decisions of the Administrator
shall be binding on all persons, including the Company and the
Participants. No member of the Board or individual exercising
administrative authority with respect to the Plan shall be
liable for any action or determination made in good faith with
respect to the Plan or any option granted hereunder.
2.
Offerings
.
The
Company will make one or more offerings to eligible employees to
purchase Common Stock under the Plan (“Offerings”).
Unless otherwise determined by the Administrator, the initial
Offering will begin on September 1, 2010 and will end on
the following December 31, 2010 (the “Initial
Offering”). Thereafter, unless otherwise determined by the
Administrator, an Offering will begin on the first business day
occurring on or after each January 1st and
July 1st and will end on the last business day
occurring on or before the following June 30th and
December 31st, respectively. The Administrator may, in its
discretion, designate a different period for any Offering,
provided that no Offering shall exceed six months in duration or
overlap any other Offering.
3.
Eligibility
.
All
individuals classified as employees on the payroll records of
the Company and each Designated Subsidiary are eligible to
participate in any one or more of the Offerings under the Plan,
provided that as of the first day of the applicable Offering
(the “Offering Date”) they are customarily employed by
the Company or a Designated Subsidiary for more than
20 hours a week. Notwithstanding any other provision
herein, individuals who are not contemporaneously classified as
employees of the Company or a Designated Subsidiary for purposes
of the Company’s or applicable Designated Subsidiary’s
payroll system are not considered to be eligible employees of
the Company or any Designated Subsidiary and shall not be
eligible to participate in the Plan. In the event any such
individuals are reclassified as employees of the Company or a
Designated Subsidiary for any purpose, including, without
limitation, common law or statutory employees, by any action of
any third party, including, without limitation, any government
agency, or as a result of any private lawsuit, action or
administrative proceeding, such individuals shall,
notwithstanding such reclassification, remain ineligible for
participation. Notwithstanding the foregoing, the exclusive
means for individuals who are not contemporaneously classified
as employees of the Company or a Designated Subsidiary on the
Company’s or Designated Subsidiary’s payroll system to
become eligible to participate in this Plan is through an
amendment to this Plan, duly executed by the Company, which
specifically renders such individuals eligible to participate
herein.
4.
Participation.
(a)
Participants
in Offerings
.
An eligible employee who is not
a Participant on any Offering Date may participate in such
Offering by submitting an enrollment form to his or her
appropriate payroll location at least 15 business days before
the Offering Date (or by such other deadline as shall be
established by the Administrator for the Offering).
B-2
(b)
Enrollment
.
The
enrollment form will (a) state a whole percentage to be
deducted from an eligible employee’s Compensation (as
defined in Section 11) per pay period,
(b) authorize the purchase of Common Stock in each Offering
in accordance with the terms of the Plan and (c) specify
the exact name or names in which shares of Common Stock
purchased for such individual are to be issued pursuant to
Section 10. An employee who does not enroll in accordance
with these procedures will be deemed to have waived the right to
participate. Unless a Participant files a new enrollment form or
withdraws from the Plan, such Participant’s deductions and
purchases will continue at the same percentage of Compensation
for future Offerings, provided he or she remains eligible.
(c) Notwithstanding
the foregoing, participation in the Plan will neither be
permitted nor be denied contrary to the requirements of the Code.
5.
Employee
Contributions
.
Each eligible employee may
authorize payroll deductions at a minimum of 1 percent up
to a maximum of 10 percent of such employee’s
Compensation for each pay period. The Company will maintain book
accounts showing the amount of payroll deductions made by each
Participant for each Offering. No interest will accrue or be
paid on payroll deductions.
6.
Deduction
Changes
.
Except as may be determined by the
Administrator in advance of an Offering, a Participant may not
increase or decrease his or her payroll deduction during any
Offering, but may increase or decrease his or her payroll
deduction with respect to the next Offering (subject to the
limitations of Section 5) by filing a new enrollment
form at least 15 business days before the next Offering Date (or
by such other deadline as shall be established by the
Administrator for the Offering). The Administrator may, in
advance of any Offering, establish rules permitting a
Participant to increase, decrease or terminate his or her
payroll deduction during an Offering.
7.
Withdrawal
.
A
Participant may withdraw from participation in the Plan by
delivering a written notice of withdrawal to his or her
appropriate payroll location. The Participant’s withdrawal
will be effective as of the next business day. Following a
Participant’s withdrawal, the Company will promptly refund
such individual’s entire account balance under the Plan to
him or her (after payment for any Common Stock purchased before
the effective date of withdrawal). Partial withdrawals are not
permitted. Such an employee may not begin participation again
during the remainder of the Offering, but may enroll in a
subsequent Offering in accordance with Section 4.
8.
Grant
of Options
.
On each Offering Date, the
Company will grant to each eligible employee who is then a
Participant in the Plan an option (“Option”) to
purchase on the last day of such Offering (the “Exercise
Date”), at the Option Price hereinafter provided for, the
lowest of (a) a number of shares of Common Stock determined
by dividing such Participant’s accumulated payroll
deductions on such Exercise Date by the Option Price (as defined
herein), (b) 5,000 shares; or (c) such other
lesser maximum number of shares as shall have been established
by the Administrator in advance of the Offering; provided,
however, that such Option shall be subject to the limitations
set forth below. Each Participant’s Option shall be
exercisable only to the extent of such Participant’s
accumulated payroll deductions on the Exercise Date. The
purchase price for each share purchased under each Option (the
“Option Price”) will be 85 percent of the Fair
Market Value of the Common Stock on the Offering Date or the
Exercise Date, whichever is less.
Notwithstanding
the foregoing, no Participant may be granted an option hereunder
if such Participant, immediately after the option was granted,
would be treated as owning stock possessing 5 percent or
more of the total combined voting power or value of all classes
of stock of the Company or any Parent or Subsidiary (as defined
in Section 11). For purposes of the preceding sentence, the
attribution rules of Section 424(d) of the Code shall apply
in determining the stock ownership of a Participant, and all
stock which the Participant has a contractual right to purchase
shall be treated as stock owned by the Participant. In addition,
no Participant may be granted an Option which permits his or her
rights to purchase stock under the Plan, and any other employee
stock purchase plan of the Company and its Parents and
Subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such stock (determined on the option grant
date or dates) for each calendar year in which the Option is
outstanding at any time. The purpose of the limitation in the
preceding sentence is to comply with Section 423(b)(8) of
the Code and shall be applied taking Options into account in the
order in which they were granted.
B-3
9.
Exercise
of Option and Purchase of Shares
.
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 on such date and shall acquire from the Company such
number of whole shares of Common Stock reserved for the purpose
of the Plan as his or her accumulated payroll deductions on such
date will purchase at the Option Price, subject to any other
limitations contained in the Plan. Any amount remaining in a
Participant’s account at the end of an Offering solely by
reason of the inability to purchase a fractional share will be
carried forward to the next Offering; any other balance
remaining in a Participant’s account at the end of an
Offering will be refunded to the Participant promptly.
10.
Issuance
of Certificates
.
Certificates (or, in the
case of uncertificated Common Stock, registration in book entry
form) 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 name of a broker
authorized by the employee to be his, her or their, nominee for
such purpose.
11.
Definitions.
The term
“Compensation” means the amount of base pay, prior to
salary reduction pursuant to Sections 125, 132(f) or 401(k)
of the Code, but excluding overtime, commissions, incentive or
bonus awards, allowances and reimbursements for expenses such as
relocation allowances or travel expenses, income or gains on the
exercise of Company stock options, and similar items.
The term
“Designated Subsidiary” means any present or future
Subsidiary (as defined below) that has been designated by the
Board to participate in the Plan. The Board may so designate any
Subsidiary, or revoke any such designation, at any time and from
time to time, either before or after the Plan is approved by the
stockholders. The current list of Designated Subsidiaries is
attached hereto as Appendix A.
The term
“Fair Market Value of the Common Stock” on any given
date means the fair market value of the Common Stock determined
in good faith by the Administrator;
provided
,
however
, that if the Common Stock is admitted to
quotation on the National Association of Securities Dealers
Automated Quotation System (“NASDAQ”), NASDAQ Global
Market or another national securities exchange, the
determination shall be made by reference to the closing price on
such date. If there is no closing price for such date, the
determination shall be made by reference to the last date
preceding such date for which there is a closing price.
The term
“Parent” means a “parent corporation” with
respect to the Company, as defined in Section 424(e) of the
Code.
The term
“Participant” means an individual who is eligible as
determined in Section 3 and who has complied with the
provisions of Section 4.
The term
“Subsidiary” means a “subsidiary
corporation” with respect to the Company, as defined in
Section 424(f) of the Code.
12.
Rights
on Termination of Employment
.
If a
Participant’s employment terminates for any reason before
the Exercise Date for any Offering, no payroll deduction will be
taken from any pay due and owing to the Participant and the
balance in the Participant’s account will be paid to such
Participant or, in the case of such Participant’s death, to
his or her designated beneficiary as if such Participant had
withdrawn from the Plan under Section 7. An employee will
be deemed to have terminated employment, for this purpose, if
the corporation that employs him or her, having been a
Designated Subsidiary, ceases to be a Subsidiary, or if the
employee is transferred to any corporation other than the
Company or a Designated Subsidiary. An employee will not be
deemed to have terminated employment for this purpose, if the
employee is on an approved leave of absence for military service
or sickness or for any other purpose approved by the Company, if
the employee’s right to reemployment is guaranteed either
by a statute or by contract or under the policy pursuant to
which the leave of absence was granted or if the Administrator
otherwise provides in writing.
13.
Special
Rules
.
Notwithstanding anything herein to the
contrary, the Administrator may adopt special rules applicable
to the employees of a particular Designated Subsidiary, whenever
the Administrator determines that such rules are necessary or
appropriate for the implementation of the Plan in a jurisdiction
where such
B-4
Designated
Subsidiary has employees; provided that such rules are
consistent with the requirements of Section 423(b) of the
Code. Any special rules established pursuant to this
Section 13 shall, to the extent possible, result in the
employees subject to such rules having substantially the same
rights as other Participants in the Plan.
14.
Optionees
Not Stockholders
.
Neither the granting of an
Option to a Participant nor the deductions from his or her pay
shall constitute such Participant a holder of the shares of
Common Stock covered by an Option under the Plan until such
shares have been purchased by and issued to him or her.
15.
Rights
Not Transferable
.
Rights under the Plan are
not transferable by a Participant other than by will or the laws
of descent and distribution, and are exercisable during the
Participant’s lifetime only by the Participant.
16.
Application
of Funds
.
All funds received or held by the
Company under the Plan may be combined with other corporate
funds and may be used for any corporate purpose.
17.
Adjustment
in Case of Changes Affecting Common Stock
.
In
the event of a subdivision of outstanding shares of Common
Stock, the payment of a dividend in Common Stock or any other
change affecting the Common Stock, the number of shares approved
for the Plan and the share limitation set forth in
Section 8 shall be equitably or proportionately adjusted to
give proper effect to such event.
18.
Amendment
of the Plan
.
The Board may at any time and
from time to time amend the Plan in any respect, except that
without the approval within 12 months of such Board action
by the stockholders, no amendment shall be made increasing the
number of shares approved for the Plan or making any other
change that would require stockholder approval in order for the
Plan, as amended, to qualify as an “employee stock purchase
plan” under Section 423(b) of the Code.
19.
Insufficient
Shares
.
If the total number of shares of
Common Stock that would otherwise be purchased on any Exercise
Date plus the number of shares purchased under previous
Offerings under the Plan exceeds the maximum number of shares
issuable under the Plan, the shares then available shall be
apportioned among Participants in proportion to the amount of
payroll deductions accumulated on behalf of each Participant
that would otherwise be used to purchase Common Stock on such
Exercise Date.
20.
Termination
of the Plan
.
The Plan may be terminated at
any time by the Board; provided that the Plan shall
automatically terminate upon the tenth anniversary of the
adoption of the Plan by the Board. Upon termination of the Plan,
all amounts in the accounts of Participants shall be promptly
refunded.
21.
Governmental
Regulations
.
The Company’s obligation to
sell and deliver Common Stock under the Plan is subject to
obtaining all governmental approvals required in connection with
the authorization, issuance, or sale of such stock.
22.
Governing
Law
.
This Plan and all Options and actions
taken thereunder shall be governed by, and construed in
accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
23.
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.
24.
Tax
Withholding
.
Participation in the Plan is
subject to any minimum required tax withholding on income of the
Participant in connection with the Plan. Each Participant
agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right to deduct any such taxes from
any payment of any kind otherwise due to the Participant,
including shares issuable under the Plan.
25.
Notification
Upon Sale of Shares
.
Each Participant agrees,
by entering the Plan, to give the Company prompt 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.
26.
Effective
Date and Approval of Shareholders
.
The Plan
shall take effect on the later of the date it is adopted by the
Board and the date it is approved by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum
is present or by written consent of the stockholders.
B-5
APPENDIX A
Designated
Subsidiaries
NONE
B-6
