UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K/A
Amendment
No. 1
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the Year Ended December 31, 2008
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Commission
File Number 000-51531
SUNESIS
PHARMACEUTICALS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
(State
or other jurisdiction of
incorporation
or organization)
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94-3295878
(I.R.S.
Employer Identification
Number)
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395
Oyster Point Boulevard, Suite 400
South
San Francisco, California 94080
(Address
of principal executive offices, including zip code)
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
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Name
of Each Exchange on Which Registered:
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Common
Stock, par value $0.0001 per share
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The
NASDAQ Stock Market LLC
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Securities
registered pursuant to Section 12(g) of the Act:
None
(Title of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes
o
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15 (d) of the Act. Yes
o
No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes
o
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
x
Indicate
by check mark whether the registrant is a large accelerated filer, accelerated
filer, a non-accelerated filer or a smaller reporting company. See definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer
o
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Accelerated
filer
o
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Non-accelerated
filer
o
(Do not check if a smaller reporting
company)
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Smaller
reporting company
x
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Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2.) Yes
o
No
x
The
aggregate market value of common stock held by non-affiliates of the registrant,
based on the closing sales price for such stock on June 30, 2008, as reported by
The Nasdaq Global Market, was $41,275,192. Shares of common stock held by each
current executive officer and director and by each person who is known by the
registrant to own 5% or more of the outstanding common stock have been excluded
from this computation in that such persons may be deemed to be affiliates of the
registrant. Share ownership information of certain persons known by the
registrant to own greater than 5% of the outstanding common stock for purposes
of the preceding calculation is based solely on information on Schedule 13G or
13D filed with the Securities and Exchange Commission and is as of June 30,
2008. This determination of affiliate status is not a conclusive determination
for other purposes.
The total
number of shares outstanding of the registrant’s common stock, $0.0001 par value
per share, as of March 20, 2009, was 34,409,768.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
SUNESIS
PHARMACEUTICALS, INC.
FORM
10-K/A
(Amendment
No. 1)
For
the Year Ended December 31, 2008
TABLE
OF CONTENTS
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Page
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Explanatory
Note
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2
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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18
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Item
11.
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Executive
Compensation
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21
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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32
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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37
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Item
14.
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Principal
Accountant Fees and Services
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40
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PART
IV
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Item
15.
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Exhibits
and Financial Statement Schedules
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40
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Signatures
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42
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Exhibit
Index
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43
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EXPLANATORY
NOTE
We are filing this Amendment No. 1 to
our Annual Report on Form 10-K/A (this “Amendment”) to amend our Annual Report
on Form 10-K for the year ended December 31, 2008, as filed with the Securities
and Exchange Commission (the “SEC”) on April 3, 2009 (the “Original Filing”).
The principal purpose of this Amendment is to update the Risk Factors in Part I,
Item IA to reflect the initial closing of a private placement to purchase up to
$43.5 million of our securities and reflect that we received a letter on April
14, 2009 from the Listing Qualifications Department of The NASDAQ Stock Market
notifying us that we do not currently comply with the $10.0 million minimum
stockholders’ equity requirement for continued listing on The NASDAQ Global
Market as set forth in NASDAQ Marketplace Rule 5450(b)(1)(A) and include the
Part III information that was to be incorporated by reference to the Proxy
Statement for our 2009 Annual Meeting of Stockholders (the “Annual Meeting”).
This Amendment hereby amends Part I, Item IA, specifically the risk factors
entitled “If we are unable to raise additional capital in the near
term, we may not be able to continue to operate as a going concern,” “The
closing of the Private Placement will result in substantial dilution to our
stockholders. If we sell shares of our common stock in future financings or
other arrangements, stockholders may experience additional dilution,” and “If we
fail to continue to comply with the listing requirements of The NASDAQ Global
Market, the price of our common stock and our ability to access the capital
markets could be negatively impacted” and Part III, Items 10 through 14, and
Part IV, Item 15. In addition, as required by Rule 12b-15 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), new
certifications by our principal executive officer and principal financial
officer are filed as exhibits to this Amendment.
No attempt has been made in this
Amendment to modify or update the other disclosures presented in the Original
Filing. Other than as stated above in the Risk Factors, this Amendment does not
reflect events occurring after the filing of the Original Filing or modify or
update those disclosures that may be affected by subsequent events. Such
subsequent matters, including changes in our management, are addressed in
subsequent reports filed by us with the SEC. Accordingly, this Amendment should
be read in conjunction with the Original Filing and our other filings with the
SEC.
In this report, “Sunesis,” the
“Company,” “we,” “us,” and “our” refer to Sunesis Pharmaceuticals, Inc. and
its wholly owned subsidiary, Sunesis Europe Limited, except where it is made
clear that the term refers only to the parent company.
PART
I
ITEM
1A:
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. You should carefully
consider the risks and uncertainties described below and all information
contained in this report in weighing a decision to purchase our common stock. If
any of the possible adverse events described below actually occurs, we may be
unable to conduct our business as currently planned and our financial condition
and operating results could be adversely affected. Additional risks
not presently known to us or that we currently believe are immaterial may also
significantly impair our business operations. In addition, the trading price of
our common stock could decline due to the occurrence of any of these risks, and
you may lose all or part of your investment. Please see “Special Note Regarding
Forward-Looking Statements.”
We
have marked with an asterisk (*) those risk factors below that reflect
substantive changes from the risk factors included in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 3,
2009.
Risks
Related to Our Business
*If
we are unable to raise additional capital in the near term, we may not be able
to continue to operate as a going concern.
We will
need to raise substantial additional capital to continue the development
and commercialization of voreloxin. We will need to raise substantial additional
capital in the near term to:
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fund
clinical trials and seek regulatory
approvals;
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continue
and expand our development
activities;
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hire
additional development personnel;
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maintain,
defend and expand the scope of our intellectual property
portfolio;
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implement
additional internal systems and infrastructure;
and
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build
or access manufacturing and commercialization
capabilities.
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Our
future funding requirements will depend on many factors, including but not
limited to:
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the
rate of progress and cost of our clinical trials and other development
activities;
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the
economic and other terms and timing of any licensing or other partnering
arrangement into which we may
enter;
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the
costs associated with building or accessing manufacturing and
commercialization capabilities;
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the
costs of acquiring or investing in businesses, product candidates and
technologies, if any;
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the
costs of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property
rights;
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the
costs and timing of seeking and obtaining U.S. Food and Drug
Administration, or FDA, and other regulatory approvals;
and
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the
effect of competing technological and market
developments.
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On March
31, 2009, we entered into a securities purchase agreement with accredited
investors, including certain members of management, providing for a private
placement of our securities of up to $43.5 million, or the Private Placement.
The Private Placement contemplates the sale of up to $15.0 million of units
consisting of Series A preferred stock and warrants to purchase common stock in
two closings. $10.0 million of units were sold in the initial closing
on April 3, 2009. Subject to the approval of our stockholders, an
additional $5.0 million of units may be sold in the second closing, which may
occur at our election or at the election of the investors in the Private
Placement. We may elect to hold the second closing if the achievement
of a specified milestone with respect to voreloxin has occurred and our common
stock is trading above a specified floor price. If we have not delivered notice
to the investors in the Private Placement of our election to complete the second
closing, or if the conditions for the second closing have not been met, the
investors may elect to purchase the units in the second closing by delivering a
notice to us of their election to purchase the units. Notice of an
election to complete the second closing, either by us or the investors in the
Private Placement, must be delivered on or before the earliest to occur of
December 31, 2009, the common equity closing described below or the occurrence
of a qualifying alternative common stock financing. If the
second closing occurs, it will be subject to the satisfaction of customary
closing conditions. Subject to the approval of our stockholders, the
remaining tranche of $28.5 million of common stock may be sold in the common
equity closing. The common equity closing may be completed at our election
prior to the earlier of December 31, 2010 or a qualifying alternative common
stock financing, or upon the election of the holders of a majority of the Series
A preferred stock issued in the Private Placement prior to a date determined
with reference to our cash balance dropping below $4.0 million at certain future
dates. If we elect to hold the common equity closing, it will be
subject to the approval of the purchasers holding a majority of the Series A
preferred stock issued in the Private Placement and subject to a condition that
we sell at least $28.5 million of common stock in the common equity
closing.
We
anticipate that the net proceeds from the initial closing of the Private
Placement, together with our existing cash, cash equivalents and marketable
securities, will be sufficient to enable us to fund our operations through at
least the end of 2009.
The
conditions to the second closing for $5.0 million of units are substantial,
including conditions related to approval by our stockholders, the
development of voreloxin and our stock price, and it is possible that the
conditions to this second closing will not be met, in which event we would
not receive the $5.0 million of gross proceeds that are contemplated for that
closing. The $28.5 million common equity closing is entirely in the
discretion of the investors in the Private Placement, and it is possible that
they will elect not to complete that closing for reasons related to our business
or other factors.
Until we
can generate a sufficient amount of product revenue to finance our cash
requirements, which we may never do, we expect to finance future cash needs
primarily through equity issuances (including the possible second closing of the
sale of units and common equity closing in the Private Placement described above
and subject to the satisfaction of the conditions described above), debt
arrangements and a possible partnership or license of development and/or
commercialization rights to voreloxin. We do not know whether additional funding
will be available on acceptable terms, or at all.
We are
currently continuing to conduct our ongoing clinical trials of voreloxin in
acute myeloid leukemia, or AML, and ovarian cancer. If we are not able to
secure additional funding when needed, we may have to delay, reduce the scope of
or eliminate one or more of our clinical trials or scale back our development
program or conduct additional workforce or other expense reductions. For
example, in June 2008, we announced that we reduced our workforce by
approximately 60% and implemented a revised operating plan to focus our efforts
on voreloxin, wind down our internal discovery research activities to streamline
our operations and extend our financial resources. In addition, we may have to
partner voreloxin at an earlier stage of development than we might otherwise
choose to do, which would lower the economic value of that program to
us.
Our
failure to raise capital when needed and on acceptable terms would require us to
reduce our operating expenses, delay or reduce the scope of our voreloxin
development program and limit our ability to continue our operations. Any one of
the foregoing would have a material adverse effect on our business, financial
condition and results of operations.
Our
independent registered public accountants have indicated that our recurring
operating losses raise substantial doubt as to our ability to continue as a
going concern.
Our
audited financial statements for the fiscal year ended December 31, 2008 were
prepared on a going concern basis in accordance with United States generally
accepted accounting principles. The going concern basis of presentation assumes
that we will continue in operation for the foreseeable future and will be able
to realize our assets and discharge our liabilities and commitments in the
normal course of business. However, our independent registered public
accountants have indicated that our recurring operating losses raise substantial
doubt as to our ability to continue as a going concern. We may be forced to
reduce our operating expenses and raise additional funds to meet our working
capital needs. However, we cannot guarantee that will be able to obtain
sufficient additional funds when needed or that such funds, if available, will
be obtainable on terms satisfactory to us. In the event that these plans cannot
be effectively realized, there can be no assurance that we will be able to
continue as a going concern.
Conditions
affecting the equity markets may make it more difficult and costly to raise
additional capital.
Currently,
there is turmoil in the U.S. economy in part due to tightening credit markets.
Banks have tightened their lending standards, investors are increasingly
unwilling to buy stock and corporate bonds and economic growth has slowed.
Factors contributing to a slowing economy appear to be reduced credit
availability, falling house prices and rising prices. If these factors continue
to affect equity markets, our ability to raise capital may be adversely
affected.
We
have incurred losses since inception and anticipate that we will continue to
incur losses for the foreseeable future. We may not ever achieve or sustain
profitability.
We are a
clinical-stage biopharmaceutical company with a limited operating history as a
public company. We are not profitable and have incurred losses in each year
since our inception in 1998. Our net loss for the years ended December 31,
2008, 2007 and 2006 was $37.2 million, $38.8 million, and
$31.2 million, respectively. As of December 31, 2008, we had an accumulated
deficit of $316.2 million. We do not currently have any products that have
been approved for marketing, and we continue to incur substantial development
and general and administrative expenses related to our operations. We expect to
continue to incur losses for the foreseeable future, and we expect these losses
to increase significantly, especially upon commencing pivotal and Phase 3
clinical trials for voreloxin, as we conduct development of, and seek regulatory
approvals for, voreloxin, and as we commercialize any approved drugs. Our
losses, among other things, have caused and will continue to cause our
stockholders’ equity and working capital to decrease.
Our
business model had been based in part upon entering into strategic
collaborations for discovery and/or the development of some of our product
candidates. To date, we have derived substantially all of our revenue from
research collaboration agreements. The research phase for all of our
revenue-generating collaboration agreements is completed. We do not expect to
enter into any new collaboration agreement that will result in research revenue
for us. We also do not anticipate that we will generate revenue from the sale of
products for the foreseeable future. In the absence of additional sources of
capital which may not be available to us on acceptable terms, if at all, the
development of voreloxin or future product candidates, if any, may be reduced in
scope, delayed or terminated. If our product candidates or those of our
collaborators fail in clinical trials or do not gain regulatory approval, or if
our future products do not achieve market acceptance, we may never become
profitable. Even if we achieve profitability in the future, we may not be able
to sustain profitability in subsequent periods.
There is a high
risk the development of voreloxin could be halted or significantly delayed for
various reasons; our clinical trials for voreloxin may not demonstrate safety or
efficacy or lead to regulatory approval.
Voreloxin
is prone to the risks of failure inherent in the drug development process. We
need to conduct significant additional preclinical studies and clinical trials
before we can attempt to demonstrate that voreloxin is safe and effective to the
satisfaction of the FDA and other regulatory authorities. Failure can occur at
any stage of the development process, and successful preclinical studies and
early clinical trials do not ensure that later clinical trials will be
successful. A number of companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical trials, even after obtaining promising
results in earlier trials.
For
example, we terminated two Phase 2 trials of voreloxin in small cell and
non-small cell lung cancer. We recently ceased development of SNS-032
and terminated our related license agreement with Bristol-Myers Squibb
Company after completion of a Phase 1 trial as no responses demonstrating
efficacy were observed in that trial. In addition, in our Phase 1 trial of
SNS-314, a maximum tolerated dose was not established and no responses were
observed. As a result, we have suspended further development of
SNS-314 while we seek a partner or licensee to support further
development.
If our
clinical trials result in unacceptable toxicity or lack of efficacy, we may have
to terminate them. If clinical trials are halted, or if they do not show that
voreloxin is safe and effective in the indications for which we are seeking
regulatory approval, our future growth will be limited and we may not have any
other product candidates to develop.
We do not
know whether our ongoing clinical trials or any other future clinical trials
with voreloxin or any of our product candidates will be completed on schedule,
or at all, or whether our ongoing or planned clinical trials will begin or
progress on the time schedule we anticipate. The commencement of our planned
clinical trials could be substantially delayed or prevented by several factors,
including:
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delays or failures to raise
additional funding;
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limited number of, and
competition for, suitable patients with particular types of cancer for
enrollment in clinical
trials;
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delays or failures in obtaining
regulatory approval to commence a clinical
trial;
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delays or failures in obtaining
sufficient clinical
materials;
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delays or failures in
obtaining institutional review board approval to conduct a
clinical trial at prospective sites;
or
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delays or failures in reaching
acceptable clinical trial agreement terms or clinical trial protocols with
prospective sites.
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The
completion of our clinical trials could also be substantially delayed or
prevented by several factors, including:
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delays or failures to raise
additional funding;
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slower than expected rates of
patient recruitment and
enrollment;
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failure of patients to complete
the clinical trial;
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unforeseen safety
issues;
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lack of efficacy during clinical
trials;
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inability or unwillingness of
patients or clinical investigators to follow our clinical trial protocols;
and
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inability to monitor patients
adequately during or after
treatment.
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Additionally,
our clinical trials may be suspended or terminated at any time by the FDA, other
regulatory authorities, ourselves or, in some cases, our collaboration partners.
Any failure to complete or significant delay in completing clinical trials for
our product candidates could harm our financial results and the commercial
prospects for our product candidates.
In March
2008, we informed the FDA of a stability observation in our voreloxin drug
product. Specifically, visible particles were observed during stability
studies of one of our voreloxin drug product lots. We have since identified a
process impurity in the voreloxin active pharmaceutical ingredient, or API,
that, when formulated into the packaged vial of the voreloxin drug product, can
result in the formation of particles over time. As a response to these
findings, we implemented a revised manufacturing process to attempt to control
the impurity and thereby prevent particle formation. One lot of voreloxin
API manufactured using the revised manufacturing process has been formulated
into a drug product lot that has completed nine months of stability testing
without formation of particles. This drug product lot is currently being
used in our clinical trials. It will take time to evaluate whether or not
this revised manufacturing process for voreloxin API will be successful in
stopping the formation of particles in this drug product lot over the longer
term, and to evaluate whether or not such control of particle formation would
also be reliably and consistently achieved in subsequent lots over the shorter
or longer term. We provided an update on the results from our process
optimization activities to the FDA in December 2008. If the change in
manufacturing process does not adequately control the formation of visible
particles, we will need to discuss other possibilities with the FDA, which could
include temporary clinical hold until the issue has been resolved to their
satisfaction.
The
failure to enroll patients for clinical trials may cause delays in developing
voreloxin.
We may
encounter delays if we are unable to enroll enough patients to complete clinical
trials of voreloxin. Patient enrollment depends on many factors,
including the size of the patient population, the nature of the protocol,
the proximity of patients to clinical sites and the eligibility criteria for the
trial. Moreover, when one product candidate is evaluated in multiple clinical
trials simultaneously, patient enrollment in ongoing trials can be adversely
effected by negative results from completed trials. Voreloxin is being tested in
patients with AML and ovarian cancer, which can be difficult patient populations
to recruit.
The
results of preclinical studies and clinical trials may not satisfy the
requirements of the FDA or other regulatory agencies.
Prior to
receiving approval to commercialize voreloxin or future product candidates, if
any, in the United States or abroad, we and our collaboration partners must
demonstrate with substantial evidence from well-controlled clinical trials, to
the satisfaction of the FDA and other regulatory authorities, that such product
candidates are safe and effective for their intended uses. The results from
preclinical studies and clinical trials can be interpreted in different ways.
Even if we and our collaboration partners believe the preclinical or clinical
data are promising, such data may not be sufficient to support approval by the
FDA and other regulatory authorities.
We
rely on third parties to manufacture our voreloxin drug product and its active
pharmaceutical ingredient, and depend on a single supplier for the active
pharmaceutical ingredient. There are a limited number of manufacturers that are
capable of manufacturing voreloxin.
We do not
currently own or operate manufacturing facilities and lack the capability to
manufacture voreloxin on a clinical or commercial scale. As a result, we rely on
third parties to manufacture both the voreloxin API and the finished drug
product. The API is classified as a toxic substance, limiting the available
manufacturers. We believe that there are at least five contract manufacturers in
North America with suitable capabilities for API manufacture, and at least four
that can manufacture finished drug product. We currently have established
relationships with only one manufacturer for API and two manufacturers for the
finished drug product. If our third-party API manufacturer is unable or
unwilling to produce voreloxin, we will need to establish a contract with
another supplier. However, establishing a relationship with an alternative
supplier would likely delay our ability to produce API for six to nine months,
during which time we would rely on current inventory to supply our drug product
manufacturing activities. We expect to continue to depend on third-party
contract manufacturers for all our API and finished drug product needs in
the foreseeable future.
Voreloxin
requires precise, high quality manufacturing. A contract manufacturer is subject
to ongoing periodic unannounced inspection by the FDA and corresponding state
agencies to ensure strict compliance with current Good Manufacturing Practice,
or cGMP, and other applicable government regulations and corresponding foreign
standards. Our contract manufacturer’s failure to achieve and maintain high
manufacturing standards in compliance with cGMP regulations could result in
manufacturing errors resulting in patient injury or death, product recalls or
withdrawals, delays or interruptions of production or failures in product
testing or delivery, delay or prevention of filing or approval of marketing
applications for voreloxin, cost overruns or other problems that could seriously
harm our business.
To date,
voreloxin has been manufactured in small quantities for preclinical studies and
clinical trials. Prior to being approved for commercial sale, we will need to
manufacture finished drug product in larger quantities. Significant scale-up of
manufacturing will be accompanied by significant validation studies, which will
be reviewed by the FDA prior to approval. If we are unable to successfully
increase the manufacturing capacity for voreloxin, the regulatory approval or
commercial launch may be delayed or there may be a shortage in commercial
supply.
Any
performance failure on the part of a contract manufacturer could delay clinical
development or regulatory approval of our product candidates or
commercialization of our future products, depriving us of potential product
revenue and resulting in additional losses. For example, because we rely on a
single supplier for voreloxin API, the failure of such supplier to have
sufficient quantities of the API or to supply API on a timely basis or at all
would negatively affect us. In addition, our dependence on a third party for
manufacturing may adversely affect our future profit margins. Our ability to
replace an existing manufacturer may be difficult because the number of
potential manufacturers is limited and the FDA must approve any replacement
manufacturer before it can be an approved commercial supplier. Such
approval would require new testing and compliance inspections. It may be
difficult or impossible for us to identify and engage a replacement manufacturer
on acceptable terms in a timely manner, or at all.
We
expect to expand our clinical development capabilities, and any difficulties
hiring or retaining key personnel or managing this growth could disrupt our
operations.
We are
highly dependent on the principal members of our development staff. We expect to
expand our clinical development capabilities by increasing expenditures in these
areas, hiring additional employees and expanding the scope of our current
operations. Future growth will require us to continue to implement and improve
our managerial, operational and financial systems and continue to retain,
recruit and train additional qualified personnel, which may impose a strain on
our administrative and operational infrastructure. The competition for qualified
personnel in the biopharmaceutical field is intense. We are highly dependent on
our continued ability to attract, retain and motivate highly qualified
management and specialized personnel required for clinical development. Due to
our limited resources, we may not be able to effectively manage the expansion of
our operations or recruit and train additional qualified personnel. If we are
unable to retain key personnel or manage our growth effectively, we may not be
able to implement our business plan.
If
we are sued for infringing intellectual property rights of third parties,
litigation will be costly and time consuming and could prevent us from
developing or commercializing voreloxin.
Our
commercial success depends on not infringing the patents and other proprietary
rights of third parties and not breaching any collaboration or other agreements
we have entered into with regard to our technologies and product candidates. If
a third party asserts that we are using technology or compounds claimed in
issued and unexpired patents owned or controlled by the third party, we may need
to obtain a license, enter into litigation to challenge the validity of the
patents or incur the risk of litigation in the event that a third party asserts
that we infringe its patents.
If a
third party asserts that we infringe its patents or other proprietary rights, we
could face a number of challenges that could seriously harm our competitive
position, including:
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infringement and other
intellectual property claims, which would be costly and time consuming to
litigate, whether or not the claims have merit, and which could delay the
regulatory approval process and divert management’s attention from our
business;
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substantial damages for past
infringement, which we may have to pay if a court determines that
voreloxin or any future product candidates infringe a third party’s patent
or other proprietary rights;
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a court order prohibiting us from
selling or licensing voreloxin or any future product candidates unless a
third party licenses relevant patent or other proprietary rights to us,
which it is not required to do;
and
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if a license is available from a
third party, we may have to pay substantial royalties or grant cross
licenses to our patents or other proprietary
rights.
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If
our competitors develop and market products that are more effective, safer or
less expensive than voreloxin, our commercial opportunities will be negatively
impacted.
The life
sciences industry is highly competitive, and we face significant competition
from many pharmaceutical, biopharmaceutical and biotechnology companies that are
researching, developing and marketing products designed to address the treatment
of cancer, including AML and ovarian cancer. Voreloxin is a small
molecule therapeutic that will compete with other drugs and therapies that
currently exist or are being developed. Many of our competitors have
significantly greater financial, manufacturing, marketing and drug development
resources than we do. Large pharmaceutical companies in particular have
extensive experience in clinical testing and in obtaining regulatory approvals
for, and marketing, drugs.
We
believe that our ability to successfully compete with voreloxin and any future
product candidates, if any, will depend on, among other things:
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our ability to develop novel
compounds with attractive pharmaceutical properties and to secure, protect
and maintain intellectual property rights based on our
innovations;
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the efficacy, safety and
reliability of our product
candidates;
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the speed at which we develop our
product candidates;
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our ability to design and
successfully execute appropriate clinical
trials;
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our ability to maintain a good
relationship with regulatory
authorities;
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our ability to obtain, and the
timing and scope of, regulatory
approvals;
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our ability to manufacture and
sell commercial quantities of future products to the market;
and
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acceptance of future products by
physicians and other healthcare
providers.
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Some of
the current key competitors of voreloxin in AML include Genzyme Corporation’s
clofarabine, Eisai Corporation’s decitabine, Celgene Corporation’s azacitidine
and Vion Pharmaceuticals, Inc.’s laromustine, all of which could change the
treatment paradigm of acute leukemia. Each of these compounds is further along
in clinical development than is voreloxin. Liposomal doxorubicin and topotecan
are current standards of care in platinum-resistant ovarian cancer patients, and
we are aware that several of our competitors have initiated Phase 3
clinical trials for this indication.
We expect
competition for voreloxin to increase as additional products are developed and
approved to treat AML and ovarian cancer in various patient
populations. If our competitors market products that are more
effective, safer or less expensive than voreloxin or our other future products,
if any, or that reach the market sooner we may not achieve commercial success or
substantial market penetration. In addition, the biopharmaceutical industry is
characterized by rapid change. Products developed by our competitors may
render voreloxin or any future product candidates obsolete.
We
rely on third parties to conduct our clinical trials. If these third parties do
not successfully carry out their contractual duties or meet expected deadlines,
we may be unable to obtain regulatory approval for or commercialize our
voreloxin drug product.
We rely
on third parties, such as contract research organizations, medical institutions,
clinical investigators and contract laboratories, to conduct our planned and
existing clinical trials for voreloxin. If the third parties conducting our
clinical trials do not perform their contractual duties or obligations, do not
meet expected deadlines or need to be replaced, or if the quality or accuracy of
the clinical data they obtain is compromised due to the failure to adhere to our
clinical trial protocols or for any other reason, we may need to enter into new
arrangements with alternative third parties and our clinical trials may be
extended, delayed or terminated or may need to be repeated, and we may not be
able to obtain regulatory approval for or commercialize the product candidate
being tested in such trials.
Our
proprietary rights may not adequately protect voreloxin or future product
candidates, if any.
Our
commercial success will depend on our ability to obtain patents and maintain
adequate protection for voreloxin and any future product candidates in the
United States and other countries. As of December 31, 2008, we owned,
co-owned or had rights to approximately 233 issued U.S. and foreign patents and
approximately 370 pending U.S. and foreign patent applications. We will be able
to protect our proprietary rights from unauthorized use by third parties only to
the extent that our proprietary technologies and future products are covered by
valid and enforceable patents or are effectively maintained as trade
secrets.
We apply
for patents covering both our technologies and product candidates, as we deem
appropriate. However, we may fail to apply for patents on important technologies
or product candidates in a timely fashion, or at all. Our existing patents and
any future patents we obtain may not be sufficiently broad to prevent others
from practicing our technologies or from developing competing products and
technologies. In addition, we generally do not exclusively control the patent
prosecution of subject matter that we license to or from others. Accordingly, in
such cases we are unable to exercise the same degree of control over this
intellectual property as we would over our own. Moreover, the patent positions
of biopharmaceutical companies are highly uncertain and involve complex legal
and factual questions for which important legal principles remain unresolved. As
a result, the validity and enforceability of patents cannot be predicted with
certainty. In addition, we do not know whether:
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we, our licensors or our
collaboration partners were the first to make the inventions covered by
each of our issued patents and pending patent
applications;
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we, our licensors or our
collaboration partners were the first to file patent applications for
these inventions;
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others will independently develop
similar or alternative technologies or duplicate any of our
technologies;
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any of our or our licensors’
pending patent applications will result in issued
patents;
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any of our, our licensors’ or our
collaboration partners’ patents will be valid or
enforceable;
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any patents issued to us, our
licensors or our collaboration partners will provide us with any
competitive advantages, or will be challenged by third
parties;
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we will develop additional
proprietary technologies that are patentable;
or
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the patents of others will have
an adverse effect on our
business.
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We also
rely on trade secrets to protect some of our technology, especially where we do
not believe patent protection is appropriate or obtainable. However, trade
secrets are difficult to maintain. While we use reasonable efforts to protect
our trade secrets, our or our collaboration partners’ employees, consultants,
contractors or scientific and other advisors, or those of our licensors, may
unintentionally or willfully disclose our proprietary information to
competitors. Enforcement of claims that a third party has illegally obtained and
is using trade secrets is expensive, time consuming and uncertain. In addition,
foreign courts are sometimes less willing than U.S. courts to protect trade
secrets. If our competitors independently develop equivalent knowledge, methods
and know-how, we would not be able to assert our trade secrets against them and
our business could be harmed.
The
composition of matter patents covering voreloxin are due to expire in 2015. Even
if voreloxin is approved by the FDA, we may not be able to recover our
development costs prior to the expiration of these patents.
The
voreloxin API composition of matter is covered by U.S. patent 5,817,669 and its
counterpart patents and patent applications in 43 foreign jurisdictions. U.S.
patent 5,817,669 is due to expire in October 2015, and most of its foreign
counterparts are due to expire in June 2015. We do not know whether patent
term extensions and data exclusivity periods will be available in the future.
Voreloxin must undergo extensive clinical trials before it can be approved by
the FDA. We do not know when, if ever, voreloxin will be approved by
the FDA. Even if voreloxin is approved by the FDA in the future, we may not have
sufficient time to commercialize our voreloxin product to enable us to recover
our development costs prior to the expiration of the U.S. and foreign patents
covering voreloxin. Our obligation to pay royalties to Dainippon, the company
from which we licensed voreloxin, may extend beyond the patent expiration, which
would further erode the profitability of this product.
Our
workforce reductions in August 2007, June 2008, March 2009 and any
future workforce and expense reductions may have an adverse impact on our
internal programs, our ability to hire and retain key personnel and may be
distracting to management.
In
August 2007, we conducted a workforce reduction of approximately 25% in
order to reduce expenses. In June 2008, we conducted a second workforce
reduction of approximately 60% to focus on the development of voreloxin. In
March 2009, in conjunction with the closing of the Private Placement we
conducted an additional workforce reduction of six employees. In light of
our continued need for funding and expense control, we may be required to
implement further workforce and expense reductions in the future. Further
workforce and expense reductions could result in reduced progress on our
internal programs. In addition, employees, whether or not directly affected by a
reduction, may seek future employment with our business partners or competitors.
Although our employees are required to sign a confidentiality agreement at the
time of hire, the confidential nature of certain proprietary information may not
be maintained in the course of any such future employment. Further, we believe
that our future success will depend in large part upon our ability to attract
and retain highly skilled personnel. We may have difficulty retaining and
attracting such personnel as a result of a perceived risk of future workforce
and expense reductions. In addition, the implementation of expense reduction
programs may result in the diversion of efforts of our executive management team
and other key employees, which could adversely affect our business.
We
may be subject to damages resulting from claims that we or our employees have
wrongfully used or disclosed alleged trade secrets of our employees’ former
employers.
Many of
our employees were previously employed at biotechnology or pharmaceutical
companies, including our competitors or potential competitors. We may be subject
to claims that we or our employees have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of their former
employers. Litigation may be necessary to defend against these claims. If we
fail in defending such claims, in addition to paying monetary damages, we may
lose valuable intellectual property rights or personnel. A loss of key personnel
or the work product of current or former personnel could hamper or prevent our
ability to commercialize voreloxin, which could severely harm our business. Even
if we are successful in defending against these claims, litigation could result
in substantial costs and be a distraction to management.
We
currently have limited marketing staff and no sales or distribution
organization. If we are unable to develop a sales and marketing and distribution
capability on our own or through collaborations with marketing partners, we will
not be successful in commercializing voreloxin.
We
currently have no sales or distribution capabilities and limited marketing
staff. We intend to establish our own sales and marketing organization with
technical expertise and supporting distribution capabilities to commercialize
voreloxin in North America, which will be expensive and time consuming. Any
failure or delay in the development of our internal sales, marketing and
distribution capabilities would adversely impact the commercialization of these
products. We plan to collaborate with third parties that have direct sales
forces and established distribution systems to commercialize voreloxin. To the
extent that we enter into co-promotion or other licensing arrangements, our
product revenue is likely to be lower than if we marketed or sold voreloxin
directly. In addition, any revenue we receive will depend upon the efforts of
third parties, which may not be successful and are only partially within our
control. If we are unable to enter into such arrangements on acceptable terms or
at all, we may not be able to successfully commercialize voreloxin. If we are
not successful in commercializing voreloxin or our future product candidates, if
any, either on our own or through collaborations with one or more third parties,
our future product revenue will suffer and we may incur significant additional
losses.
We
depend on various consultants and advisors for the success and continuation of
development efforts.
We work
extensively with various consultants and advisors, who provide advice and/or
services in various business and development functions, including clinical
development, operations and strategy, regulatory matters, accounting and
finance. The potential success of our drug development programs depends, in
part, on continued collaborations with certain of these consultants and
advisors. Our consultants and advisors are not our employees and may have
commitments and obligations to other entities that may limit their availability
to us. We do not know if we will be able to maintain such relationships or that
such consultants and advisors will not enter into other arrangements with
competitors, any of which could have a detrimental impact on our development
objectives and our business.
If
conflicts of interest arise between our collaboration partners and us, any of
them may act in their self interest, which may be adverse to our
interests.
If a
conflict of interest arises between us and one or more of our collaboration
partners, they may act in their own self interest or otherwise in a way that is
not in the interest of our company or our stockholders. Our collaboration
partners are conducting multiple product development efforts within the disease
area that is the subject of collaboration with our company. In some of our
collaborations, we have agreed not to conduct, independently or with any third
party, any research that is competitive with the research conducted under our
collaborations. Our collaboration partners, however, may develop, either alone
or with others, products in related fields that are competitive with the product
candidates that are the subject of these collaborations. Competing products,
either developed by our collaboration partners or to which our collaboration
partners have rights, may result in their withdrawal of support for a product
candidate covered by the collaboration agreement.
If one or
more of our collaboration partners were to breach or terminate their
collaboration agreements with us or otherwise fail to perform their obligations
thereunder in a timely manner, the preclinical or clinical development or
commercialization of the affected product candidates could be delayed or
terminated. We do not know whether our collaboration partners will pursue
alternative technologies or develop alternative product candidates, either on
their own or in collaboration with others, including our competitors, as a means
for developing treatments for the diseases targeted by collaboration agreements
with our company.
Our
facilities are located near known earthquake fault zones, and the occurrence of
an earthquake or other catastrophic disaster could cause damage to our
facilities and equipment, which could require us to cease or curtail
operations.
Our
facilities are located in the San Francisco Bay Area near known earthquake fault
zones and are vulnerable to significant damage from earthquakes. We are also
vulnerable to damage from other types of disasters, including fires, floods,
power loss, communications failures and similar events. If any disaster were to
occur, our ability to operate our business at our facilities may be seriously or
completely impaired and our data could be lost or destroyed.
Compliance
with changing regulation of corporate governance and public disclosure may
result in additional expenses.
Changing
laws, regulations and standards relating to corporate governance and public
disclosure may create uncertainty regarding compliance matters. New or changed
laws, regulations and standards are subject to varying interpretations in many
cases. As a result, their application in practice may evolve over time. We are
committed to maintaining high standards of corporate governance and public
disclosure. Complying with evolving interpretations of new or changed legal
requirements may cause us to incur higher costs as we revise current practices,
policies and procedures, and may divert management time and attention from
potential revenue-generating activities to compliance matters. If our efforts to
comply with new or changed laws, regulations and standards differ from the
activities intended by regulatory or governing bodies due to ambiguities related
to practice, our reputation may also be harmed. Further, our board members,
chief executive officer and chief financial officer could face an increased risk
of personal liability in connection with the performance of their duties. As a
result, we may have difficulty attracting and retaining qualified board members
and executive officers, which could harm our business.
Global
credit and financial market conditions negatively impact the value of our
current portfolio of cash equivalents or short-term investments and our ability
to meet our financing objectives.
Our cash
and cash equivalents are maintained in highly liquid investments with remaining
maturities of 90 days or less at the time of purchase. Our marketable
securities consist primarily of investments in readily marketable debt
securities with remaining maturities of more than 90 days at the time of
purchase. While, as of the date of this filing, we are not aware of any
downgrades, material losses, or other significant deterioration in the fair
value of our cash equivalents or marketable securities, no assurance can be
given that further deterioration in conditions of the global credit and
financial markets would not negatively impact our current portfolio of cash
equivalents or marketable securities or our ability to meet our current
liquidity needs.
Risks
Related to Our Industry
The
regulatory approval process is expensive, time consuming and uncertain and may
prevent us from obtaining approval for the commercialization of
voreloxin.
The
research, testing, manufacturing, selling and marketing of product candidates
are subject to extensive regulation by the FDA and other regulatory authorities
in the United States and other countries, which regulations differ from country
to country. Neither we nor our collaboration partners are permitted to market
our product candidates in the United States until we receive approval of a new
drug application or NDA, from the FDA, or in any other country without the
equivalent marketing approval from such country. We have not received marketing
approval for voreloxin. None of our collaboration partners has had a
product resulting from our collaboration enter clinical trials. In
addition, failure to comply with FDA and other applicable U.S. and foreign
regulatory requirements may subject us to administrative or judicially imposed
sanctions, including warning letters, civil and criminal penalties, injunctions,
product seizure or detention, product recalls, total or partial suspension of
production, and refusal to approve pending NDAs, supplements to approved NDAs or
their foreign equivalents.
Regulatory
approval of an NDA or NDA supplement or a foreign equivalent is not guaranteed,
and the approval process is expensive and may take several years. Furthermore,
the development process for oncology products may take longer than in other
therapeutic areas. Regulatory authorities have substantial discretion in the
drug approval process. Despite the time and expense exerted, failure can occur
at any stage, and we could encounter problems that cause us to abandon clinical
trials or to repeat or perform additional preclinical studies and clinical
trials. The number of preclinical studies and clinical trials that will be
required for marketing approval varies depending on the drug candidate, the
disease or condition that the drug candidate is designed to address, and the
regulations applicable to any particular drug candidate. The FDA or a foreign
regulatory authority can delay, limit or deny approval of a drug candidate for
many reasons, including:
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the drug candidate may not be
deemed safe or effective;
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regulatory officials may not find
the data from preclinical studies and clinical trials
sufficient;
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the FDA or foreign regulatory
authority might not approve our or our third-party manufacturer’s
processes or facilities; or
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the FDA or foreign regulatory
authority may change its approval policies or adopt new
regulations.
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We
may be subject to costly claims related to our clinical trials and may not be
able to obtain adequate insurance.
Because
we conduct clinical trials in humans, we face the risk that the use of voreloxin
or future product candidates, if any, will result in adverse side effects. We
cannot predict the possible harms or side effects that may result from our
clinical trials. Although we have clinical trial liability insurance for up to
$10.0 million aggregate, our insurance may be insufficient to cover any
such events. We do not know whether we will be able to continue to obtain
clinical trial coverage on acceptable terms, or at all. We may not have
sufficient resources to pay for any liabilities resulting from a claim excluded
from, or beyond the limit of, our insurance coverage. There is also a risk that
third parties that we have agreed to indemnify could incur liability. Any
litigation arising from our clinical trials, even if we were ultimately
successful, would consume substantial amounts of our financial and managerial
resources and may create adverse publicity.
Even
if we receive regulatory approval to sell voreloxin, the market may not be
receptive to voreloxin.
Even if
voreloxin obtains regulatory approval, it may not gain market acceptance among
physicians, patients, healthcare payors and/or the medical community. We believe
that the degree of market acceptance will depend on a number of factors,
including:
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timing of market introduction of
competitive products;
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efficacy of our
product;
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prevalence and severity of any
side effects;
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potential advantages or
disadvantages over alternative
treatments;
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strength of marketing and
distribution support;
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price of voreloxin, both in
absolute terms and relative to alternative treatments;
and
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availability of reimbursement
from health maintenance organizations and other third-party
payors.
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For
example, the potential toxicity of single and repeated doses of voreloxin has
been explored in a number of animal studies that suggest the dose-limiting
toxicities in humans receiving voreloxin may be similar to some of those
observed with approved cytotoxic agents, including reversible toxicity to bone
marrow cells, the gastrointestinal system and other systems with rapidly
dividing cells. In our Phase 1 and Phase 2 clinical trials of
voreloxin, we have witnessed the following side effects, irrespective of
causality, ranging from mild to more severe: lowered white blood cell count that
may lead to a serious or possibly life-threatening infection, hair loss, mouth
sores, fatigue, nausea with or without vomiting, lowered platelet count, which
may lead to an increase in bruising or bleeding, lowered red blood cell count
(anemia), weakness, tiredness, shortness of breath, diarrhea and intestinal
blockage.
If
voreloxin fails to achieve market acceptance, due to unacceptable side effects
or any other reasons, we may not be able to generate significant revenue or to
achieve or sustain profitability.
Even
if we receive regulatory approval for voreloxin, we will be subject to ongoing
FDA and other regulatory obligations and continued regulatory review, which may
result in significant additional expense and limit our ability to commercialize
voreloxin.
Any
regulatory approvals that we or our collaboration partners receive for voreloxin
or our future product candidates, if any, may also be subject to limitations on
the indicated uses for which the product may be marketed or contain requirements
for potentially costly post-marketing studies. In addition, even if approved,
the labeling, packaging, adverse event reporting, storage, advertising,
promotion and recordkeeping for any product will be subject to extensive and
ongoing regulatory requirements. The subsequent discovery of previously unknown
problems with a product, including adverse events of unanticipated severity or
frequency, may result in restrictions on the marketing of the product, and could
include withdrawal of the product from the market.
Regulatory
policies may change and additional government regulations may be enacted that
could prevent or delay regulatory approval of our product candidates. We cannot
predict the likelihood, nature or extent of government regulation that may arise
from future legislation or administrative action, either in the United States or
abroad. If we are not able to maintain regulatory compliance, we might not be
permitted to market voreloxin or our future products and we may not achieve or
sustain profitability.
The
coverage and reimbursement status of newly approved drugs is uncertain, and
failure to obtain adequate coverage and reimbursement could limit our ability to
market voreloxin and decrease our ability to generate revenue.
There is
significant uncertainty related to the third-party coverage and reimbursement of
newly approved drugs both nationally and internationally. The commercial success
of voreloxin and our future products, if any, in both domestic and international
markets depends on whether third-party coverage and reimbursement is available
for the ordering of our future products by the medical profession for use by
their patients. Medicare, Medicaid, health maintenance organizations and other
third-party payors are increasingly attempting to manage healthcare costs by
limiting both coverage and the level of reimbursement of new drugs and, as a
result, they may not cover or provide adequate payment for our future products.
These payors may not view our future products as cost effective, and
reimbursement may not be available to consumers or may not be sufficient to
allow our future products to be marketed on a competitive basis. Likewise,
legislative or regulatory efforts to control or reduce healthcare costs or
reform government healthcare programs could result in lower prices or rejection
of our future products. Changes in coverage and reimbursement policies or
healthcare cost containment initiatives that limit or restrict reimbursement for
our future products may reduce any future product revenue.
Failure
to obtain regulatory approval in foreign jurisdictions will prevent us from
marketing voreloxin abroad.
We intend
to market voreloxin in international markets. In order to market voreloxin in
Canada, the European Union and many other foreign jurisdictions, we must obtain
separate regulatory approvals. We have had limited interactions with foreign
regulatory authorities, and the approval procedures vary among countries and can
involve additional testing at significant cost. The time required to obtain
approval may differ from that required to obtain FDA approval. Approval by the
FDA does not ensure approval by regulatory authorities in other countries, and
approval by one foreign regulatory authority does not ensure approval by
regulatory authorities in other foreign countries or by the FDA. The foreign
regulatory approval processes may include all of the risks associated with
obtaining FDA approval. We may not obtain foreign regulatory approvals on a
timely basis, if at all. We may not be able to file for regulatory approvals and
may not receive necessary approvals to commercialize voreloxin or any other
future products in any market.
Foreign
governments often impose strict price controls, which may adversely affect our
future profitability.
We intend
to seek approval to market voreloxin in both the United States and foreign
jurisdictions. If we obtain approval in one or more foreign jurisdictions, we
will be subject to rules and regulations in those jurisdictions relating to
voreloxin. In some foreign countries, particularly in the European Union,
prescription drug pricing is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can take
considerable time after the receipt of marketing approval for a drug candidate.
To obtain reimbursement or pricing approval in some countries, we may be
required to conduct a clinical trial that compares the cost-effectiveness of
voreloxin to other available therapies. If reimbursement of voreloxin is
unavailable or limited in scope or amount, or if pricing is set at
unsatisfactory levels, we may be unable to achieve or sustain
profitability.
We
may incur significant costs complying with environmental laws and regulations,
and failure to comply with these laws and regulations could expose us to
significant liabilities.
We use
hazardous chemicals and radioactive and biological materials in our business and
are subject to a variety of federal, state, regional and local laws and
regulations governing the use, generation, manufacture, storage, handling and
disposal of these materials. Although we believe our safety procedures for
handling and disposing of these materials and waste products comply with these
laws and regulations, we cannot eliminate the risk of accidental injury or
contamination from the use, storage, handling or disposal of hazardous
materials. In the event of contamination or injury, we could be held liable for
any resulting damages, and any liability could significantly exceed our
insurance coverage, which is limited to $0.1 million for pollution cleanup,
and we are uninsured for third-party contamination injury.
Risks
Related to Our Common Stock
*The
closing of the Private Placement will result in substantial dilution to our
stockholders. If we sell shares of our common stock in future financings or
other arrangements, stockholders may experience additional
dilution.
We need
to raise substantial additional funds, through the Private Placement and
otherwise, to continue our operations, fund additional clinical trials of
voreloxin and potentially commercialize voreloxin. We plan to continue
to finance our operations with a combination of equity issuances (including the
possible second closing of the sale of units and common equity closing in the
Private Placement and subject to the satisfaction of the conditions described
above), debt arrangements and a possible partnership or license of development
and/or commercialization rights to voreloxin. Any issuance of convertible
debt securities, preferred stock or common stock may be at a discount from the
then-current trading price of our common stock. If we issue additional common or
preferred stock or securities convertible into common stock, our stockholders
will experience additional dilution, which may be significant.
The
closing of the Private Placement will result in substantial dilution to our
stockholders. Following the initial closing, the holders of
our common stock prior thereto hold approximately 54.3% of our outstanding
common stock (assuming conversion of the convertible preferred at the
current conversion price), and will hold approximately 37.2% if the warrants
issued at the initial closing are exercised in full. Following the
second closing for $5.0 million of units, if completed, the holders of our
common stock prior to the Private Placement will hold approximately 44.2% of our
outstanding common stock (assuming conversion of the convertible preferred
at the current conversion price), and will hold approximately 28.4% if the
warrants issued at the initial and second closings are exercised in
full. Following the common equity closing, if completed, the holders
of our common stock prior to the Private Placement would hold approximately
19.0% of our outstanding common stock (assuming conversion of the convertible
preferred at the current conversion price), and would hold approximately 15.3%
if the warrants issued at the initial and second closings are exercised in
full.
We may not have the sufficient
funding to distribute capital to our common stockholders or continue our
business upon a change of control event.
If a
change of control (as that term is defined in the Certificate related to
the convertible preferred to be issued in the Private Placement),
which includes a sale or merger of Sunesis or a significant
partnering transaction, occurs, the holders of
the convertible preferred would be entitled to receive, before any
proceeds are distributed to common stockholders, three times the amount that the
investors in the Private Placement paid for the units ($10.0 million at
the initial closing and, if consummated, an additional $5.0 million at the
second closing), which could equal up to a total of $45.0 million. We
would not have any capital to distribute to our common stockholders if the
consideration received in a transaction that triggers a change of control event
under the certificate of designation is less than this liquidation preference
amount. Further, if the investors elect to treat a partnering
transaction as a change of control, entitling the holders of the
convertible preferred to the liquidation preference described above, the
holders of the convertible preferred would be entitled to the full amount
of any payments made by a corporate partner by surrendering the
convertible preferred, up to the liquidation preference amount, which may
leave us with insufficient resources to continue our business. This
right of the holders of the convertible preferred may also impair our
ability to enter into a significant partnering transaction since a partner would
be willing to enter into a partnering agreement with us only if we have or had
access to sufficient capital to satisfy our obligations under the partnering
agreement. Whether or not we would have sufficient resources would
depend on the terms of the partnering agreement and other cash resources
available to us at that time.
We
cannot take fundamental actions related to Sunesis without the consent of a
majority of the holders of the convertible preferred to be issued in the
Private Placement.
For as
long as the convertible preferred is outstanding, the holders of the
convertible preferred issued and to be issued in the Private Placement will
have a number of rights, including the right to approve any sale of the company,
any significant partnering transaction, any issuance of debt or
convertible preferred and, unless certain conditions are met, any issuance
of common stock other than the second closing and the common equity
closing contemplated by the Private Placement. It is possible
that the interests of the holders of the convertible preferred and the
holders of common stock may be inconsistent, resulting in the inability to
obtain the consent of the holders of convertible preferred to matters that
may be in the best interests of the common stockholders.
The
price of our common stock may continue to be volatile, and the value of an
investment in our common stock may decline.
In 2008,
our common stock traded as low as $0.18 and as high as $2.10. Factors that could
cause continued volatility in the market price of our common stock include, but
are not limited to:
|
|
·
|
failure to raise additional
capital to move forward with our clinical development plans and current
and future operations;
|
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·
|
results from, and any delays in
or discontinuance of, ongoing and planned clinical trials for
voreloxin;
|
|
|
·
|
announcements of FDA non-approval
of voreloxin, delays in filing regulatory documents with the FDA or other
regulatory agencies, or delays in the review process by the FDA or other
foreign regulatory agencies;
|
|
|
·
|
announcements relating to our
collaborations with Biogen Idec, J&JPRD and
Merck;
|
|
|
·
|
announcements relating to
restructuring and other operational
changes;
|
|
|
·
|
delays in the commercialization
of voreloxin or our future products, if
any;
|
|
|
·
|
market conditions in the
pharmaceutical, biopharmaceutical and biotechnology
sectors;
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|
·
|
issuance of new or changed
securities analysts’ reports or
recommendations;
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·
|
actual and anticipated
fluctuations in our quarterly operating
results;
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·
|
developments or disputes
concerning our intellectual property or other proprietary
rights;
|
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·
|
introduction of new products by
our competitors;
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·
|
issues in manufacturing voreloxin
drug substance or drug product ,or future products, if
any;
|
|
|
·
|
market acceptance of voreloxin or
our future products, if any;
|
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·
|
deviations in our operating
results from the estimates of
analysts;
|
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|
·
|
third-party healthcare
reimbursement policies;
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·
|
FDA or other U.S. or foreign
regulatory actions affecting us or our
industry;
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|
·
|
litigation or public concern
about the safety of voreloxin or future products, if
any;
|
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·
|
failure to develop or sustain an
active and liquid trading market for our common
stock;
|
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·
|
sales of our common stock by our
officers, directors or significant stockholders;
and
|
|
|
·
|
additions or departures of key
personnel.
|
In
addition, the stock markets in general, and the markets for pharmaceutical,
biopharmaceutical and biotechnology stocks in particular, have experienced
extreme volatility that has often been unrelated to the operating performance of
the issuer. These broad market fluctuations may adversely affect the trading
price or liquidity of our common stock. In the past, when the market price of a
stock has been volatile, holders of that stock have sometimes instituted
securities class action litigation against the issuer. If any of our
stockholders were to bring such a lawsuit against us, we could incur substantial
costs defending the lawsuit and the attention of our management would be
diverted from the operation of our business.
*We no longer
comply with certain of the listing requirements of The NASDAQ Global
Market. We may be delisted and the price of our common stock and our
ability to access the capital markets could be negatively impacted.
Our common stock is currently listed on
The NASDAQ Global Market. To maintain the listing of our common stock on The
NASDAQ Global Market we are required to meet certain listing requirements,
including a minimum closing bid price of $1.00 per share, a market value of
publicly held shares (excluding shares held by our executive officers, directors
and 10% or more stockholders) of at least $5 million and stockholders’
equity of at least $10.0 million. We announced on April 17, 2009 we had received
a letter, dated April 14, 2009, from the Listing Qualifications Department of
The NASDAQ Stock Market notifying us that we do not comply with the $10.0
million minimum stockholders’ equity requirement for continued listing on The
NASDAQ Global Market set forth in NASDAQ Marketplace Rule 5450(b)(1)(A).
NASDAQ’s determination was based on a review of our Annual Report on Form 10-K
for the period ended December 31, 2008. At that time, our stockholders’ equity
was reported at $6.5 million. Since that time, we announced an up to $43.5
million financing, of which the first $10.0 million was received on April 3,
2009 upon the issuance of shares of our Series A preferred stock and warrants to
purchase our common stock and the remainder of which may be issued by us,
subject to approval by our stockholders, upon the satisfaction of a certain
clinical milestone and our common stock trading above a specified floor price or
upon approval by a majority of the investors in the Private Placement, among
other conditions. While we do not anticipate that we will meet the $10.0 million
of stockholders’ equity continued listing requirement as of March 31, 2009 on a
GAAP or pro-forma basis after giving effect to the $10.0 million initial closing
of the Private Placement, the amount of the shortfall depends on the net
proceeds from the initial closing of the Private Placement, the amount of the
restructuring charge from our reduction in force on March 31, 2009 and the
application of GAAP to the terms of the newly issued securities, which we are in
the process of analyzing. As provided in the NASDAQ rules, we have
the opportunity to submit to NASDAQ a specific plan and timeline to achieve and
sustain compliance. We submitted in a timely manner to the NASDAQ Staff a
plan to continue listing on The NASDAQ Global Market. There is no assurance that
NASDAQ will accept our plan to satisfy the stockholders’ equity requirement. If,
after the completion of its review, NASDAQ determines that we have not presented
a plan that adequately addresses the stockholders’ equity issue, NASDAQ will
provide written notice that our securities will be subject to delisting from The
NASDAQ Global Market. In that event, we may either apply for listing on The
NASDAQ Capital Market, provided we meet the continued listing requirements of
that market, or appeal the decision to a NASDAQ Listing Qualifications Panel. In
the event of an appeal, we would remain listed on The NASDAQ Global Market
pending a decision by the Panel following the hearing.
Additionally,
our common stock has traded in the near term below the $1.00 minimum bid price
every trading day since September 17, 2008. Under normal circumstances,
companies traded on NASDAQ would receive a deficiency notice from NASDAQ if
their common stock has traded below the $1.00 minimum bid price for 30
consecutive business days. Due to market conditions, however, on
October 16, 2008, NASDAQ announced suspension of the enforcement of rules
requiring a minimum $1.00 closing bid price and the market value of publicly
held shares, with enforcement scheduled to resume on Monday,
July 20, 2009. If our common stock is still listed on The NASDAQ Global
Market on July 20, 2009 and our common stock continues to trade below the $1.00
minimum bid price for 30 consecutive business days following the end of NASDAQ’s
enforcement suspension or if the market value of our publicly held shares trades
below $5 million for 30 consecutive business days following the end of NASDAQ’s
enforcement suspension, we would likely receive a deficiency notice. Following
receipt of a deficiency notice, we expect we would have 180 calendar days to
regain compliance by having our common stock trade over the $1.00 minimum bid
price for at least a 10-day period and we would have 90 calendar days to regain
compliance by having our publicly held shares trade over $5 million in value for
at least a 10-day period. If we were to fail to regain compliance during the
grace period, our common stock could be delisted.
If we
fail to comply with The NASDAQ Global Market listing standards, we may consider
transferring to The NASDAQ Capital Market, provided we met the transfer
criteria, which is a lower tier market, or our common stock may be delisted and
traded on the over-the-counter bulletin board network. Moving our listing to the
NASDAQ Capital Market could adversely affect the liquidity of our common stock
as would our common stock being traded on the over-the-counter bulletin board
network. If our common stock were to be delisted by NASDAQ, we could
face significant material adverse consequences, including:
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|
·
|
a limited availability of market
quotations for our common
stock;
|
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|
·
|
a reduced amount of news and
analyst coverage for us;
|
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|
·
|
a decreased ability to issue
additional securities or obtain additional financing in the
future;
|
|
|
·
|
reduced liquidity for our
stockholders;
|
|
|
·
|
potential loss of confidence by
collaboration partners and employees;
and
|
|
|
·
|
loss of institutional investor
interest and fewer business development
opportunities.
|
Provisions
of our charter documents or Delaware law could delay or prevent an acquisition
of our company, even if the acquisition would be beneficial to our stockholders,
and could make it more difficult to change management.
Provisions
of our amended and restated certificate of incorporation and amended and
restated bylaws may discourage, delay or prevent a merger, acquisition or other
change in control that stockholders might otherwise consider
favorable, including transactions in which stockholders might otherwise receive
a premium for their shares. In addition, these provisions may frustrate or
prevent any attempt by our stockholders to replace or remove our current
management by making it more difficult to replace or remove our board of
directors. These provisions include:
|
|
·
|
a classified Board of Directors
so that not all directors are elected at one
time;
|
|
|
·
|
a prohibition on stockholder
action through written
consent;
|
|
|
·
|
limitations on our stockholders’
ability to call special meetings of
stockholders;
|
|
|
·
|
an advance notice requirement for
stockholder proposals and nominations;
and
|
|
|
·
|
the authority of our Board of
Directors to issue preferred stock with such terms as our Board of
Directors may determine.
|
In
addition, Delaware law prohibits a publicly held Delaware corporation from
engaging in a business combination with an interested stockholder, generally a
person who, together with its affiliates, owns or within the last three years
has owned 15% of our voting stock, for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. Accordingly, Delaware
law may discourage, delay or prevent a change in control of our
company.
Provisions
in our charter documents and provisions of Delaware law could limit the price
that investors are willing to pay in the future for shares of our common
stock.
The
ownership of our common stock is highly concentrated, and your interests may
conflict with the interests of our existing stockholders.
Our
executive officers and directors and their affiliates beneficially owned
approximately 7.5% of our outstanding common stock as of March 15, 2009.
Accordingly, these stockholders, acting as a group, could have significant
influence over the outcome of corporate actions requiring stockholder approval,
including the election of directors, any merger, consolidation or sale of all or
substantially all of our assets or any other significant corporate transaction.
The significant concentration of stock ownership may adversely affect the
trading price of our common stock due to investors’ perception that conflicts of
interest may exist or arise.
We
have never paid dividends on our capital stock and we do not anticipate paying
any cash dividends in the foreseeable future.
We have
never declared or paid cash dividends on our capital stock. We do not anticipate
paying any cash dividends on our capital stock in the foreseeable future. We
currently intend to retain all available funds and any future earnings to fund
the development and growth of our business. As a result, capital appreciation,
if any, of our common stock will be our stockholders’ sole source of gain for
the foreseeable future.
We
are at risk of securities class action litigation.
In the
past, securities class action litigation has often been brought against a
company following a decline in the market price of its securities. This risk is
especially relevant for us because biotechnology companies have experienced
greater than average stock price volatility in recent years. If we faced such
litigation, it could result in substantial costs and a diversion of management’s
attention and resources, which could harm our business.
PART III
ITEM
10:
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS
OF THE COMPANY
The
following table sets forth information as of April 10, 2009 with respect to our
directors:
|
|
|
|
|
|
|
James
W. Young, Ph.D.
|
|
64
|
|
2000
|
|
Daniel
N. Swisher, Jr.
|
|
46
|
|
2004
|
|
Matthew
K. Fust
|
|
44
|
|
2005
|
|
Homer
L. Pearce, Ph.D.
|
|
56
|
|
2006
|
|
David
C. Stump, M.D.
|
|
59
|
|
2006
|
|
Edward
Hurwitz
|
|
45
|
|
2009
|
|
Dayton
Misfeldt
|
|
35
|
|
2009
|
The
principal occupations and positions for at least the past five years of our
directors are as follows:
James W. Young, Ph.D.
served
as Executive Chairman of our Board of Directors from December 2003 to April 2009
and has served as non-executive Chairman of our Board of Directors since April
2009. From May 2000 to November 2003, Dr. Young served as our Chief
Executive Officer. In April 2006, he joined 5AM Ventures, a venture capital
firm, as a Venture Partner. From September 1995 to March 2000, Dr. Young
served as Vice President of Research, as Senior Vice President, Research and
Development, and as Group Vice President at ALZA Corporation, a pharmaceutical
company. From September 1992 to August 1995, Dr. Young served as Senior
Vice President for Business Development and as President of the Pharmaceuticals
Division of Affymax, N.V., a biopharmaceutical company. From September 1987
to August 1992, he served as Senior Vice President for Business Development and
as Senior Vice President and General Manager of the Pharmaceuticals Division at
Sepracor Inc., a pharmaceutical company. Dr. Young holds a B.S. in
Chemistry from Fordham University and a Ph.D. in Organic Chemistry from Cornell
University.
Daniel N. Swisher, Jr.
has
served as our Chief Executive Officer, or CEO, and a member of our Board of
Directors since January 2004 and also as our President since August 2005. From
December 2001 to December 2003, he served as our Chief Business Officer and
Chief Financial Officer. From June 1992 to September 2001, Mr. Swisher
served in various management roles, including Senior Vice President of Sales and
Marketing, for ALZA Corporation. In 2007, Mr. Swisher joined the Board of
Directors of the Okizu Foundation, an organization that provides support to
families affected by childhood cancers. Mr. Swisher holds a B.A. in History
from Yale University and an M.B.A. from the Stanford Graduate School of
Business.
Matthew K. Fust
has been
Executive Vice President and Chief Financial Officer at Onyx Pharmaceuticals,
Inc., a biopharmaceutical company, since January 2009. Prior to
joining Onyx, Mr. Fust was Executive Vice President and Chief Financial Officer
at Jazz Pharmaceuticals, Inc., a pharmaceutical company, which he joined in
May 2003. From May 2002 to May 2003, Mr. Fust was Chief Financial Officer
at Perlegen Sciences, Inc., a biotechnology company. From June 1996 to
January 2002, Mr. Fust was with ALZA Corporation, first as Controller and
then as Chief Financial Officer. Mr. Fust holds a B.A. in Accounting from
the University of Minnesota and an M.B.A. from the Stanford Graduate School of
Business.
Homer L. Pearce, Ph.D.
served
in various capacities at Eli Lilly & Company between 1979 and March
2006, including Vice President, Cancer Research and Clinical Investigation from
1994 to 2002 and Distinguished Research Fellow, Cancer Research, Lilly Research
Laboratories from 2002 to March 2006. Since August 2006, Dr. Pearce has
served as a consultant to Sunesis, reviewing, assessing and advising us on our
development plans and strategies. He is a member of the American Association for
Cancer Research, the American Chemical Society and the American Association for
the Advancement of Science. Dr. Pearce holds a B.S. from Texas A&M
University and a Ph.D. in Organic Chemistry from Harvard
University.
David C. Stump, M.D.
is
Executive Vice President, Research and Development, at Human Genome
Sciences, Inc., a biopharmaceutical company, and has served at that company
since November 1999. From December 2003 to May 2007, Dr. Stump served as
Executive Vice President of Drug Development at Human Genome Sciences and, from
November 1999 to December 2003, as its Senior Vice President, Drug Development.
Prior to joining Human Genome Sciences, Dr. Stump held roles of increasing
responsibility at Genentech, Inc., a biopharmaceutical company, from 1989
to 1999, including Vice President, Clinical Research and Genentech Fellow. Prior
to joining Genentech, Dr. Stump was an Associate Professor of Medicine and
Biochemistry at the University of Vermont. Since September 2006, Dr. Stump
has served as a consultant to Sunesis, reviewing, assessing and advising us on
our development plans and strategies. Dr. Stump holds an A.B. from Earlham
College and an M.D. from Indiana University, and did his residency and
fellowship training in internal medicine, hematology, oncology and biochemistry
at the University of Iowa.
Edward Hurwitz
has served as
a director of Alta Partners, a venture capital firm, since June
2002. From June 1997 to October 2002, Mr. Hurwitz served as Senior
Vice President and Chief Financial Officer of Affymetrix, Inc., a microarray
technology company. From April 1994 to June 1997, Mr. Hurwitz was a
biotechnology research analyst for Robertson Stephens & Company, and from
April 1992 to April 1994 was a biotechnology research analyst for Smith Barney
Shearson. From November 1990 to April 1992, Mr. Hurwitz practiced commercial law
at Cooley Godward LLP. Mr. Hurwitz holds a B.A. in Molecular Biology
from Cornell University, a J.D. from the University of California, Berkeley
Boalt Hall School of Law and an M.B.A. from the Haas School of Business. Mr.
Hurwitz was appointed as a director pursuant to the Investor Rights Agreement
executed in connection with Alta Partners’ purchase of our securities in the
Private Placement. See “
Item 13:
Certain Relationships and Related
Transactions and Director Independence
” for a description of this
agreement.
Dayton Misfeldt
is an
Investment Partner at Bay City Capital LLC, a venture capital firm, and focuses
on biopharmaceutical investment opportunities. Prior to joining Bay City
Capital in May 2000, Mr. Misfeldt was a Vice President at Roth Capital Partners
where he worked as a sell-side analyst covering the biopharmaceutical industry.
Mr. Misfeldt has also worked as a Project Manager at LifeScience Economics.
Mr. Misfeldt received a B.A. in Economics from the University of California, San
Diego. Mr. Misfeldt was appointed as a director pursuant to the Investor Rights
Agreement executed in connection with Bay City Capital’s purchase of our
securities in the Private Placement. See “
Item 13: Certain Relationships and
Related Transactions and Director Independence
” for a description of this
agreement.
There are
no family relationships among any of our executive officers and
directors.
EXECUTIVE
OFFICERS OF THE COMPANY
Set forth
below is information regarding each of our executive officers as of April 10,
2009. Biographical information with regard to Mr. Swisher is set forth
under “
Directors of the
Company
” above.
|
|
|
|
|
|
|
Daniel
N. Swisher, Jr.
|
|
46
|
|
CEO,
President and Director
|
|
Eric
H. Bjerkholt
|
|
49
|
|
Senior
Vice President, Corporate Development and Finance and Chief Financial
Officer
|
|
Steven
B. Ketchum, Ph.D.
|
|
46
|
|
Senior
Vice President, Research and
Development
|
The
principal occupations and positions for at least the past five years of our
executive officers, other than Mr. Swisher, are as follows:
Eric H. Bjerkholt
has served
as our Senior Vice President, Corporate Development and Finance and Chief
Financial Officer since February 2007. From January 2004 to January 2007, he
served as our Senior Vice President and Chief Financial Officer. From January
2002 to January 2004, Mr. Bjerkholt served as Senior Vice President and
Chief Financial Officer at IntraBiotics Pharmaceuticals, Inc., a
pharmaceutical company focused on the development of antibacterial and
antifungal drugs for the treatment of serious infectious diseases.
Mr. Bjerkholt was a co-founder of LifeSpring Nutrition, Inc., a
privately held nutraceutical company, and from May 1999 to March 2002 served at
various times as its Chief Executive Officer, President and Chief Financial
Officer. From 1990 to 1997, Mr. Bjerkholt was an investment banker at J.P.
Morgan & Co. Mr. Bjerkholt is a member of the Board of
Directors of StemCells, Inc., a biotechnology company. Mr. Bjerkholt
holds a Cand. Oecon degree in Economics from the University of Oslo and an
M.B.A. from Harvard Business School.
Steven B. Ketchum, Ph.D.
has
served as our Senior Vice President, Research and Development since June
2008. From May 2005 to May 2008, Dr. Ketchum served as Senior Vice
President, Research & Development and Medical Affairs of Reliant
Pharmaceuticals, Inc., a pharmaceutical company. From June 2002 to
April 2005, Dr. Ketchum served as Senior Vice President, Operations and
Regulatory Affairs for IntraBiotics Pharmaceuticals, Inc. Dr. Ketchum also held
positions at ALZA Corporation from November 1994 to May 2002, most recently as
Senior Director, Regulatory Affairs. Dr. Ketchum earned a Ph.D. in Pharmacology
from University College London (funded by the Sandoz Institute for Medical
Research) and a B.S. in Biological Sciences from Stanford
University.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Exchange Act requires our executive officers, directors and persons who
own more than 10% of our common stock to file reports of ownership and changes
in ownership with the SEC. Executive officers, directors and greater than ten
percent stockholders are required by SEC regulations to furnish us with copies
of all Section 16(a) forms they file.
To our
knowledge, based solely on a review of the copies of reports furnished to us, we
believe that during the year ended December 31, 2008, our executive
officers, directors and greater than 10% stockholders complied with all
Section 16(a) filing requirements.
CERTAIN
CORPORATE GOVERNANCE MATTERS
Code
of Business Conduct & Ethics
We have adopted a Code of Business
Conduct & Ethics which applies to all of our directors, officers and
employees. A copy of our Code of Business Conduct & Ethics can be found on
our website,
www.sunesis.com
, in the
section titled “
Investors and
Media
” under the subsection titled “
Corporate Governance
.”
Information found on our website is not incorporated by reference into this
report. In addition, we intend to promptly disclose (1) the nature of any
amendment to our Code of Business Conduct & Ethics that applies to our
principal executive officer, principal financial officer, principal accounting
officer or persons performing similar functions and (2) the nature of any
waiver, including an implicit waiver, from a provision of our Code of Business
Conduct & Ethics that is granted to one of these specified officers, the
name of such person who is granted the waiver and the date of the waiver on our
website in the future.
Material
Changes to Procedures for Recommending Directors
No material changes have been made to
the procedures by which security holders may recommend nominees to our Board of
Directors.
Identification
of Audit Committee and Financial Expert
Our Board
of Directors has a standing Audit Committee with a written charter approved by
our Board of Directors that reflects the applicable standards and requirements
adopted by the SEC and the NASDAQ Stock Market, LLC, or NASDAQ. A copy of each
charter can be found on our website,
www.sunesis.com
, in the
section titled “
Investors and
Media
” under the subsection titled “
Corporate Governance.
”
Information found on our website is not incorporated by reference into this
report.
The Audit
Committee is chaired by Mr. Fust, and also includes Mr. Hurwitz and Dr.
Stump. Anthony B. Evnin, Ph.D., and Steven Goldby served on the Audit
Committee until their respective resignations from the Board of Directors on
April 3, 2009. The Board of Directors reviews the NASDAQ definition of
“independence” for Audit Committee members on an annual basis and has determined
that all members of our Audit Committee are independent (as independence is
currently defined in Rule 5605(c)(2)(A)(i) and (ii) of the NASDAQ
listing requirements). The Board of Directors has also determined that
Mr. Fust qualifies as an “audit committee financial expert,” as defined in
applicable SEC rules. The Board of Directors made a qualitative assessment of
Mr. Fust’s level of knowledge and experience based on a number of factors,
including his formal education and experience as a chief financial officer for
public reporting companies.
ITEM
11:
EXECUTIVE
COMPENSATION
EXECUTIVE
COMPENSATION AND RELATED INFORMATION
Summary
Compensation Table
The following table sets forth the
compensation information for our Chief Executive Officer and our two most highly
compensated executive officers other than our Chief Executive Officer who were
serving as executive officers as of December 31, 2008, as well as two
former executive officers who would have qualified as our most highly
compensated executive officers during 2008, but were no longer serving as our
executive officers as of December 31, 2008. Such individuals are referred to as
our “named executive officers” for the year ended December 31, 2008. All
compensation awarded to, earned by, or paid to our named executive officers are
included in the table below for the years indicated.
Name
and Principal Position
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|
|
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|
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|
All
Other
Compensation
(4)
($)
|
|
|
|
|
Daniel
N. Swisher, Jr
.
Chief
Executive Officer and President
|
|
|
2008
2007
|
|
|
$
|
403,125
386,250
|
|
|
$
|
—
105,000
|
|
|
$
|
405,414
465,737
|
|
|
$
|
930
1,140
|
|
|
$
|
809,469
958,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
H. Bjerkholt
Senior
Vice President, Corporate Development and Finance and Chief Financial
Officer
|
|
|
2008
2007
|
|
|
|
321,458
283,125
|
|
|
|
—
60,000
|
|
|
|
221,412
257,486
|
|
|
|
930
883
|
|
|
|
543,800
601,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valerie
L. Pierce (5)
Former
Senior Vice President, General Counsel and Corporate
Secretary
|
|
|
2008
2007
|
|
|
|
318,958
185,682
|
|
|
|
—
45,000
|
|
|
|
109,113
61,477
|
|
|
|
630
408
|
|
|
|
428,701
292,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
C. Adelman, M.D. (6)
Former
Senior Vice President, Development and Chief Medical
Officer
|
|
|
2008
2007
|
|
|
|
135,000
298,125
|
|
|
|
—
50,000
|
|
|
|
163,922
226,043
|
|
|
|
234,421
1,306
|
|
|
|
533,343
575,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
S. McDowell, Ph.D. (7)
Former
Vice President, Research
|
|
|
2008
2007
|
|
|
|
156,040
253,750
|
|
|
|
33,313
50,000
|
|
|
|
104,895
131,778
|
|
|
|
134,233
583
|
|
|
|
395,168
436,111
|
|
|
(1)
|
Includes
amounts earned but deferred at the election of the named executive
officer, such as salary deferrals under our 401(k) Plan established under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the
“Code”).
|
|
(2)
|
Cash
bonus earned in 2007 and paid in February 2008 under our bonus
program. No cash bonuses were earned in 2008. See “
Narrative to Summary
Compensation Table
–
Cash Bonuses in 2008
”
below.
|
|
(3)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2008 and 2007 fiscal years for the
fair value of stock options granted to each of the named executive
officers in such years in accordance with FASB Statement No. 123
(revised), “
Share-Based
Payment
,” or FAS 123R. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to service-based
vesting conditions. For additional information on the valuation
assumptions, refer to Note 13, “
Stock-Based
Compensation
” in our Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the SEC on April 3, 2009, which identifies
assumptions made in the valuation of option awards in accordance with FAS
123R. These amounts reflect our accounting expense for these awards and do
not correspond to the actual value that will be recognized by the named
executive officers.
|
|
(4)
|
Represents
group term life insurance premiums, reimbursements of up to $420 for
health club memberships, and up to $300 for airline club fees, each as
applicable.
|
|
(5)
|
Ms.
Pierce’s employment with us began in April 2007 and terminated as of April
10, 2009.
|
|
(6)
|
Dr.
Adelman’s employment with us terminated as of June 6,
2008. “All Other Compensation” for 2008 includes a severance
payment of $234,000.
|
|
(7)
|
Dr.
McDowell’s employment with us terminated as of August 4,
2008. “All Other Compensation” for 2008 includes a severance
payment of $133,250.
|
Narrative
to Summary Compensation Table
Stock
Option Grants in 2008
See
“
Outstanding Equity Awards
Table at December 31, 2008
”
below for the terms of
the stock options granted to certain of our named executive officers in
2008.
Executive
Severance Benefits Agreements
We
entered into executive severance benefits agreements with each of our named
executive officers to provide certain benefits upon a termination of
employment. The agreements with Messrs. Swisher and Bjerkholt and Dr.
Ketchum were amended in April 2009 in connection with our adoption of a Change
of Control Payment Plan. See “
Post-Termination Compensation –
Change of Control Severance Protections
” for a more detailed discussion
of the benefits under such plan and pursuant to the executive severance benefits
agreements, as amended, in connection with a change of control
transaction.
The
Compensation Committee believes such agreements help us attract and retain
employees in a marketplace where such protections are commonly offered by our
peer companies. We also believe that severance protections offered upon
terminations arising in connection with a change of control allow our executives
to assess a potential change of control objectively, without regard to the
potential impact of the transaction on their own job security. At the time we
originally entered into the executive severance benefits agreements with each of
the named executive officers, the Compensation Committee determined that the
terms of such executive severance benefits agreements reflected industry
standard severance payments, benefits and equity acceleration.
Mr. Swisher.
Under
the executive severance benefits agreement with Mr. Swisher, if Mr. Swisher
is terminated without cause or he is constructively terminated, he is entitled
to receive a payment equal to 12 months salary and continued health benefits for
a maximum period of the first 12 months following termination (which may be
terminated earlier upon his coverage by a new employer), subject to the
execution of a general release in favor of Sunesis. If such
termination occurs within 12 months following a change of control transaction of
Sunesis, he is entitled to receive, subject to the execution of a general
release in favor of Sunesis: (i) a lump sum payment equal to 18 months of
his base salary at the time of termination, (ii) a lump sum payment equal
to 150% of his target bonus for the year during which the termination occurs,
and (iii) continued health benefits for a maximum period of the first 18
months following termination (which may be terminated earlier upon his coverage
by a new employer). In connection with our adoption of the Change of
Control Payment Plan, Mr. Swisher’s executive severance benefits agreement was
amended in April 2009 to
eliminate the severance
benefits described in the immediately preceding sentence, which would have been
payable in the event of Mr. Swisher’s termination following a change of control
transaction of Sunesis. In addition, this agreement, as amended, also
provides that in the event that Mr. Swisher is terminated by an acquirer within
six months after a change of control transaction, the above-described severance
benefits payable in the event Mr. Swisher is terminated without cause or
constructively terminated would be reduced on a dollar-for-dollar basis by the
amount paid or payable to Mr. Swisher pursuant to the Change of Control Payment
Plan.
Under Mr. Swisher’s executive severance benefits
agreement he will also be eligible for certain option acceleration benefits, as
described in more detail under “
Post-Termination
Compensation –
Change
of Control Severance Protections
” below.
Mr. Bjerkholt and Dr.
Ketchum.
Under the respective executive severance
benefits agreements with Mr. Bjerkholt and Dr. Ketchum, if such executive
is terminated without cause or is constructively terminated, each is entitled to
receive a payment equal to nine months salary and continued health benefits for
a maximum period of the first nine months following termination (which may be
terminated earlier upon his coverage by a new employer), subject to the
execution of a general release in favor of Sunesis. If such
termination occurs within 12 months following a change of control transaction of
Sunesis, such executive is entitled to receive, subject to the execution of a
general release in favor of Sunesis: (i) a lump sum payment equal to 14
months of his base salary at the time of termination, (ii) a lump sum
payment equal to 117% of his target bonus for the year during which the
termination occurs, and (iii) continued health benefits for a maximum
period of the first 14 months following termination (which may be terminated
earlier upon his coverage by a new employer).
In connection with our
adoption of the Change of Control Payment Plan, these executive severance
benefits agreements were amended in April 2009 to
eliminate the severance
benefits described in the immediately preceding sentence, which would have been
payable in the event of Mr. Bjerkholt’s or Dr. Ketchum’s, as the case may be,
termination following a change of control transaction of Sunesis. In
addition, these agreements, as amended, also provide that in the event that Mr.
Bjerkholt or Dr. Ketchum, as the case may be, is terminated by an acquirer
within six months after a change of control transaction, the above-described
severance benefits payable in the event the executive is terminated without
cause or constructively terminated would be reduced on a dollar-for-dollar basis
by the amount paid or payable to the executive pursuant to the Change of Control
Payment Plan.
Under Mr.
Bjerkholt’s and Dr. Ketchum’s respective executive severance benefits agreements
they will also be eligible for certain option acceleration benefits, as
described in more detail under
“
Post-Termination Compensation –
Change
of Control Severance Protections
”
below.
Drs. Adelman and McDowell and Ms.
Pierce
. The employment of Dr. Adelman terminated on June
6, 2008, the employment of Dr. McDowell terminated August 4, 2008 and the
employment of Ms. Pierce terminated on April 10, 2009. Each of these
former executive officers received or are entitled to receive the following
severance benefits pursuant to their executive severance benefits agreements
with Sunesis in connection with the termination of their
employment:
|
|
|
|
|
|
|
|
|
Valerie
L. Pierce
|
|
$
|
255,000
|
(1)
|
|
$
|
19,723
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
C. Adelman, M.D.
|
|
|
234,000
|
(1)
|
|
|
18,963
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Robert
S. McDowell, Ph.D.
|
|
|
133,250
|
(2)
|
|
|
2,377
|
(4)
|
|
(1)
|
Represents
nine months of base salary at time of
termination.
|
|
(2)
|
Represents
six months of base salary at time of
termination.
|
|
(3)
|
Represents
nine months of health care benefits (which may be terminated earlier upon
coverage of the executive by a new
employer).
|
|
(4)
|
Represents
six months of health care benefits (which may be terminated earlier upon
coverage of the executive by a new
employer).
|
Cash
Bonuses in 2008
Given the recommendation by our CEO not
to pay our executive officers cash bonuses for performance in the year 2008,
which recommendation was approved by our Compensation Committee and, in the case
of our CEO, by a committee of those directors qualifying as “outside directors”
within the meaning of Section 162(m) of the Code and as “non-employee directors”
within the meaning of Rule 16b-3 of the Exchange Act, no cash bonuses were
awarded to our executive officers for performance in 2008.
Outstanding
Equity Awards Table at December 31, 2008
The
following information sets forth the outstanding stock options held by our named
executive officers as of December 31, 2008. As of December 31, 2008,
none of our named executive officers held unearned equity incentive awards or
stock awards.
|
|
|
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
|
|
|
Number of
Securities
Underlying
Unexercised
|
|
|
|
|
|
|
Daniel N. Swisher,
Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,647
|
|
|
|
—
|
|
|
$
|
2.55
|
|
02/06/12
|
|
|
|
|
11,765
|
|
|
|
—
|
|
|
|
2.55
|
|
02/06/12
|
|
|
|
|
47,059
|
|
|
|
—
|
|
|
|
2.55
|
|
04/16/13
|
|
|
|
|
70,589
|
|
|
|
—
|
|
|
|
2.55
|
|
01/21/14
|
|
|
|
|
21,176
|
|
|
|
—
|
|
|
|
2.55
|
|
06/24/14
|
|
|
|
|
181,145
|
(1)
|
|
|
53,855
|
(1)
|
|
|
5.25
|
|
11/29/15
|
|
|
|
|
65,000
|
(2)
|
|
|
55,000
|
(2)
|
|
|
4.85
|
|
10/13/16
|
|
|
|
|
48,437
|
(3)
|
|
|
106,563
|
(3)
|
|
|
2.59
|
|
09/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
H. Bjerkholt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,824
|
|
|
|
—
|
|
|
|
2.55
|
|
01/21/14
|
|
|
|
|
17,647
|
|
|
|
—
|
|
|
|
2.55
|
|
06/09/14
|
|
|
|
|
92,500
|
(1)
|
|
|
27,500
|
(1)
|
|
|
5.25
|
|
11/29/15
|
|
|
|
|
32,500
|
(2)
|
|
|
27,500
|
|
|
|
4.85
|
|
10/13/16
|
|
|
|
|
28,125
|
(3)
|
|
|
61,875
|
(3)
|
|
|
2.59
|
|
09/13/17
|
|
|
|
|
8,437
|
(4)
|
|
|
59,063
|
(4)
|
|
|
1.44
|
|
06/30/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valerie
L. Pierce
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(5)
|
|
|
70,000
|
(5)
|
|
|
4.60
|
|
04/30/17
|
|
|
|
|
14,062
|
(3)
|
|
|
30,938
|
(3)
|
|
|
2.59
|
|
09/13/17
|
|
|
|
|
8,437
|
(4)
|
|
|
59,063
|
(4)
|
|
|
1.44
|
|
06/30/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
C. Adelman, M.D.
(6)
|
|
|
47,059
|
|
|
|
—
|
|
|
|
2.55
|
|
6/30/09
|
|
|
|
|
11,765
|
|
|
|
—
|
|
|
|
2.55
|
|
6/30/09
|
|
|
|
|
18,824
|
|
|
|
—
|
|
|
|
2.55
|
|
6/30/09
|
|
|
|
|
104,999
|
(1)
|
|
|
—
|
|
|
|
5.25
|
|
6/30/09
|
|
|
|
|
38,750
|
(2)
|
|
|
—
|
|
|
|
4.85
|
|
6/30/09
|
|
|
|
|
37,499
|
(3)
|
|
|
—
|
|
|
|
2.59
|
|
6/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
S. McDowell, Ph.D.
(7)
|
|
|
12,941
|
|
|
|
—
|
|
|
|
2.55
|
|
6/30/09
|
|
|
|
|
18,824
|
|
|
|
—
|
|
|
|
2.55
|
|
6/30/09
|
|
|
|
|
4,706
|
|
|
|
—
|
|
|
|
2.55
|
|
6/30/09
|
|
|
|
|
14,118
|
|
|
|
—
|
|
|
|
2.55
|
|
6/30/09
|
|
|
|
|
50,416
|
(1)
|
|
|
—
|
|
|
|
5.25
|
|
6/30/09
|
|
|
|
|
34,374
|
(2)
|
|
|
—
|
|
|
|
4.85
|
|
6/30/09
|
|
|
|
|
27,499
|
(3)
|
|
|
—
|
|
|
|
2.59
|
|
6/30/09
|
|
(1)
|
This
stock option was granted on November 29, 2005 pursuant to our 2005
Equity Incentive Award Plan and vests monthly during the 48-month period
measured from the grant date, subject to the holder’s continued service
with Sunesis.
|
|
(2)
|
This
stock option was granted on October 13, 2006 pursuant to our 2005
Equity Incentive Award Plan and vests monthly during the 48-month period
measured from the grant date, subject to the holder’s continued service
with Sunesis.
|
|
(3)
|
This
stock option was granted on September 13, 2007 pursuant to our 2005
Equity Incentive Award Plan and vests monthly during the 48-month period
measured from the grant date, subject to the holder’s continued service
with Sunesis.
|
|
(4)
|
This
stock option was granted on June 30, 2008 pursuant to our 2005 Equity
Incentive Award Plan and vests monthly during the 48-month period measured
from the grant date, subject to the holder’s continued service with
Sunesis.
|
|
(5)
|
This
stock option was granted on April 30, 2007 pursuant to our 2005 Equity
Incentive Award Plan and 25% of the shares subject to the option vest one
year from the date of the grant and the remaining shares vest monthly
during the subsequent 36-month period thereafter, subject to the holder’s
continued service with Sunesis.
|
|
(6)
|
Dr.
Adelman’s employment with us terminated as of June 6, 2008. Pursuant to
the Acceptance of Option Amendment by and between us and Dr. Adelman,
dated June 6, 2008, the post-termination exercise period of Dr. Adelman’s
outstanding options that had vested as of June 6, 2008, together with
options that vested in connection with his severance, were extended until
the earlier of (i) the original end of the term of each such option or
(ii) June 30, 2009.
|
|
(7)
|
Dr.
McDowell’s employment with us terminated as of August 4,
2008. Pursuant to the Acceptance of Option Amendment by and
between us and Dr. McDowell, dated June 27, 2008, the post-termination
exercise period of Dr. McDowell’s outstanding options that had vested as
of August 4, 2008, together with options that vested in connection with
his severance, were extended until the earlier of (i) the original end of
the term of each such option or (ii) June 30,
2009.
|
Post-Termination
Compensation
Retirement
Savings
We encourage our executives and
employees generally to plan for retirement compensation through voluntary
participation in our 401(k) Plan. All of our employees, including our
executives, may participate in our 401(k) Plan by making pre-tax contributions
from wages of up to 60% of their annual cash compensation, up to the current
Internal Revenue Service limits. During 2008, we did not make matching
contributions to the 401(k) Plan. All of our executives can participate in the
401(k) Plan on the same terms as our employees. We believe this program is
comparable with programs offered by our peer companies and assists us in
attracting and retaining our executives.
Medical
Benefits
On April 3, 2009, Dr. Young retired as
our Executive Chairman. In connection with his resignation, we agreed to cover
Dr. Young’s medical benefits for a period of 12 months; however, Dr. Young is
not otherwise entitled to any severance in connection with his resignation
pursuant to the terms of his Second Amended and Restated Executive Severance
Benefits Agreement with us, dated December 23, 2008.
Change
of Control Severance Protections
Change of Control Payment
Plan
On April
3, 2009, we adopted a Change of Control Payment Plan, or the Plan, pursuant to
which 10.5 to 12.0% of the transaction value, or the Plan Pool, of a change of
control transaction of Sunesis would be allocated to our eligible employees,
including our named executive officers remaining employed by Sunesis, pursuant
to the terms of such Plan. The aggregate proceeds available for
distribution to eligible employees under the Plan is as follows:
|
|
|
|
|
|
|
≤
|
$30
million
|
|
|
10.5
|
%
|
|
>
|
30
million but less than 45 million
|
|
|
11.0
|
|
|
≥
|
45
million but less than 60 million
|
|
|
11.5
|
|
|
≥
|
60
million
|
|
|
12.0
|
|
In order for an employee to be eligible
to participate in the Change of Control Payment Plan, the individual must be a
full-time regular U.S. employee and designated in writing by our Board of
Directors, subject to certain limitations. Each participant shall be
allocated a percentage of the Plan Pool. The percentage allocations
of the Plan Pool for our executive officers are as follows:
Title of Executive Officer
|
|
|
|
|
Chairman
of the Board of Directors
|
|
|
3.0
|
%
|
|
Chief
Executive Officer
|
|
|
20.0
|
|
|
Senior
Vice Presidents
|
|
12.5
each, 25.0 in the aggregate
|
|
Our Vice Presidents and other employees
are also eligible to participate in the Plan. If the number of
employees at a level of Vice President or higher participating in the Plan
changes after April 3, 2009, the Plan Pool allocations shown above shall be
reallocated by the Compensation Committee of our Board of Directors, or the
Compensation Committee, on a pro rata basis without increasing or decreasing the
aggregate Plan Pool. If there are significant decreases in the number of
eligible employees below the level of Vice President, the Compensation
Committee, in its sole discretion but considering the recommendation of our CEO,
may reallocate a portion of the Plan Pool to other allocation categories
(including those at or above the level of Vice President) without increasing or
decreasing the aggregate Plan Pool.
If a change of control occurs, a
participant in the Plan shall receive, in exchange for a general release of
claims against us, a payment under the Plan in the same consideration received
by us or our stockholders in the transaction if the participant is still an
eligible employee on the date that payments pursuant to the Plan are scheduled
to be made, and any cash severance payments owed by us in the future to the
participant on account of a termination by us without cause or a constructive
termination by us within six months following the change of control transaction
under any severance agreement shall be reduced on a dollar-for-dollar basis by
any payments pursuant to the Plan. If the participant has been
terminated by us without cause or constructively terminated by us at the time
payments under the Plan are scheduled to be made, we shall still provide the
participant with such participant’s allocated portion of the Plan Pool, but any
cash severance payments otherwise payable to the participant by us shall be
reduced on a dollar-for-dollar basis by such allocated portion of the Plan Pool,
which shall be paid in cash to the extent of the cash severance payments that
have been so reduced. The application of the Plan to amounts that are
paid from escrow or pursuant to earn-out or other contingencies shall be
determined at a future date in the sole discretion of our Board of Directors,
recognizing that it is the present intention of our Board of Directors to apply
the Plan to such amounts in the same manner as it applies to amounts payable
immediately upon the effective date of the change of control, subject, however,
to the requirements for either compliance with or exemption from Section 409A of
the Code.
In
general, a “change of control” under the Plan includes an acquisition
transaction in which a person or entity (with certain exceptions) becomes the
direct or indirect beneficial owner of more than 50% of our voting stock, as
well as the consummation of certain types of corporate transactions, such as a
merger, consolidation, reorganization, business combination or sale of all or
substantially all of our assets, pursuant to which our stockholders own,
directly or indirectly, less than 50% of Sunesis or our successor, or if our
stockholders approve a liquidation or dissolution of Sunesis. However, a cash
financing transaction will not constitute a change of control transaction
pursuant to the terms of the Plan.
The Plan shall remain in effect until
the earlier of the conclusion of a change of control transaction and payout
under the Plan or six months after the earlier of (a) the common equity closing
of the Private Placement or (b) the conversion of our outstanding shares of
Series A preferred stock; provided, however, that our obligation to make
payments pursuant to a change of control transaction that occurs on or prior to
such termination shall be unaffected by such termination. For more
information on these events, see Note 17 “
Subsequent Events
” to the
Notes to Consolidated Financial Statements in our Annual Report on
Form 10-K for the year ended December 31, 2008, filed with the SEC on
April 3, 2009. We reserve the right to amend or terminate the Plan at any time,
subject to the consent of any adversely affected participant.
Executive Severance Benefits
Agreements
In
general, a “change of control” under these executive severance benefits
agreements, as amended, includes an acquisition transaction in which a person or
entity (with certain exceptions described in the agreements) becomes the direct
or indirect beneficial owner of more than 50% of our voting stock, as well as
the consummation of certain types of corporate transactions, such as a merger,
consolidation, reorganization, business combination or sale of all or
substantially all of our assets, pursuant to which our stockholders own,
directly or indirectly, less than 50% of Sunesis or our successor, or if our
stockholders approve a liquidation or dissolution of
Sunesis. However, a cash financing transaction will not constitute a
change of control transaction pursuant to the terms of the executive severance
benefits agreements.
Each of
the executive severance benefits agreements provides that, in the event that any
benefits provided in connection with a change of control (or a related
termination of employment) would be subject to the 20% excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, or the Code, the
executive officer will receive the greater, on an after-tax basis (taking
account of all federal, state and local taxes and excise taxes), of such
benefits or such lesser amount of benefits as would result in no portion of the
benefits being subject to the excise tax. An executive officer’s receipt of any
severance benefits is subject to his execution of a release in favor of Sunesis.
Any benefits under the executive severance benefits agreement would terminate
immediately if the executive officer, at any time, violates any proprietary
information or confidentiality obligation to us. See “
Narrative to Summary Compensation
Table – Executive Severance Benefits Agreements
” above for a description
of the other terms of the executive severance benefits agreements.
Stock Option Acceleration
Under the
executive severance benefits agreements, as amended, with Messrs. Swisher
and Bjerkholt and Dr. Ketchum, in connection with a change of control of
Sunesis, the vesting of 50% of each such executive officer’s outstanding option
awards is automatically accelerated immediately prior to the effective date of
such change of control. In the event of a termination without cause or a
constructive termination of any of these executives officers (i) within 12
months following a change of control, 100% of such executive officer’s
outstanding awards would automatically accelerate on the date of termination, or
(ii) if prior to or more than 12 months following a change of control, the
outstanding awards that would have vested over the 12 month period following the
date of termination would automatically accelerate for such executive
officer.
Change of Control Equity Incentive Plan
Protections
Our 1998
Stock Plan and our 2001 Stock Plan both provide that in the event of a proposed
sale of all or substantially all of our assets or a merger of Sunesis with or
into another corporation in which we are not the surviving corporation, each
outstanding award shall be assumed or an equivalent award substituted by such
successor corporation, unless the successor corporation does not agree to assume
the award, in which case, the award shall terminate upon the consummation of the
merger or sale of assets.
Our 2005
Equity Incentive Award Plan and 2006 Employment Commencement Incentive Plan
provide that upon any change of control of Sunesis, our Board of Directors (or
any committee delegated authority by our Board) may, in its discretion, make
adjustments it deems appropriate to reflect such change with respect to
(i) the aggregate number and type of awards that may be issued under the
applicable plan, (ii) the terms and conditions of any outstanding awards,
and (iii) and the grant or exercise price of any outstanding awards. If
outstanding awards are not assumed by the surviving or successor entity and such
successor entity does not substitute substantially similar awards for those
awards outstanding under the 2005 Equity Incentive Award Plan and the 2006
Employment Commencement Incentive Plan, such outstanding awards shall become
fully exercisable and/or payable as applicable and all forfeiture restrictions
on such outstanding awards shall lapse.
In
addition, our 2005 Equity Incentive Award Plan and 2006 Employment Commencement
Incentive Plan include change in control provisions, which may result in the
accelerated vesting of outstanding awards. In the event of a change in control
of our company, for example, if we are acquired by merger or asset sale, each
outstanding award under the 2005 Equity Incentive Award Plan and 2006 Employment
Commencement Incentive Plan will accelerate and immediately vest with respect to
50% of the award, and if the remainder of the award is not to be assumed by the
successor corporation, the full amount of the award will automatically
accelerate and become immediately vested. Additionally, in the event the
remainder of the award is assumed by the successor corporation, any remaining
unvested shares would accelerate and immediately vest in the event the optionee
is terminated without cause or resigns for good reason within 12 months
following such change in control. Pursuant to amendments to the 2005 Equity
Incentive Award Plan and 2006 Employment Commencement Incentive Plan approved by
our Board in March 2009, a cash financing will not constitute a change of
control.
In order to
make the treatment of outstanding options granted under the 1998 Stock Plan and
2001 Stock Plan for then-current employees identical to the treatment of options
granted under the 2005 Equity Incentive Award Plan and 2006 Employment
Commencement Incentive Plan, all options outstanding under the 1998 and 2001
plans were amended to reflect identical change in control
provisions.
We
believe that the terms of our equity incentive plans described above are
consistent with industry practice.
Potential
Payments Upon Termination or Change of Control
The following table illustrates
potential payments to our named executive officers under our executive severance
benefits agreements in connection with a change of control event or with respect
to a termination without good cause or resignation for good reason subsequent to
a change of control event, as if such change of control event or covered
termination occurred as of December 31, 2008:
|
|
|
|
|
Potential Payments in Connection With:
|
|
|
|
|
|
|
A Change of
Control
($)
|
|
|
Termination
Within 12
Months
Following a
Change of
Control
($)
|
|
|
Covered
Termination
Prior to or
More
than 12
Months
Following a
Change of
Control
($)
|
|
|
Daniel
N. Swisher, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Award Acceleration
|
|
$
|
—
|
(1)
|
|
$
|
—
|
(2)
|
|
$
|
—
|
(9)
|
|
|
|
Salary
|
|
|
—
|
|
|
|
604,688
|
(3)
|
|
|
403,125
|
(10)
|
|
|
|
Bonus
|
|
|
—
|
|
|
|
241,875
|
(4)
|
|
|
—
|
|
|
|
|
Health
Benefits
|
|
|
—
|
|
|
|
39,447
|
(5)
|
|
|
26,298
|
(11)
|
|
|
|
Total:
|
|
|
—
|
|
|
|
886,010
|
|
|
|
429,423
|
|
|
Eric
H. Bjerkholt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Award Acceleration
|
|
|
—
|
(1)
|
|
|
—
|
(2)
|
|
|
—
|
(9)
|
|
|
|
Salary
|
|
|
—
|
|
|
|
375,034
|
(6)
|
|
|
241,094
|
(12)
|
|
|
|
Bonus
|
|
|
—
|
|
|
|
112,510
|
(7)
|
|
|
—
|
|
|
|
|
Health
Benefits
|
|
|
—
|
|
|
|
17,056
|
(8)
|
|
|
10,965
|
(13)
|
|
|
|
Total:
|
|
|
—
|
|
|
|
504,600
|
|
|
|
252,059
|
|
|
Valerie
L. Pierce
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Award Acceleration
|
|
|
—
|
(1)
|
|
|
—
|
(2)
|
|
|
—
|
(9)
|
|
|
|
Salary
|
|
|
—
|
|
|
|
372,118
|
(6)
|
|
|
239,219
|
(12)
|
|
|
|
Bonus
|
|
|
—
|
|
|
|
111,635
|
(7)
|
|
|
—
|
|
|
|
|
Health
Benefits
|
|
|
—
|
|
|
|
30,681
|
(8)
|
|
|
19,723
|
(13)
|
|
|
|
Total:
|
|
|
—
|
|
|
|
514,434
|
|
|
|
258,942
|
|
|
Daniel
C. Adelman, M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Award Acceleration
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
(14)
|
|
|
|
Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
234,000
|
(12)
|
|
|
|
Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Health
Benefits
|
|
|
—
|
|
|
|
—
|
|
|
|
18,582
|
(13)
|
|
|
|
Total:
|
|
|
—
|
|
|
|
—
|
|
|
|
252,582
|
|
|
Robert
S. McDowell, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Award Acceleration
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
(15)
|
|
|
|
Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
133,250
|
(16)
|
|
|
|
Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
33,313
|
(17)
|
|
|
|
Health
Benefits
|
|
|
—
|
|
|
|
—
|
|
|
|
2,299
|
(18)
|
|
|
|
Total:
|
|
|
—
|
|
|
|
—
|
|
|
|
168,862
|
|
|
|
(1)
|
Represents
the amount of the benefit each of our named executive officers would have
received pursuant to the terms of our executive severance benefits
agreements with them from the acceleration of 50% of such executive’s
aggregate outstanding unvested stock options, assuming a change of control
event occurred on December 31, 2008. As of December 31, 2008,
none of our named executive officers held in-the-money stock options as
determined by the closing price of our common stock on December 31,
2008 as reported by NASDAQ, which was $0.32, and, as a result, none of our
named executive officers would have received any benefit from such
provisions under our executive severance benefits agreements with them if
a change of control had occurred as of December 31,
2008.
|
|
|
(2)
|
Represents
the amount of the benefit each of our named executive officers would have
received pursuant to the terms of our executive severance benefits
agreements with them from the acceleration of 100% of such executive’s
aggregate outstanding unvested stock options, assuming such executive’s
employment with us terminated on December 31, 2008 within 12 months
of a change of control event. As of December 31, 2008, none of our
named executive officers held in-the-money stock options as determined by
the closing price of our common stock on December 31, 2008 as
reported by NASDAQ, which was $0.32, and, as a result, none of our named
executive officers would have received any benefit from such provisions
under our executive severance benefits agreements with them if their
employment terminated as of December 31, 2008 within 12 months of a
change of control event.
|
|
(3)
|
Represents
18 months of base salary at time of
termination.
|
|
(4)
|
Represents
a lump sum equal to 150% of such named executive officer’s applicable
target bonus for 2008.
|
|
(5)
|
Represents
18 months of healthcare
benefits.
|
|
(6)
|
Represents
14 months of base salary at time of
termination.
|
|
(7)
|
Represents
a lump sum equal to 117% of such named executive officer’s applicable
target bonus for 2008.
|
|
(8)
|
Represents
14 months of healthcare
benefits.
|
|
(9)
|
Represents
the amount of the benefit each of our named executive officers would have
received pursuant to the terms of our executive severance benefits
agreements from the acceleration with respect to an additional
12 months of vesting of such executive’s aggregate outstanding
unvested stock options, assuming such executive’s employment with us
terminated on December 31, 2008. As of December 31, 2008, none
of our named executive officers held in-the-money stock options as
determined by the closing price of our common stock on December 31,
2008, as reported by NASDAQ, which was $0.32, and, as a result, none of
our named executive officers would have received any benefit from such
provisions under our executive severance benefits agreements with them if
their employment terminated as of December 31,
2008.
|
|
(10)
|
Represents
12 months of base salary at time of
termination.
|
|
(11)
|
Represents
12 months of healthcare
benefits.
|
|
(12)
|
Represents
nine months of base salary at time of
termination.
|
|
(13)
|
Represents
nine months of healthcare benefits.
|
|
(14)
|
Dr.
Adelman’s employment with us was terminated as of June 6,
2008. This amount represents the benefit Dr. Adelman received
pursuant to the terms of his executive severance benefits agreement from
the acceleration with respect to an additional 12 months of vesting
of his aggregate outstanding unvested stock options. As of June
6, 2008, none of Dr. Adelman’s stock options were in the money as
determined by the closing price of our common stock on June 6, 2008 as
reported by NASDAQ, which was $1.80, and, as a result, he did not receive
any benefit from such provision under his executive severance benefits
agreement.
|
|
(15)
|
Dr.
McDowell’s employment with us was terminated as of August 4,
2008. This amount represents the benefit Dr. McDowell received
pursuant to the terms of his executive severance benefits agreement from
the acceleration with respect to an additional 12 months of vesting
of his aggregate outstanding unvested stock options. As of
August 4, 2008, none of Dr. McDowell’s stock options were in the money as
determined by the closing price of our common stock on August 4, 2008 as
reported by NASDAQ, which was $1.55, and, as a result, he did not receive
any benefit from such provision under his executive severance benefits
agreement.
|
|
(16)
|
Represents
six months of base salary at time of
termination.
|
|
(17)
|
Represents
a lump sum equal to 12.5% of Dr. McDowell’s base salary at time of
termination.
|
|
(18)
|
Represents
six months of healthcare benefits.
|
See “
Narrative
to Summary Compensation Table
”
and
“
Post-Termination
Compensation –
Change
of Control Severance Protections
” above
for a discussion of the
Change of Control Payment Plan we adopted in April 2009 and the related
amendments to our executive’s executive severance benefits
agreements.
DIRECTOR
COMPENSATION
Board and Committee Fees and
Awards
On the date of our annual meeting of
stockholders each year, each non-employee director of our Board of Directors,
except the Chairman of our Board of Directors, is entitled to receive $20,000 in
connection with his services as a director. A non-employee Chairman of our Board
of Directors is entitled to receive $50,000 in connection with his services as a
director and chair of our Board of Directors. Additionally, each non-employee
director who serves on a committee is entitled to receive an annual payment of
$5,000 for service as chairman of a committee and $3,000 for service as a member
on a committee. At the same time, each continuing non-employee director receives
a non-qualified stock option grant to purchase 10,000 shares of our common
stock. These options vest in equal installments over a 12-month period from the
grant date. Newly elected non-employee directors are granted, in addition to the
Board and committee fees discussed above, an initial grant of non-qualified
stock options to purchase 30,000 shares of our common stock upon first being
elected to our Board of Directors. These options vest over a two-year period
with 50% annual vesting on each anniversary of the grant date. Our employee
directors did not receive any compensation in 2008 for their service on our
Board of Directors.
Consulting
Arrangements
We
have entered into consulting agreements with Drs. Pearce and Stump.
In August
2006, we entered into a consulting agreement with Dr. Pearce under which
his services include reviewing, assessing and advising us on our development
plans and strategies. Pursuant to the consulting agreement, Dr. Pearce is
entitled to receive up to $3,000 a day, prorated at an hourly rate of $375 an
hour, for his consulting services. Total payments to Dr. Pearce under this
agreement may not exceed $40,000 during any one-year period.
In
September 2006, we entered into a consulting agreement with Dr. Stump under
which his services include reviewing, assessing and advising us on our
development plans and strategies. Pursuant to the consulting agreement,
Dr. Stump is entitled to receive up to $3,000 a day, prorated at an hourly
rate of $375 an hour, for his consulting services. Total payments to
Dr. Stump under this agreement may not exceed $40,000 during any one-year
period.
2008
Director Compensation Table
The
following table sets forth the compensation information for our non-employee
directors, as well as Dr. Young, the current Chairman of our Board and former
Executive Chairman, for the year ended December 31, 2008. The compensation
received by Mr. Swisher, as a named executive officer, is set forth in
“
Executive Compensation and
Related Information
” on page 21 above.
|
|
|
Fees Earned
or Paid in
Cash
($)
|
|
|
|
|
|
All Other
Compensation
($)
|
|
|
|
|
|
Anthony
B. Evnin, Ph.D.
(6)
|
|
$
|
28,000
|
|
|
$
|
17,235
|
|
|
$
|
—
|
|
|
$
|
45,235
|
|
|
Stephen
P.A. Fodor, Ph.D.
(7)
|
|
|
25,000
|
|
|
|
17,235
|
|
|
|
—
|
|
|
|
42,235
|
|
|
Matthew
K. Fust
|
|
|
28,000
|
|
|
|
17,235
|
|
|
|
—
|
|
|
|
45,235
|
|
|
Steven
D. Goldby
(8)
|
|
|
26,000
|
|
|
|
17,235
|
|
|
|
—
|
|
|
|
43,235
|
|
|
Jonathan
S. Leff
(9)
|
|
|
23,000
|
|
|
|
17,235
|
|
|
|
—
|
|
|
|
40,235
|
|
|
Homer
L. Pearce, Ph.D.
|
|
|
23,000
|
|
|
|
48,135
|
|
|
|
6,563
|
(4)
|
|
|
77,698
|
|
|
David
C. Stump M.D.
|
|
|
20,000
|
|
|
|
48,135
|
|
|
|
6,563
|
(5)
|
|
|
74,698
|
|
|
James
A. Wells, Ph.D.
(10)
|
|
|
20,000
|
(1)
|
|
|
11,784
|
|
|
|
—
|
|
|
|
31,784
|
|
|
James
W. Young, Ph.D.
(11)
|
|
|
—
|
|
|
|
207,530
|
|
|
|
202,772
|
|
|
|
410,302
|
|
|
(1)
|
The
annual retainer of $20,000 otherwise payable to Dr. Wells for serving
on our Board was paid to The Regents of the University of California in
accordance with an agreement between Dr. Wells and The Regents of the
University of California.
|
|
(2)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes in 2008 for the fair value of stock options granted to
each of our non-employee directors and Dr. Young in 2008, as well as in
prior years, in accordance with FAS 123R. Pursuant to SEC rules, the
amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. These amounts reflect Sunesis’
accounting expense for these awards and do not correspond to the actual
value that will be recognized by our directors. For additional information
on the valuation assumptions, refer to Note 13 “
Stock-Based
Compensation
” to the Notes to Consolidated Financial Statements in
our Annual Report on Form 10-K for the year ended December 31,
2008, filed with the SEC on April 3, 2009, which identifies assumptions
made in the valuation of option awards in accordance with FAS
123R.
|
|
(3)
|
On
June 5, 2008, each non-employee director received a stock option to
purchase 10,000 shares. The grant date fair value of these awards was
$1.08 per share for a total grant date fair value of $10,813 per grant,
calculated in accordance with FAS 123R. Assumptions used in the
calculation of these amounts are included in Note 13 “
Stock-Based
Compensation
” to the Notes to Consolidated Financial Statements in
our Annual Report on Form 10-K for the year ended December 31,
2008, filed with the SEC on April 3, 2009. As of December 31,
2008, each non-employee director held stock options to purchase the
following aggregate number of shares of our common stock: Dr. Evnin
held options to purchase 30,000 shares of our common stock; Dr. Fodor
held options to purchase 63,530 shares of our common stock; Mr. Fust
held options to purchase 60,000 shares of our common stock;
Mr. Goldby held options to purchase 63,530 shares of our common
stock; Mr. Leff held options to purchase 30,000 shares of our common
stock; Dr. Pearce held options to purchase 50,000 shares of our
common stock; Dr. Stump held options to purchase 50,000 shares of our
common stock; and Dr. Wells held options to purchase 142,354 shares
of our common stock.
|
|
(4)
|
This
amount reflects payments to Dr. Pearce under his consulting agreement
with us for consulting services performed in
2008.
|
|
(5)
|
This
amount reflects payments to Dr. Stump under his consulting agreement
with us for consulting services performed in
2008.
|
|
(6)
|
Dr.
Evnin resigned effective as of April 3,
2009.
|
|
(7)
|
Dr.
Fodor resigned effective as of April 3,
2009.
|
|
(8)
|
Mr.
Goldby resigned effective as of April 3,
2009.
|
|
(9)
|
Mr.
Leff resigned effective as of February 3,
2009.
|
|
(10)
|
Dr.
Wells resigned effective as of June 25,
2008.
|
|
(11)
|
Until
April 2009, Dr. Young served as our Executive Chairman. As
noted above, our employee directors did not receive any compensation in
2008 for their service on our Board of Directors. As of
December 31, 2008, Dr. Young held stock options to purchase 329,118
shares of our common stock. He did not receive any equity awards in
2008. “All Other Compensation” includes Dr. Young’s annual salary of
$200,000 and group term life insurance payments of
$2,772.
|
ITEM
12:
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
OWNERSHIP
OF SUNESIS SECURITIES
The
following table sets forth, as of April 10, 2009, information regarding
beneficial ownership of our common stock by:
|
|
·
|
each
person, or group of affiliated persons, known by us to beneficially own
more than 5% of our common stock;
|
|
|
·
|
each
of our named executive officers;
|
|
|
·
|
each
of our directors; and
|
|
|
·
|
all
of our executive officers and directors as a
group.
|
Beneficial
ownership is determined according to the rules of the SEC and generally means
that a person has beneficial ownership of a security if he, she or it possesses
sole or shared voting or investment power of that security, and includes options
and warrants that are currently exercisable or exercisable within 60 days
of April 10, 2009. Shares of common stock subject to stock options
and warrants currently exercisable or exercisable within 60 days of April
10, 2009 are deemed to be outstanding for computing the percentage ownership of
the person holding these options and warrants and the percentage ownership of
any group of which the holder is a member, but are not deemed outstanding for
computing the percentage of any other person. Except as indicated by
footnote, and subject to community property laws where applicable, we believe
the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by
them.
This
table lists applicable percentage ownership based on 34,409,768 shares of common
stock outstanding and 2,898,544 shares of Series A preferred stock outstanding,
or an aggregate of 37,308,312 shares of capital stock, as of April 10,
2009. Unless otherwise indicated, the address for each of the
beneficial owners in the table below is c/o Sunesis Pharmaceuticals, Inc.,
395 Oyster Point Boulevard, Suite 400, South San Francisco, California
94080.
|
|
|
|
|
|
|
|
Shares of
Common
Stock
Beneficially
Owned (#)(2)
|
|
|
Percentage
of
Common
Stock
Beneficially
Owned (%)
|
|
|
Shares of
Preferred
Stock
Beneficially
Owned (#)
|
|
|
Percentage
of
Preferred
Stock
Beneficially
Owned (%)
|
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities
affiliated with Alta Partners
(3)
|
|
|
6,143,853
|
|
|
|
16.0
|
%
|
|
|
333,165
|
|
|
|
11.5
|
%
|
|
Entities
affiliated with Bay City Capital
(4)
|
|
|
6,672,421
|
|
|
|
16.2
|
|
|
|
666,333
|
|
|
|
23.0
|
|
|
Biogen
Idec
(5)
|
|
|
2,912,022
|
|
|
|
8.5
|
|
|
|
-
|
|
|
|
0.0
|
|
|
Caxton
Advantages Life Sciences Fund, L.P.
(6)
|
|
|
1,665,830
|
|
|
|
4.6
|
|
|
|
166,583
|
|
|
|
5.8
|
|
|
Entities
affiliated with Credit Suisse First Boston
(7)
|
|
|
3,406,590
|
|
|
|
9.9
|
|
|
|
-
|
|
|
|
0.0
|
|
|
Entities
affiliated with Deerfield
(8)
|
|
|
2,148,102
|
|
|
|
6.2
|
|
|
|
-
|
|
|
|
0.0
|
|
|
Fidelity
Management & Research Company
(9)
|
|
|
3,156,200
|
|
|
|
9.2
|
|
|
|
-
|
|
|
|
0.0
|
|
|
Growth
Equity Opportunities Fund, LLC
(10)
|
|
|
6,663,330
|
|
|
|
16.2
|
|
|
|
666,333
|
|
|
|
23.0
|
|
|
Entities
affiliated with Merlin Biomed
(11)
|
|
|
4,906,351
|
|
|
|
13.0
|
|
|
|
339,830
|
|
|
|
11.7
|
|
|
|
|
Beneficial Ownership
(1)
|
|
|
|
|
Shares of
Common
Stock
Beneficially
Owned (#)(2)
|
|
|
Percentage
of
Common
Stock
Beneficially
Owned (%)
|
|
|
Shares of
Preferred
Stock
Beneficially
Owned (#)
|
|
|
Percentage
of
Preferred
Stock
Beneficially
Owned (%)
|
|
|
ONC
General Partnership Limited
(12)
|
|
|
3,331,660
|
|
|
|
8.8
|
|
|
|
333,166
|
|
|
|
11.5
|
|
|
Entities
Affiliated with Venrock Associates
(13)
|
|
|
2,474,404
|
|
|
|
6.9
|
|
|
|
133,266
|
|
|
|
4.6
|
|
|
Vision
Opportunity Master Fund, Ltd.
(14)
|
|
|
1,999,000
|
|
|
|
5.5
|
|
|
|
199,900
|
|
|
|
6.9
|
|
|
Entities
affiliated with Warburg Pincus LLC
(15)
|
|
|
4,545,621
|
|
|
|
13.1
|
|
|
|
-
|
|
|
|
0.0
|
|
|
Named
Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
W. Young, Ph.D.
(16)
|
|
|
413,421
|
|
|
|
1.2
|
|
|
|
0
|
|
|
|
0.0
|
|
|
Daniel
N. Swisher, Jr.
(17)
|
|
|
795,066
|
|
|
|
2.3
|
|
|
|
13,326
|
|
|
|
*
|
|
|
Eric
H. Bjerkholt
(18)
|
|
|
345,912
|
|
|
|
1.0
|
|
|
|
6,663
|
|
|
|
*
|
|
|
Valerie
L. Pierce
(19)
|
|
|
148,684
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0.0
|
|
|
Daniel
C. Adelman, M.D.
(20)
|
|
|
263,906
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0.0
|
|
|
Robert
S. McDowell, Ph.D.
(21)
|
|
|
188,760
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0.0
|
|
|
Matthew
K. Fust
(22)
|
|
|
60,000
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0.0
|
|
|
Homer
L. Pearce, Ph.D.
(23)
|
|
|
50,000
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0.0
|
|
|
David
C. Stump, M.D.
(24)
|
|
|
50,000
|
|
|
|
*
|
|
|
|
0
|
|
|
|
0.0
|
|
|
Dayton
Misfeldt
(25)
|
|
|
6,672,421
|
|
|
|
16.2
|
|
|
|
666,333
|
|
|
|
23.0
|
|
|
Edward
Hurwitz
(26)
|
|
|
6,143,873
|
|
|
|
16.0
|
|
|
|
333,165
|
|
|
|
11.5
|
|
|
All
executive officers and directors as a group
(9 persons)
|
|
|
14,597,323
|
|
|
|
31.4
|
|
|
|
1,026,150
|
|
|
|
35.4
|
|
|
*
|
Represents
beneficial ownership of less than one percent (1%) of the outstanding
shares of our capital stock.
|
|
(1)
|
This
table is based upon information provided to us by our executive officers
and directors and upon information about principal stockholders known to
us based on Schedules 13G and 13D filed with the
SEC.
|
|
(2)
|
Includes
shares issuable pursuant to stock options and warrants exercisable within
60 days of April 10, 2009.
|
|
(3)
|
Includes
(i) 137,323 shares of our common stock, 20,493 shares of our Series A
preferred stock and 240,591 shares of common stock issuable upon exercise
of warrants outstanding held by Alta BioPharma Partners III GmbH & Co.
Beteiligungs KG, (ii) 2,044,750 shares of our common stock, 305,152 shares
of our Series A preferred stock and 3,582,512 shares of common stock
issuable upon exercise of warrants outstanding held by Alta BioPharma
Partners III, L.P., and (iii) 50,391 shares of our common stock, 7,520
shares of our Series A preferred stock and 88,286 shares of common stock
issuable upon exercise of warrants outstanding held by Alta Embarcadero
BioPharma Partners III, LLC. Alta Partners III, Inc. provides
investment advisory services to Alta BioPharma Partners III GmbH & Co.
Beteiligungs KG, Alta BioPharma Partners III, L.P. and Alta Embarcadero
BioPharma Partners III, LLC, which we refer to collectively as the Alta
Funds. The managing directors of Alta BioPharma Management III,
LLC, which is a general partner of Alta BioPharma Partners III, L.P. and
the managing limited partner of Alta BioPharma Partners III GmbH & Co.
Beteiligungs KG, and the managers of Alta Embarcadero BioPharma Partners
III, LLC exercise sole dispositive and voting power over the shares owned
by the Alta Funds. Certain principals of Alta Partners III,
Inc., Jean Deleage, Alix Marduel, Farah Campsi, Edward Penhoet and Edward
Hurwitz, are managing directors of Alta BioPharma Management III, LLC and
managers of Alta Embarcadero BioPharma Partners III, LLC. These
individuals may be deemed to share dispositive and voting power over the
shares held by the Alta Funds. Each of these individuals
disclaims beneficial ownership of such shares, except to the extent of his
or her pecuniary interest therein. The address of Alta Partners
III, Inc. and its affiliates is One Embarcadero Center, 37th Floor, San
Francisco, California 94111.
|
|
(4)
|
Includes
(i) 9,091 shares of our common stock held by Bay City Capital LLC, a
Delaware limited liability company (“BCC”), (ii) 653,873 shares of our
Series A preferred stock and 6,538,730 shares of common stock issuable
upon exercise of warrants outstanding held by Bay City Capital Fund V,
L.P. (“Fund V”), and (iii) 12,460 shares of our Series A preferred stock
and 124,600 shares of common stock issuable upon exercise of warrants
outstanding held by Bay City Capital Fund V Co-Investment Fund, L.P.
(“Co-Investment V”). BCC is the manager of Bay City Capital
Management V, LLC, a Delaware limited liability company (“Management
V”). Management V is the general partner of Fund V and
Co-Investment V. BCC is also an advisor to Fund V and
Co-Investment V. Dayton Misfeldt is a partner of BCC. The
address of the principal business and office of Bay City Capital and its
affiliates is 750 Battery Street, Suite 400, San Francisco,
California 94111.
|
|
(5)
|
Biogen
Idec MA, Inc., a Massachusetts corporation, is a wholly owned subsidiary
of Biogen Idec Inc., a biotechnology company. James C.
Mullen, Bruce R. Ross and Peter N. Kellogg are the directors and
executive officers of Biogen Idec MA, Inc. These
individuals may be deemed to share dispositive and voting power over the
shares which are, or may be, deemed to be beneficially owned by Biogen
Idec MA, Inc. Each of these individuals disclaims
beneficial ownership of these shares, except to the extent of his
pecuniary interest therein.
|
|
(6)
|
Includes
166,583 shares of our Series A preferred stock and 1,665,830 shares of
common stock issuable upon the exercise of warrants outstanding owned by
Caxton Advantages Life Sciences Fund, L.P. (“Caxton”). The
principal address for Caxton is c/o Caxton Advantage Venture Partners,
L.P., 500 Park Avenue, 9th Floor, New York, New York
10022.
|
|
(7)
|
Includes
(i) 175,775 shares of our common stock held by EMA Partners Fund 2000,
L.P. (“EMA Partners”), (ii) 233,004 shares of our common stock held by EMA
Private Equity Fund 2000, L.P. (“EMA Private”), (iii) 654,387 shares of
our common stock held by Credit Suisse First Boston Equity Partners
(Bermuda), L.P. (“CSFB Bermuda”), (iv) 2,341,061 shares of our common
stock held by Credit Suisse First Boston Equity Partners, L.P.
(“CSFB-EP”), and (v) 2,263 shares of our common stock held by Credit
Suisse First Boston U.S. Executive Advisors, L.P. (“CSFB
U.S.”). Credit Suisse First Boston Advisory Partners, LLC, or
CSFB Advisory, manages the investments of CSFB-EP, CSFB Bermuda and CSFB
U.S. EMA Partners and EMA Private each must invest in and
dispose of its portfolio securities simultaneously with CSFB-EP on a pro
rata basis. CFSB Advisory may be deemed to have dispositive and
voting power over the shares held by CSFB-EP, CSFB Bermuda, CSFB U.S., EMA
Partners and EMA Private. Credit Suisse Group, through a wholly
owned subsidiary, is a parent of CSFB Advisory, and may be deemed to have
dispositive and voting power over the shares held by CSFB-EP, CSFB
Bermuda, CSFB U.S., EMA Partners and EMA Private. Credit Suisse
Group disclaims beneficial ownership of the shares owned by such
investment partnerships. The address of Credit Suisse First
Boston and its affiliates is Eleven Madison Avenue, New York, New
York 10010.
|
|
(8)
|
Includes
(i) 1,077,262 shares of our common stock and 305,314 shares of common
stock issuable upon exercise of warrants outstanding held by Deerfield
Special Situations Fund International, Ltd.,
and (ii) 587,748
shares of our common stock and 177,778 shares of common stock issuable
upon exercise of warrants outstanding held by Deerfield Special Situations
Fund, L.P. James Flynn, investment manager of each of Deerfield
International Limited, Deerfield Partners, L.P., Deerfield Special
Situations Fund International, Ltd. and Deerfield Special Situations Fund,
L.P. has dispositive and voting power over the shares owned by these
funds. All such warrants are immediately exercisable. Mr. Flynn
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest therein. The address of Deerfield and its
affiliates is 780 Third Avenue, 37th Floor, New York, New York
10017.
|
|
(9)
|
Fidelity Management &
Research Company (“Fidelity”), a wholly owned subsidiary of FMR LLC
(“FMR”) and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is the beneficial owner of 3,156,200
shares of our common stock as a result of acting as investment adviser to
various investment companies registered under Section 8 of the Investment
Company Act of 1940, as amended (the “Investment Company
Act”). The ownership of one investment company, Fidelity Growth
Company Fund (“Fidelity”), amounted to 3,156,200 shares of the common
stock outstanding. Edward C. Johnson 3d and FMR, through its
control of Fidelity and the funds, each has sole power to dispose of the
3,156,200 shares owned by the funds. Members of the family of Edward C.
Johnson 3d, Chairman of FMR, are the predominant owners, directly or
through trusts, of shares of Series B voting common stock of FMR,
representing approximately 49% of the voting power of FMR. The Johnson
family group and all other Series B shareholders have entered into a
shareholders’ voting agreement under which all shares of Series B voting
common stock will be voted in accordance with the majority vote of shares
of Series B voting common stock. Accordingly, through their ownership of
voting common stock and the execution of the shareholders’ voting
agreement, members of the Johnson family may be deemed, under the
Investment Company Act, to form a controlling group with respect to
FMR. Neither FMR nor Edward C. Johnson 3d, Chairman of FMR, has
the sole power to vote or direct the voting of the shares owned directly
by the funds, which power resides with the funds’ boards of
trustees. Fidelity carries out the voting of the shares under
written guidelines established by the Funds’ Board of
Trustees. The address of Fidelity is 82 Devonshire
Street, Boston, Massachusetts
02109.
|
|
(10)
|
Includes
666,333 shares of our Series A preferred stock and 6,663,330
shares of common stock issuable upon the exercise of warrants outstanding
owned by Growth Equity Opportunities Fund, LLC (“GEO”). The
sole member of GEO is New Enterprise Associates 12, Limited Partnership
(“NEA 12”). NEA Partners 12, Limited Partnership (“NEA Partners 12”), is
the general partner of NEA 12 and NEA 12 GP, LLC (“NEA 12 GP”), and
Michael James Barrett, Peter J. Barris , Forest Baskett, Ryan D. Drant,
Patrick J. Kerins, Krishna Kolluri, C. Richard Kramlich, Charles M.
Linehan, Charles W. Newhall III, Mark W. Perry, Scott D. Sandell and
Eugene A. Trainor III (collectively, the “Managers”) are the individual
managers of NEA 12 GP, GEO, NEA 12, NEA Partners 12 and NEA 12
GP. Each of the above named entities and persons, except GEO,
disclaims beneficial ownership of the securities except to the extent of
their pecuniary interest therein, if any. The address for GEO
is 119 St. Paul Street, Baltimore, Maryland
21202.
|
|
(11)
|
Includes
(i) 1,000,000 shares of our common stock, 139,930 shares of our Series A
preferred stock and 1,399,300 shares of common stock issuable upon the
exercise of warrants outstanding owned by Nexus Gemini, L.P. (“Gemini”),
(ii) 508,051 shares of our common stock owned by Merlin Nexus II L.P.
(“Nexus II”) and (iii) 199,900 shares of our Series A preferred stock and
1,999,000 shares of common stock issuable upon the exercise of warrants
outstanding owned by Merlin Nexus III, L.P. (“Nexus III”). Merlin BioMed
Private Equity Advisors, LLC, a Delaware limited liability company
(“Merlin”), is the investment adviser to Gemini, Nexus II and Nexus
III. Dominique Semon is the controlling principal and chief
investment officer of Merlin. Merlin and Mr. Semon share voting
power and dispositive power over the shares held by Gemini, Nexus II and
Nexus III. The principal address for Merlin and it affiliates
is 230 Park Avenue, Suite 928, New York, New York
10169.
|
|
(12)
|
Includes
333,166 shares of our Series A preferred stock and 3,331,660 shares of
common stock issuable upon the exercise of warrants outstanding owned by
ONC General Partner Limited (“ONC”). The principal address for
ONC is 26 New Street, St. Helier, Jersey, Channel Islands JE4
8PP.
|
|
(13)
|
Includes
(i) 467,380 shares of our common stock, 54,639 shares of our Series A
preferred stock and 546,390 shares of common stock issuable upon the
exercise of warrants held by Venrock Associates, (ii) 649,955 shares
of our common stock, 78,627 shares of our Series A preferred stock and
786,270 shares of common stock issuable upon the exercise of warrants held
by Venrock Associates II, L.P., and (iii) 24,409 shares of our common
stock held by Venrock Entrepreneur’s Fund, L.P. Dr. Evnin,
Michael C. Brooks, Eric S. Copeland, Bryan E. Roberts,
Ray A. Rothrock, Michael F. Tyrrell and Anthony Sun are the
general partners of Venrock Associates and Venrock Associates II,
L.P. These individuals may be deemed to share dispositive and
voting power over the shares which are, or may be, deemed to be
beneficially owned by Venrock Associates and Venrock Associates II,
L.P. Each of these individuals disclaims beneficial ownership
of these shares, except to the extent of his or her pecuniary interest
therein. The general partner of Venrock Entrepreneurs Fund,
L.P. is Venrock Management LLC. Dr. Evnin, Michael C.
Brooks, Eric S. Copeland, Bryan E. Roberts, Ray A.
Rothrock, Michael F. Tyrrell and Anthony Sun are the members of
Venrock Management LLC. These individuals may be deemed to
share dispositive and voting power over the shares which are, or may be,
deemed to be beneficially owned by Venrock Entrepreneurs Fund,
L.P. Dr. Evnin disclaims beneficial ownership of the shares
held by the above-referenced entities, except to the extent of his
pecuniary interest therein. The principal address for the
Venrock Associates and its affiliates is 530 Fifth Avenue, 22nd Floor, New
York, New York 10036.
|
|
(14)
|
Includes
199,900 shares of our Series A preferred stock and 1,999,000 shares of
common stock issuable upon the exercise of warrants outstanding owned by
Vision Opportunity Master Fund, Ltd., a Cayman Islands company (the
“Vision Fund”). Vision Capital Advisors, LLC, a Delaware
limited liability company, is the investment manager of the Vision Fund
and Adam Benowitz is the Managing Member of the investment
manager. The Vision Fund directly beneficially owns all of the
shares reported in this table. Mr. Benowitz and the investment
manager may be deemed to share with the Vision Fund voting and dispositive
power with respect to such shares. The principal address of the
Vision Fund is c/o Citi Hedge Fund Services (Cayman) Limited, P.O. Box
1748, Cayman Corporate Centre, 27 Hospital Road, 5th Floor, Grand Cayman
KY1-1109, Cayman Islands.
|
|
(15)
|
Includes
(i) 4,183,939 shares of our common stock and 228,261 shares of common
stock issuable upon exercise of warrants outstanding held by Warburg,
Pincus Equity Partners, L.P. (“WPEP”), (ii) 109,214 shares of our
common stock and 12,077 shares of common stock issuable upon exercise of
warrants outstanding held by Warburg, Pincus Netherlands Equity Partners
I, C.V. (“WP Netherlands I”), and (iii) 10,922 shares of our common
stock and 1,208 shares of common stock issuable upon exercise of warrants
outstanding held by Warburg, Pincus Netherlands Equity Partners III, C.V.
(“WP Netherlands III”). Warburg Pincus Partners, LLC, a subsidiary of
Warburg, Pincus & Co., is the sole general partner of WPEP, WP
Netherlands I and WP Netherlands III. Warburg Pincus LLC
manages WPEP, WP Netherlands I and WP Netherlands III. Mr. Leff
is a Partner of Warburg Pincus & Co. and a Member and Managing
Director of Warburg Pincus LLC. Charles R. Kaye and Joseph P.
Landy are Managing General Partners of Warburg, Pincus & Co. and
Managing Members and Co-Presidents of Warburg Pincus
LLC. Messrs. Kay, Landy and Leff may be deemed to have an
indirect pecuniary interest in an indeterminate portion of the shares held
by the Warburg Pincus entities. Each of these individuals
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest therein. The address of Warburg Pincus and
its affiliates is 466 Lexington Avenue, New York, New York
10017.
|
|
(16)
|
Includes
11,765 shares of our common stock held by family members of Dr.
Young. Dr. Young disclaims beneficial ownership of such
shares, except to the extent of his pecuniary interest
therein. Also includes options held by Dr. Young to purchase
156,873 shares of common stock that are exercisable within 60 days of
April 10, 2009.
|
|
(17)
|
Includes
options held by Mr. Swisher to purchase 615,941 shares of our common stock
that are exercisable within 60 days of April 10, 2009. Also
includes 13,326 shares of our Series A preferred stock and 133,260 shares
of common stock issuable upon the exercise of warrants outstanding that
are held in the Swisher Revocable Trust for which Mr. Swisher is the
trustee.
|
|
(18)
|
Includes
options held by Mr. Bjerkholt to purchase 273,187 shares of our common
stock exercisable within 60 days of April 10, 2009. Also
includes 6,663 shares of our Series A preferred stock and 66,630 shares of
common stock issuable upon the exercise of warrants outstanding that are
held in the Bjerkholt/Hahn Family Trust for which Mr. Bjerkholt is the
trustee.
|
|
(19)
|
Includes
options held by Ms. Pierce to purchase 145,156 shares of our common stock
exercisable within 60 days of April 10,
2009.
|
|
(20)
|
Includes
options held by Dr. Adelman to purchase 258,896 shares of our common stock
exercisable within 60 days of April 10,
2009.
|
|
(21)
|
Includes
options held by Dr. McDowell to purchase 162,878 shares of our common
stock exercisable within 60 days of April 10,
2009.
|
|
(22)
|
Includes
options held by Mr. Fust to purchase 60,000 shares of our common stock
exercisable within 60 days of April 10,
2009.
|
|
(23)
|
Includes
options held by Dr. Pearce to purchase 50,000 shares of our common stock
exercisable within 60 days of April 10,
2009.
|
|
(24)
|
Includes
options held by Dr. Stump to purchase 50,000 shares of our common stock
exercisable within 60 days of April 10,
2009.
|
|
(25)
|
Includes
the shares of our common stock, Series A preferred stock and shares of
common stock issuable upon the exercise of warrants outstanding detailed
in Note (4) above held by the entities affiliated with BCC. Mr.
Misfeldt is a partner of BCC. BCC is the manager of Management
V. Management V, the general partner of Fund V and
Co-Investment V, has sole voting and dispositive power with respect to the
securities held by Fund V and Co-Investment V. BCC, as the
manager of Management V, is also an advisor to Fund V and Co-Investment V
and has sole voting and dispositive power with respect to the securities
held by Fund V and Co-Investment V. The address for Mr. Misfeldt is c/o
Bay City Capital, 750 Battery Street, Suite 400, San Francisco,
California 94111.
|
|
(26)
|
Includes
the shares of common stock, Series A preferred stock and shares of common
stock issuable upon the exercise of warrants outstanding detailed in Note
(3) above held by the entities affiliated with Alta
Partners. Mr. Hurwitz is a principal of Alta Partners III,
Inc., one of the managing directors of Alta BioPharma Management III, LLC,
and a manager of Alta Embarcadero BioPharma Partners III,
LLC. He may be deemed to share dispositve and voting power over
the shares held by the Alta Funds. Mr. Hurwitz disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. The address of Mr. Hurwitz is c/o Alta
Partners III, Inc., One Embarcadero Center, 37th Floor, San Francisco,
California 94111.
|
EQUITY
COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
to be Issued
upon Exercise of
Outstanding
Options, Warrants
|
|
|
Weighted Average
Exercise Price of
Outstanding
Options,
Warrants
|
|
|
Number of Securities Remaining
Available for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
|
|
|
Equity
Compensation Plans Approved by Stockholders
(1)
|
|
|
4,193,894
|
(2)
|
|
$
|
3.48
|
|
|
|
2,373,569
|
(3)
|
|
Equity
Compensation Plans Not Approved by Stockholders
(4)
|
|
|
457,061
|
|
|
|
3.05
|
|
|
|
67,939
|
|
|
Total:
|
|
|
4,650,955
|
|
|
$
|
3.44
|
|
|
|
2,441,508
|
|
|
(1)
|
Includes
our 1998 Stock Plan, or 1998 Plan, 2001 Stock Plan, or 2001 Plan, 2005
Equity Incentive Award Plan, or 2005 Plan, and Employee Stock Purchase
Plan, or ESPP.
|
|
(2)
|
Includes
(i) 1,018,642 shares of common stock issuable upon the exercise of
options granted under our 1998 Plan, all of which were exercisable as of
December 31, 2008, (ii) 148,304 shares of common stock issuable
upon the exercise of options granted under our 2001 Plan, all of which
were exercisable as of December 31, 2008, and (iii) 3,026,948
shares of common stock issuable upon the exercise of options granted under
our 2005 Plan, 1,833,135 of which were exercisable as of December 31,
2008. Excludes purchase rights currently accruing under the ESPP. Offering
periods under the ESPP are 12-month periods, which are comprised of two
six-month purchase periods. Eligible employees may purchase shares of
common stock at a price equal to 85% of the lower of the fair market value
of the common stock at the beginning of each offering period or the end of
each semi-annual purchase period. Participation is limited to 20% of an
employee’s eligible compensation, subject to limitations under the
Code.
|
|
(3)
|
Includes
(i) 2,121,116 shares of common stock available for issuance under our
2005 Plan and (ii) 252,453 shares of common stock available for
issuance under our ESPP. Beginning in 2006, the number of
shares of common stock reserved under the 2005 Plan automatically
increases on the first trading day each year by an amount equal to the
least of: (i) four percent of our outstanding shares of common
stock outstanding on such date, (ii) 1,082,352 shares, or
(iii) a lesser amount determined by the Board of Directors. The
number of shares of common stock reserved under our ESPP automatically
increases on the first trading day each year by an amount equal to the
least of: (i) 0.5% of our outstanding shares of common stock
outstanding on such date, (ii) 135,294 shares, or (iii) a lesser
amount determined by our Board of
Directors.
|
|
(4)
|
Represents
our 2006 Employment Commencement Incentive
Plan.
|
ITEM
13:
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
RELATED
PARTY TRANSACTIONS
Other
than as described below, there were no other related party transactions during
2008 with our executive officers, directors and beneficial owners of five
percent or more of our securities.
Executive
Severance Benefits Agreements
We have
entered into executive severance benefits agreements and related amendments with
our executive officers. See “
Executive Compensation and Related
Information
”
for further discussion
of these arrangements.
Stock
Option Grants
We have
granted stock options to our executive officers and our non-employee directors.
See “
Executive Compensation
and Related Information
” and “
Director Compensation
” for
further discussion of these awards.
Indemnification
of Directors and Officers
We have
entered into indemnity agreements with our executive officers and directors
which provide, among other things, that we will indemnify such executive officer
or director, under the circumstances and to the extent provided for therein, for
expenses, damages, judgments, fines and settlements he or she may be required to
pay in actions or proceedings which he or she is or may be made a party by
reason of his or her position as a director, executive officer or other agent of
Sunesis, and otherwise to the fullest extent permitted under Delaware law and
our bylaws. We also intend to execute these agreements with our future executive
officers and directors.
There is
no pending litigation or proceeding naming any of our directors or executive
officers as to which indemnification is being sought, nor are we aware of any
pending or threatened litigation that may result in claims for indemnification
by any director or executive officer.
Consulting
Agreements
We have
entered into consulting agreements with two of our directors, Drs. Pearce and
Stump. See “
Director
Compensation
” for further discussion of these agreements.
Purchases
of Our Securities
On March
31, 2009, we entered into a securities purchase agreement with accredited
investors, including certain members of management, providing for a private
placement of our securities, or the Private Placement. The Private Placement
contemplates the sale of up to $15.0 million of units, consisting of Series A
preferred stock and warrants to purchase common stock in two closings, and a
common stock closing of up to $28.5 million. $10.0 million in units
were sold at the initial closing on April 3, 2009. The participation
in the Private Placement by some of our executive officers was approved by the
Audit Committee of the Board of the Directors.
The
shares of Series A preferred stock and warrants to purchase common stock set
forth in the table below were issued and sold in the initial closing of the
Private Placement held on April 3, 2009 to entities affiliated with certain of
our executive officers and entities affiliated with Alta Partners, one of our
principal stockholders. We believe the terms obtained or consideration that we
received in connection with the Private Placement were comparable to terms
available or the amounts that would be received by us in arm’s-length
transactions.
|
|
|
Executive Officer
Affiliation (if any)
|
|
|
|
|
|
|
|
|
Initial
Closing
Investment
Amount ($)
|
|
|
Total
Participation
Amount ($)
(1)
|
|
|
Entities
affiliated with Alta Partners
|
|
|
—
|
|
|
|
333,165
|
(2)
|
|
|
3,331,650
|
(3)
|
|
$
|
1,149,425
|
|
|
$
|
5,000,000
|
|
|
Swisher
Revocable Trust
|
|
Daniel
N. Swisher, Jr.
|
|
|
|
13,326
|
|
|
|
133,260
|
|
|
|
45,978
|
|
|
|
200,000
|
|
|
Bjerkholt
/ Hahn Family Trust
|
|
Eric
H. Bjerkholt
|
|
|
|
6,663
|
|
|
|
66,630
|
|
|
|
22,989
|
|
|
|
100,000
|
|
|
Steven
B. Ketchum, Ph.D.
|
|
Self
|
|
|
|
6,663
|
|
|
|
66,630
|
|
|
|
22,989
|
|
|
|
100,000
|
|
|
(1)
|
Reflects
the total dollars that such entities and individual could invest in the
aggregate in the Private Placement.
|
|
(2)
|
Consists
of (i) 305,152 shares purchased by Alta BioPharma Partners III, L.P., (ii)
20,493 shares purchased by Alta BioPharma Partners III GmbH & Co.
Beteiligungs KG, and (iii) 7,520 shares purchased by Alta
EmbarcaderoBioPharma Partners III, LLC. In addition, the
entities affiliated with Alta Partners may participate in the subsequent
closings of the Private Placement with an additional investment of up to
approximately $3,850,000.
|
|
(3)
|
Consists
of warrants to purchase (i) 3,051,520 shares of common stock purchased by
Alta BioPharma Partners III, L.P., (ii) 204,930 shares of common stock
purchased by Alta BioPharma Partners III GmbH & Co. Beteiligungs
KG,and (iii) 75,200 shares of common stock purchased by Alta Embarcadero
BioPharma Partners III, LLC.
|
In
addition, entities affiliated with Bay City Capital LLC participated in the
initial closing of the Private Placement with an investment in the amount of
$2,298,851 and may participate in the subsequent closings of the Private
Placement with an additional investment of up to approximately $7,700,000. In
connection with and immediately subsequent to the Private Placement, affiliates
of each of Alta Partners and Bay City Capital were appointed to our Board of
Directors. The director on our Board of Directors designated by Alta Partners is
Edward Hurwitz, a director of Alta Partners, and the director designated by Bay
City Capital is Dayton Misfeldt, an investment partner of Bay City Capital. See
“
Security Ownership of Certain
Beneficial Owners and Management
” for more information regarding the
holdings of each of these individuals and entities.
Investor
Rights Agreements
Eighth
Amended and Restated Investor Rights Agreement
We have
entered into an Eighth Amended and Restated Investor Rights Agreement, dated
August 30, 2004 and as subsequently amended, with the prior holders of our
convertible preferred stock and certain holders of warrants to purchase
convertible preferred stock, including entities with which certain of our
directors are affiliated. As of December 31, 2008, the holders of 4,304,075
shares of our common stock and 241,546 shares of common stock issuable upon the
exercise of outstanding warrants are entitled to certain rights with respect to
the registration of their shares pursuant to the terms and conditions of such
agreement. These registration rights were waived with respect to the issuance of
our securities contemplated by the Private Placement. All registration rights
under this agreement will terminate on or about May 4, 2009.
Investor
Rights Agreement
In
connection with the initial closing of the Private Placement, we entered into an
Investor Rights Agreement on April 3, 2009 with the investors in the Private
Placement, pursuant to which we granted to the investors certain registration
rights with respect to the securities issued and sold pursuant to the Private
Placement. As of April 10, 2009, the holders of 2,898,544 shares of
our preferred stock and 28,985,440 shares of common stock issuable upon the
exercise of outstanding warrants are entitled to certain rights with respect to
the registration of their shares pursuant to the terms and conditions of such
agreement.
Pursuant to the Investor
Rights Agreement, we also granted to the investors certain rights of first
refusal with respect to certain future issuances of our securities, including as
part of a future equity financing, subject to customary exclusions.
If we
determine to issue any such securities not subject to such exceptions, then we
must provide notice and an offer to sell the securities to the purchasing
stockholders on the same terms as we propose to sell such securities to other
investors a pro rata amount of such securities, based on such investors’
respective percentage ownership of our outstanding common stock, calculated as
if all shares of Series A preferred stock (including any dividends thereon) had
been converted into shares of common stock immediately following the original
issuance of our Series A preferred stock.
The
Investor Rights Agreement also includes an agreement between the parties with
respect to the size and composition of our board of directors. Specifically,
following the initial closing, the size of our board of directors was set at
eight members, and the holders of a majority of the Series A preferred stock
have the right to designate, and we are required to nominate, three members to
our board of directors. Alta BioPharma Partners III, L.P. (“Alta”),
Bay City Capital LLC (“Bay City Capital”) and Growth Equity Opportunities Fund,
LLC (“GEO”), together with their respective affiliates, each have the right to
designate one such investor designee. As a result, our Board of Directors
elected Messrs. Hurwitz and Misfeldt to our Board of Directors on April 3, 2009
as designees of Alta and Bay City Capital, respectively. To date, GEO has not
exercised its right to designate a director for election to our Board of
Directors, but may exercise such right in the future subject to the terms of the
Investor Rights Agreement. Following the earlier to occur of (a) the
second closing of the Private Placement, (b) the common equity closing of the
Private Placement or (c) the closing of a qualifying alternative common stock
financing, provided the investors exercise their preemptive rights and
beneficially own greater than a majority of our voting stock as of such
applicable closing, the size of our Board of Directors would be increased to
nine members pursuant to the Investor Rights Agreement, and the holders of a
majority of our Series A preferred stock would be entitled to designate, and we
would be required to nominate, five members to our Board of
Directors. Alta, Bay City Capital and GEO, together with their
respective affiliates, would each have the right to designate one such investor
designee.
INDEPENDENCE
OF THE MEMBERS OF OUR BOARD OF DIRECTORS
The laws
and rules governing public companies and The NASDAQ Stock Market LLC, or
NASDAQ, listing requirements obligate our Board of Directors to affirmatively
determine the independence of its members. The Board of Directors consults with
our corporate counsel to ensure that the Board’s determinations are consistent
with relevant securities and other laws and regulations regarding the definition
of “independent,” including those set forth in NASDAQ listing requirements, as
in effect from time to time.
Consistent
with these considerations, after a review of all relevant transactions or
relationships between each director, or any of his family members, and Sunesis,
our senior management and our independent registered public accounting firm, the
Board of Directors has affirmatively determined that Drs. Pearce and Stump and
Messrs. Fust, Hurwitz and Misfeldt, a majority of our Board of Directors,
are independent directors within the meaning of the applicable NASDAQ listing
requirements. In addition, the Board has affirmatively determined that Anthony
B. Evnin, Ph.D., Stephen P.A. Fodor, Ph.D, Steven D. Goldby and Jonathan S. Leff
were independent directors within the meaning of the applicable NASDAQ
requirements until their respective resignations from the Board.
In making
its determination of independence, the Board considered our consulting
relationships with Drs. Pearce and Stump and the relationships of Messrs.
Hurwitz and Misfeldt with certain of our principal stockholders, which are
described under
“
Related Party Transactions
”
above. In 2008, Drs. Pearce and Stump each received consulting fees of $6,563
pursuant to these arrangements, which is significantly below the $120,000
threshold contained in the NASDAQ listing requirements. Our Board of Directors
does not believe that these stockholder relationships or these consulting
arrangements interfere with Dr. Pearce, Dr. Stump, or Messrs. Hurtwitz and
Misfeldt's exercise of independent judgment in carrying out their
responsibilities as directors.
ITEM
14:
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Principal
Accountant Fees and Services
The
following is a summary of the aggregate fees billed to us by Ernst &
Young LLP for the years ended December 31, 2008 and 2007 for each of the
following categories of professional services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
Audit
Fees
(1)
|
|
$
|
320,872
|
|
|
$
|
519,647
|
|
|
Audit-Related
Fees
|
|
|
—
|
|
|
|
—
|
|
|
Tax
Fees
|
|
|
—
|
|
|
|
—
|
|
|
Other
Fees
(2)
|
|
|
1,320
|
|
|
|
1,500
|
|
|
Total
Fees:
|
|
$
|
322,192
|
|
|
$
|
521,147
|
|
|
(1)
|
Audit
fees for 2008 and 2007 included the aggregate fees for professional
services rendered for the audit of our financial statements, review of our
interim financial statements, review of our registration statements on
Forms S-3 and Form S-8, an opinion on management’s assessment of
the effectiveness of our internal control over financial reporting as
required by Section 404 of the Sarbanes-Oxley Act of 2002 and the
issuance of comfort letters and
consents.
|
|
(2)
|
Other
fees in 2008 and 2007 were a subscription for Ernst & Young’s
online research services tool.
|
All of
the fees described above were pre-approved by the Audit Committee.
Pre-approval
Policies
The Audit
Committee has adopted a policy relating to the approval of all audit and
non-audit services that are to be performed by our independent registered public
accounting firm. This policy generally provides that we will not engage our
independent registered public accounting firm to render audit or non-audit
services unless the service is specifically approved in advance by the Audit
Committee or the engagement is entered into pursuant to pre-approval procedures
established by the Audit Committee, including policies for delegating authority
to a member of the Audit Committee. Any service that is approved pursuant to a
delegation of authority to a member of the Audit Committee must be reported to
the full Audit Committee at a subsequent meeting.
The Audit
Committee has determined that the rendering of the services other than audit
services by Ernst & Young LLP as described above is compatible with
maintaining their independence.
PART
IV
|
ITEM 15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
(a)
The following documents are filed as part of this Amendment No. 1 to Annual
Report on Form 10-K/A
or as part of the
registrant’s Annual Report on Form 10-K filed with the SEC on
April 3,
2009
:
See
Item 8 of the registrant’s Annual Report on Form 10-K filed with the SEC on
April 3, 2009.
|
2.
|
Financial
Statement Schedules:
|
See
Item 8 of the registrant’s Annual Report on Form 10-K filed with the SEC on
April 3, 2009. All other schedules were omitted because they are inapplicable or
the requested information is shown in the consolidated financial statements of
the registrant or related notes thereto.
A list of exhibits filed with this
report or incorporated herein by reference is found in the Exhibit Index
immediately following the signature page of this report.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Sunesis Pharmaceuticals, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized on April
30, 2009.
|
|
|
SUNESIS
PHARMACEUTICALS, INC.
|
|
|
|
|
|
|
|
By:
|
|
/s/ Eric H. Bjerkholt
|
|
|
|
|
|
Eric
H. Bjerkholt
|
|
|
|
|
|
Senior
Vice President, Corporate Development
|
|
|
|
|
|
and
Finance, Chief Financial
Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
*
|
|
Chairman
of the Board
|
|
April
30, 2009
|
|
James
W. Young, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Daniel N. Swisher, Jr.
|
|
President,
Chief Executive Officer and
|
|
April
30, 2009
|
|
Daniel
N. Swisher, Jr.
|
|
Director
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Eric H. Bjerkholt
|
|
Senior
Vice President, Corporate Development
|
|
April
30, 2009
|
|
Eric
H. Bjerkholt
|
|
and
Finance, Chief Financial Officer
|
|
|
|
|
|
(Principal
Financial Officer
|
|
|
|
|
|
and
Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2009
|
|
Matthew
K. Fust
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2009
|
|
Edward
Hurwitz
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2009
|
|
Dayton
Misfeldt
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2009
|
|
Homer
L. Pearce, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2009
|
|
David
C. Stump, M.D.
|
|
|
|
|
|
*By:
|
/s/
Eric H. Bjerkholt
|
|
|
Eric H. Bjerkholt
|
|
|
Attorney-in-Fact
|
EXHIBIT INDEX
|
Exhibit
Number
|
|
Description
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation of the Registrant (Delaware
(incorporated by reference to Exhibit 3.1 to the Registrant’s Annual
Report on Form 10-K/A filed on May 23, 2007).
|
|
3.2
|
|
Amended
and Restated Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed
on December 11, 2007).
|
|
3.3
|
|
Certificate
of Designation of the Series A preferred stock of the Registrant
(incorporated by reference to Exhibit 3.3 to the Registrant’s Current
Report on Form 8-K filed on April 3, 2009).
|
|
4.1
|
|
Specimen
Common Stock certificate of the Registrant (incorporated by reference to
Exhibit 4.1 to the Registrant’s Registration Statement on
Form S-1 (SEC File No. 333-121646) filed on December 23,
2004).
|
|
4.2
|
|
Investor
Rights Agreement, dated April 3, 2009, by and among the Registrant and the
purchasers identified on the signature pages thereto (incorporated by
reference to Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K filed on April 3, 2009).
|
|
10.1
|
*
|
1998
Stock Plan and Form of Stock Option Agreement (incorporated by reference
to Exhibit 10.1 to Amendment No. 1 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on January 27, 2005).
|
|
10.2
|
*
|
2001
Stock Plan and Form of Stock Option Agreement (incorporated by reference
to Exhibit 10.2 to the Registrant’s Registration Statement on
Form S-1 (SEC File No. 333-121646) filed on December 23,
2004).
|
|
10.3
|
*
|
2005
Equity Incentive Award Plan, as amended.
|
|
10.4
|
*
|
Employee
Stock Purchase Plan and Enrollment Form (incorporated by reference to
Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q
filed on November 9, 2006).
|
|
10.5
|
*
|
Form
of Indemnification Agreement for directors and executive officers
(incorporated by reference to Exhibit 10.5 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on December 23, 2004).
|
|
10.6
|
*
|
Amended
and Restated Consulting Agreement, dated August 8, 2005, by and
between the Registrant and James A. Wells (incorporated by reference to
Exhibit 10.12 to Amendment No. 4 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on September 1, 2005).
|
|
10.7
|
|
Eighth
Amended and Restated Investor Rights Agreement, dated August 30,
2004, by and among the Registrant and certain stockholders and warrant
holders (incorporated by reference to Exhibit 10.17 to the
Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on December 23, 2004).
|
|
10.8
|
*
|
Warrant,
dated April 9, 1998, issued to James A. Wells (incorporated by
reference to Exhibit 10.18 to the Registrant’s Registration Statement
on Form S-1 (SEC File No. 333-121646) filed on December 23,
2004).
|
|
10.9
|
|
Warrant,
dated December 1, 1999, issued to Three Crowns Capital (Bermuda)
Limited (incorporated by reference to Exhibit 10.19 to the
Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on December 23, 2004).
|
|
10.10
|
|
Warrant,
dated July 7, 2000, issued to Broadview Ltd. Limited and
Amendment No. 1 thereto (incorporated by reference to
Exhibit 10.20 to the Registrant’s Registration Statement on
Form S-1 (SEC File No. 333-121646) filed on December 23,
2004).
|
|
10.11
|
|
Warrant,
dated June 11, 2003, issued to General Electric Capital Corporation
(incorporated by reference to Exhibit 10.21 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on December 23, 2004).
|
|
10.12
|
|
Warrant,
dated June 21, 2004, issued to General Electric Capital Corporation
and Amendment No. 1 thereto, dated December 16, 2004
(incorporated by reference to Exhibit 10.22 to Amendment No. 2
to the Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on April 29, 2005).
|
|
10.13
|
|
Agreement
for Termination of Lease and Voluntary Surrender of Premises, dated as of
January 15, 2009, by and between the Registrant and ARE-Technology Center,
SSF, LLC (incorporated by reference to Exhibit 10.13 to the Registrant’s
Annual Report on Form 10-K for the year ended December 31,
2008, as filed with the SEC on April 3, 2009).
|
|
10.14
|
†
|
Collaboration
Agreement, dated December 18, 2002, by and between the Registrant and
Biogen Idec MA Inc. (successor to Biogen Inc.) (incorporated by
reference to Exhibit 10.26 to Amendment No. 1 to the
Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on January 27, 2005).
|
|
10.15
|
†
|
Amendment
No. 1 to Collaboration Agreement, dated June 17, 2003, between
the Registrant and Biogen Idec MA Inc. (incorporated by reference to
Exhibit 10.27 to Amendment No. 1 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on January 27, 2005).
|
|
10.16
|
†
|
Amendment
No. 2 to Collaboration Agreement, dated September 17, 2003,
between the Registrant and Biogen Idec MA Inc. (incorporated by
reference to Exhibit 10.28 to Amendment No. 1 to the
Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on January 27,
2005).
|
|
10.17
|
†
|
Collaboration
Agreement, dated August 25, 2004, between the Registrant and Biogen
Idec, Inc. (incorporated by reference to Exhibit 10.29 to Amendment
No. 2 to the Registrant’s Registration Statement on Form S-1
(SEC File No. 333-121646) filed on April 29,
2005).
|
|
10.18
|
†
|
Collaboration
Agreement, dated May 3, 2002, by and between the Registrant and
Johnson & Johnson Pharmaceutical Research &
Development, LLC (incorporated by reference to Exhibit 10.30 to
Amendment No. 1 to the Registrant’s Registration Statement on
Form S-1 (SEC File No. 333-121646) filed on January 27,
2005).
|
|
10.19
|
†
|
Amendment
to Collaboration Agreement, dated December 15, 2002, between the
Registrant and Johnson & Johnson Pharmaceutical
Research & Development, LLC (incorporated by reference to
Exhibit 10.31 to Amendment No. 1 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on January 27, 2005).
|
|
10.20
|
|
Notice
of Extension and Second Amendment to Collaboration Agreement, dated
December 15, 2003, between the Registrant and Johnson &
Johnson Pharmaceutical Research & Development, LLC
(incorporated by reference to Exhibit 10.32 to Amendment No. 1
to the Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on January 27, 2005).
|
|
10.21
|
†
|
Third
Amendment to Collaboration Agreement, dated December 22, 2004,
between the Registrant and Johnson & Johnson Pharmaceutical
Research & Development, LLC (incorporated by reference to
Exhibit 10.33 to Amendment No. 2 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on April 29, 2005).
|
|
10.22
|
†
|
License
and Collaboration Agreement, dated February 12, 2003, by and between
the Registrant and Merck & Co., Inc. (incorporated by
reference to Exhibit 10.34 to Amendment No. 1 to the
Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on January 27, 2005).
|
|
10.23
|
†
|
License
and Research Collaboration Agreement, dated July 22, 2004, by and
between the Registrant and Merck & Co., Inc.
(incorporated by reference to Exhibit 10.35 to Amendment No. 1
to the Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on January 27, 2005).
|
|
10.24
|
†
|
License
Agreement, dated October 14, 2003, by and between the Registrant and
Dainippon Sumitomo Pharma Co., Ltd. (formerly known as Dainippon
Pharmaceutical Co., Ltd.) (incorporated by reference to
Exhibit 10.36 to Amendment No. 2 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on April 29, 2005).
|
|
10.25
|
†
|
License
Agreement, dated as of April 27, 2005, between the Registrant and
Bristol-Meyers Squibb Company (incorporated by reference to
Exhibit 10.35 to Amendment No. 4 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on September 1, 2005).
|
|
10.26
|
|
Stock
Purchase Agreement, dated as of April 27, 2005, between the
Registrant and Bristol-Meyers Squibb Company (incorporated by reference to
Exhibit 10.38 to Amendment No. 2 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 333-121646)
filed on April 29, 2005).
|
|
10.27
|
|
Amendment
to Eighth Amended and Restated Investor Rights Agreement, dated as of
April 27, 2005, among the Registrant and investors listed on the
signature pages thereto (incorporated by reference to Exhibit 10.39
to Amendment No. 2 to the Registrant’s Registration Statement on
Form S-1 (SEC File No. 333-121646) filed on April 29,
2005).
|
|
10.28
|
|
Amendment
to Eighth Amended and Restated Investor Rights Agreement, dated as of
August 25, 2005, among the Registrant and the investors listed on the
signature pages thereto (incorporated by reference to Exhibit 10.39
to Amendment No. 4 to the Registrant’s Registration Statement on
Form S-1 (SEC File No. 333-121646) filed on September 1,
2005).
|
|
10.29
|
|
Warrant,
dated August 25, 2005, issued to Horizon Technology Funding Company
II LLC (incorporated by reference to Exhibit 10.40 to Amendment
No. 4 to the Registrant’s Registration Statement on Form S-1
(SEC File No. 333-121646) filed on September 1,
2005).
|
|
10.30
|
|
Warrant,
dated August 25, 2005, issued to Horizon Technology Funding Company
III LLC (incorporated by reference to Exhibit 10.41 to Amendment
No. 4 to the Registrant’s Registration Statement on Form S-1
(SEC File No. 333-121646) filed on September 1,
2005).
|
|
10.31
|
|
Warrant,
dated August 25, 2005, issued to Oxford Finance Corporation
(incorporated by reference to Exhibit 10.42 to Amendment No. 4
to the Registrant’s Registration Statement on Form S-1 (SEC File
No. 333-121646) filed on September 1, 2005).
|
|
10.32
|
*
|
Amended
and Restated 2006 Employment Commencement Incentive
Plan.
|
|
10.33
|
|
Common
Stock and Warrant Purchase Agreement, dated as of March 17, 2006,
among the Registrant and the investors listed on the signature pages
thereto (incorporated by reference to Exhibit 10.44 to the
Registrant’s Current Report on Form 8-K filed on March 22,
2006).
|
|
10.34
|
|
Form
of Warrant (incorporated by reference to Exhibit 10.46 to the
Registrant’s Current Report on Form 8-K filed on March 22,
2006).
|
|
10.35
|
†
|
Sublease,
dated December 22, 2006, by and between the Registrant and Oncology
Therapeutics Network Joint Venture, L.P., for office space located at
395 Oyster Point Boulevard, South San Francisco, California (incorporated
by reference to Exhibit 10.47 to the Registrant’s Annual Report on
Form 10-K filed on March 17,
2008).
|
|
10.36
|
*
|
Amendment,
dated December 21, 2005, to the Amended and Restated Consulting
Agreement, dated August 8, 2005, by and between the Registrant and
James A. Wells, Ph. D. (incorporated by reference to Exhibit 10.48 to
the Registrant’s Quarterly Report on Form 10-Q filed on May 9,
2007).
|
|
10.37
|
*
|
Consulting
Agreement, dated August 17, 2006, by and between the Registrant and
Homer L. Pearce, Ph. D. (incorporated by reference to Exhibit 10.49
to the Registrant’s Quarterly Report on Form 10-Q filed on
May 9, 2007).
|
|
10.38
|
*
|
Consulting
Agreement, dated September 2, 2006, by and between the Registrant and
David C. Stump, M. D. (incorporated by reference to Exhibit 10.50 to
the Registrant’s Quarterly Report on Form 10-Q filed on May 9,
2007).
|
|
10.39
|
*
|
Forms
of Stock Option Grant Notice and Stock Option Agreement under the 2005
Equity Incentive Award Plan (incorporated by reference to
Exhibit 10.52 to the Registrant’s Current Report on Form 8-K
filed on September 19, 2007).
|
|
10.40
|
*
|
Sunesis
Pharmaceuticals, Inc. 2008 Executive Bonus Program (incorporated by
reference to Exhibit 10.56 to the Registrant’s Quarterly Report on Form
10-Q filed on August 7, 2008).
|
|
10.41
|
*
|
Forms
of Stock Option Grant Notice and Stock Option Agreement under the Amended
and Restated 2006 Employment Commencement Incentive Plan (incorporated by
reference to Exhibit 10.71 to the Registrant’s Current Report on Form 8-K
filed on December 23, 2008).
|
|
10.42
|
*
|
Amended
and Restated Executive Severance Benefits Agreement, dated December 23,
2008, by and between the Registrant and Steven B. Ketchum, Ph.D.
(incorporated by reference to Exhibit 10.43 to the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2008, as filed
with the SEC on April 3, 2009).
|
|
10.43
|
*
|
Second
Amended and Restated Executive Severance Benefits Agreement, dated
December 24, 2008, by and between Registrant and Daniel N. Swisher, Jr.
(incorporated by reference to Exhibit 10.44 to the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2008, as filed
with the SEC on April 3, 2009).
|
|
10.44
|
*
|
Second
Amended and Restated Executive Severance Benefits Agreement, dated
December 24, 2008, by and between Registrant and Eric H.
Bjerkholt (incorporated by reference to Exhibit 10.45 to the
Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008, as filed with the SEC on April 3,
2009).
|
|
10.45
|
*
|
Second
Amended and Restated Executive Severance Benefits Agreement, dated
December 23, 2008, by and between Registrant and James W. Young, Ph.D.
(incorporated by reference to Exhibit 10.46 to the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2008, as filed
with the SEC on April 3, 2009).
|
|
10.46
|
*
|
Second
Amended and Restated Executive Severance Benefits Agreement, dated
December 24, 2008, by and between Registrant and Valerie L.
Pierce (incorporated by reference to Exhibit 10.47 to the
Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008, as filed with the SEC on April 3,
2009).
|
|
10.47
|
*
|
Amended
and Restated Executive Severance Benefits Agreement, dated May 27, 2008,
by and between Registrant and Daniel C. Adelman, M.D. (incorporated by
reference to Exhibit 10.63 to the Registrant’s Quarterly Report on Form
10-Q filed on August 7, 2008).
|
|
10.48
|
*
|
Amended
and Restated Executive Severance Benefits Agreement, dated May 28, 2008,
by and between Registrant and Robert S. McDowell, Ph.D. (incorporated by
reference to Exhibit 10.64 to the Registrant’s Quarterly Report on Form
10-Q filed on August 7, 2008).
|
|
10.49
|
*
|
Release
Agreement, dated June 6, 2008, by and between Registrant and Daniel C.
Adelman, M.D. (incorporated by reference to Exhibit 10.65 to the
Registrant’s Quarterly Report on Form 10-Q filed on August 7,
2008).
|
|
10.50
|
*
|
Release
Agreement, dated August 4, 2008, by and between Registrant and Robert S.
McDowell, Ph.D. (incorporated by reference to Exhibit 10.66 to the
Registrant’s Quarterly Report on Form 10-Q filed on August 7,
2008).
|
|
10.51
|
*
|
Acceptance
of Option Amendment, dated June 6, 2008, by and between Registrant and
Daniel C. Adelman, M.D. (incorporated by reference to Exhibit 10.67 to the
Registrant’s Quarterly Report on Form 10-Q filed on August 7,
2008).
|
|
10.52
|
*
|
Acceptance
of Option Amendment, dated June 27, 2008, by and between Registrant and
Robert S. McDowell, Ph.D. (incorporated by reference to Exhibit 10.68 to
the Registrant’s Quarterly Report on Form 10-Q filed on August 7,
2008).
|
|
10.53
|
*
|
Forms
of Stock Option Grant Notice and Stock Option Agreement for Automatic
Grants to Outside Directors under the 2005 Equity Incentive Award Plan
(incorporated by reference to Exhibit 10.69 to the Registrant’s Quarterly
Report on Form 10-Q filed on November 7, 2008).
|
|
10.54
|
*
|
Consulting
Agreement, dated August 5, 2008, and First Amendment to Consulting
Agreement, dated October 1, 2008, by and between Registrant and Robert S.
McDowell, Ph.D. (incorporated by reference to Exhibit 10.70 to the
Registrant’s Quarterly Report on Form 10-Q filed on November 7,
2008).
|
|
10.55
|
|
Intellectual
Property Assignment and License Termination Agreement by and between the
Registrant and SARcode Corporation, dated March 6, 2009 (incorporated by
reference to Exhibit 10.72 to the Registrant’s Current Report on Form 8-K
filed on March 10,
2009).
|
|
10.56
|
|
Form
of Amended and Restated Convertible Secured Promissory Notes issued by
SARcode Corporation to the Registrant, dated March 6, 2009 (incorporated
by reference to Exhibit 10.73 to the Registrant’s Current Report on Form
8-K filed on March 10, 2009).
|
|
10.57
|
|
Summary
of Non-Employee Director Cash Compensation
Arrangements (incorporated by reference to Exhibit 10.59 to the
Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008, as filed with the SEC on April 3,
2009).
|
|
10.58
|
†
|
Securities
Purchase Agreement, dated March 31, 2009, by and among the Registrant and
the purchasers identified on the signature pages thereto (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed on April 3, 2009).
|
|
10.59
|
|
Form
of Warrant to purchase shares of Common Stock (incorporated by reference
to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
filed on April 3, 2009).
|
|
21.1
|
|
Subsidiaries
of the Registrant (incorporated by reference to Exhibit 21.1 to
the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008, as filed with the SEC on April 3,
2009).
|
|
23.1
|
|
Consent
of Independent Registered Public Accounting Firm (incorporated
by reference to Exhibit 23.1 to the Registrant’s Annual Report on Form
10-K for the year ended December 31, 2008, as filed with
the SEC on April 3, 2009).
|
|
24.1
|
|
Power
of Attorney (included in the signature page to the Registrant’s Annual
Report on Form 10-K, filed with the SEC on April 3,
2009).
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act (incorporated by
reference to Exhibit 31.1 to the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 2008, as filed with the SEC on April
3, 2009).
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act (incorporated by
reference to Exhibit 31.2 to the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 2008, as filed with the SEC on April
3, 2009).
|
|
31.3
|
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act.
|
|
31.4
|
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act.
|
|
32.1
|
#
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14(b) or Rule 15d-14(b) of the Exchange Act (incorporated by reference
to Exhibit 32.1 to the Registrant’s Annual Report on Form
10-K for the year ended December 31, 2008, as filed with
the SEC on April 3,
2009).
|
|
*
|
Management
contract, compensatory plan or
arrangement.
|
|
†
|
Portions
of the exhibit have been omitted pursuant to a request for confidential
treatment. The omitted informationhas been filed separately with the
Securities and Exchange Commission.
|
|
#
|
In accordance with
Item 601(b)(32)(ii) of Regulation S-K and SEC Release
Nos. 33-8238 and 34-47986, Final Rule; Management’s Reports on
Internal Control over Financial Reporting and Certification of Disclosure
in Exchange Act Periodic Reports, the Certification furnished in
Exhibit 32.1 hereto is deemed to accompany this Form 10-K and
will not be filed for purposes of Section 18 of the Exchange Act.
Such certification will not be deemed incorporated by reference into any
filing under the Securities Act or the Exchange Act, except to the extent
that the registrant specifically incorporates it by
reference.
|
EXHIBIT
10.3
SUNESIS
PHARMACEUTICALS, INC.
2005
EQUITY INCENTIVE AWARD PLAN
(Amended
and Restated June 27, 2007)
(Amended
and Restated April 3, 2009)
ARTICLE
1
PURPOSE
1.1
General
. The purpose
of the Sunesis Pharmaceuticals, Inc. 2005 Equity Incentive Award Plan (the
“
Plan
”) is to promote the success and enhance the value of Sunesis
Pharmaceuticals, Inc. (the “
Company
”) by linking the personal interests of the members of the Board, employees,
consultants, officers, and executives of the Company and any Subsidiary, to
those of Company stockholders and by providing such individuals with an
incentive for outstanding performance to generate superior returns to Company
stockholders. The Plan is further intended to provide flexibility to the Company
in its ability to motivate, attract, and retain the services of members of the
Board, employees, consultants, officers, and executives of the Company upon
whose judgment, interest, and special effort the successful conduct of the
Company’s operation is largely dependent.
ARTICLE
2
DEFINITIONS
AND CONSTRUCTION
2.1
Definitions
. The
following words and phrases shall have the following meanings:
(a) “
Award
”
means an Option, a Restricted Stock award, a Stock Appreciation Right award, a
Performance Share award, a Dividend Equivalents award, a Stock Payment award, a
Restricted Stock Unit award, or a Performance-Based Award granted to a
Participant pursuant to the Plan.
(b) “
Award
Agreement
” means any written agreement, contract, or other instrument or
document evidencing an Award.
(c) “
Board
”
means the Board of Directors of the Company.
(d) “
Cause
”
includes one or more of the following: (i) the commission of an act of fraud,
embezzlement or dishonesty by a Participant that has a material adverse impact
on the Company or any successor or parent or Subsidiary thereof; (ii) a
conviction of, or plea of “guilty” or “no contest” to, a felony by a
Participant; (iii) any unauthorized use or disclosure by a Participant of
confidential information or trade secrets of the Company or any successor or
parent or Subsidiary thereof that has a material adverse impact on any such
entity or (iv) any other intentional misconduct by a Participant that has a
material adverse impact on the Company or any successor or parent or Subsidiary
thereof. However, if the term or concept of “Cause” has been defined in an
agreement between a Participant and the Company or any successor or parent or
Subsidiary thereof, then “Cause” shall have the definition set forth in such
agreement. The foregoing definition shall not in any way preclude or restrict
the right of the Company or any
successor
or parent or Subsidiary thereof to discharge or dismiss any Participant in the
service of such entity for any other acts or omissions, but such other acts or
omissions shall not be deemed, for purposes of this Plan, to constitute grounds
for termination for Cause.
(e) “
Change of
Control
” means and includes each of the following:
(1)
the acquisition, directly or indirectly, by any “person” or “group” (as
those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act
and the rules thereunder) of “beneficial ownership” (as determined pursuant to
Rule 13d-3 under the Exchange Act) of securities entitled to vote generally
in the election of directors (“voting securities”) of the Company that represent
50% or more of the combined voting power of the Company’s then outstanding
voting securities, other than:
(A)
an acquisition by a trustee or other fiduciary holding securities under
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any person controlled by the Company or by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any person
controlled by the Company, or
(B)
an acquisition of voting securities by the Company or a corporation owned,
directly or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of the stock of the Company;
Notwithstanding
the foregoing, the following event shall not constitute an “acquisition” by any
person or group for purposes of this subsection (e): an acquisition of the
Company’s securities by the Company that causes the Company’s voting securities
beneficially owned by a person or group to represent 50% or more of the combined
voting power of the Company’s then outstanding voting securities;
provided,
however,
that if a person or group shall become the beneficial
owner of 50% or more of the combined voting power of the Company’s then
outstanding voting securities by reason of share acquisitions by the Company as
described above and shall, after such share acquisitions by the Company, become
the beneficial owner of any additional voting securities of the Company, then
such acquisition shall constitute a Change of Control; or
(2)
during any period of two consecutive years, individuals who, at the
beginning of such period, constitute the Board together with any new director(s)
(other than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in clauses
(1) or (3) of this subsection (e)) whose election by the Board or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the two year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(3)
the consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of
(x) a merger, consolidation, reorganization, or business combination or
(y) a sale or other disposition of all or substantially all of the
Company’s assets or (z) the acquisition of assets or stock of another
entity, in each case
other
than a transaction:
(A)
which results in the Company’s voting securities outstanding immediately
before the transaction continuing to represent (either by remaining outstanding
or by being converted into voting securities of the Company or the person that,
as a result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Company’s assets
or otherwise succeeds to the business of the Company (the Company or such
person, the “
Successor
Entity
”)) directly or indirectly, at least a majority of the combined
voting power of the Successor Entity’s outstanding voting securities immediately
after the transaction, and
(B)
after which no person or group beneficially owns voting securities
representing 50% or more of the combined voting power of the Successor
Entity;
provided,
however,
that no person or group shall be treated for purposes
of this clause (B) as beneficially owning 50% or more of combined voting
power of the Successor Entity solely as a result of the voting power held in the
Company prior to the consummation of the transaction; or
(4)
the Company’s stockholders approve a liquidation or dissolution of the
Company.
The
Committee shall have full and final authority, which shall be exercised in its
discretion, to determine conclusively whether a Change of Control of the Company
has occurred pursuant to the above definition, and the date of the occurrence of
such Change of Control and any incidental matters relating
thereto. Notwithstanding the foregoing, a transaction shall not
constitute a Change of Control if it is a transaction effected primarily
for the purpose of financing the Company with cash, whether such transaction is
effectuated by a merger, equity financing or otherwise (unless otherwise
determined by the Committee in its discretion).
(f) “
Code
”
means the Internal Revenue Code of 1986, as amended.
(g) “
Committee
”
means the committee of the Board described in Article 12.
(h) “
Covered
Employee
” means an Employee who is, or could be, a “covered employee”
within the meaning of Section 162(m) of the Code.
(i) “
Disability
”
means, for purposes of
this Plan, that the Participant qualifies to receive long-term disability
payments under the Company’s long-term disability insurance program, as it may
be amended from time to time.
(j) “
Dividend
Equivalents
” means a right granted to a Participant pursuant to Article 8
to receive the equivalent value (in cash or Stock) of dividends paid on
Stock.
(k) “
Employee
”
means any officer or other employee (as defined in accordance with Section
3401(c) of the Code) of the Company or any Subsidiary.
(l) “
Exchange
Act
” means the Securities Exchange Act of 1934, as amended.
(m) “
Fair Market
Value
” shall mean, as of any date, the value of Stock determined as
follows:
(1) If
the Stock is listed on any established stock exchange or a national market
system, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system for such date, or if no bids or sales were reported for such date, then
the closing sales price (or the closing bid, if no sales were reported) on the
trading date immediately prior to such date during which a bid or sale occurred,
in ease case, as reported in
The Wall Street
Journal
or such other source as the Committee deems
reliable;
(2) If
the Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean of the closing
bid and asked prices for the Stock on the date prior to the date of
determination as reported in
The Wall Street
Journal
or such other source as the Committee deems reliable;
or
(3) In
the absence of an established market for the Stock, the Fair Market Value
thereof shall be determined in good faith by the Committee.
(n) “
Good
Reason
” means a Participant’s voluntary resignation following any one or
more of the following that is effected without the Participant’s written
consent: (i) a change in his or her position following the Change of Control
that materially reduces his or her duties or responsibilities, (ii) a reduction
in his or her base salary following a Change of Control, unless the base
salaries of all similarly situated individuals are similarly reduced, or (iii) a
relocation of such Participant’s place of employment following a Change of
Control by more than fifty (50) miles from such Participant’s place of
employment prior to a Change of Control. However, if the term or concept of
“Good Reason” has been defined in an agreement between a Participant and the
Company or any successor or parent or Subsidiary thereof, then “Good Reason”
shall have the definition set forth in such agreement.
(o) “
Incentive Stock
Option
” means an Option that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
(p) “
Non-Employee
Director
” means a member of the Board who qualifies as a “Non-Employee
Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor
definition adopted by the Board.
(q) “
Non-Qualified
Stock Option
” means an Option that is not intended to be an Incentive
Stock Option.
(r) “
Option
”
means a right granted to a Participant pursuant to Article 5 of the Plan to
purchase a specified number of shares of Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.
(s) “
Participant
”
means a person who, as a member of the Board, consultant to the Company or any
Subsidiary or Employee, has been granted an Award pursuant to the
Plan.
(t) “
Performance-Based
Award
” means an Award granted to selected Covered Employees pursuant to
Articles 6 and 8, but which is subject to the terms and conditions set forth in
Article 9. All Performance-Based Awards are intended to qualify as Qualified
Performance-Based Compensation.
(u) “
Performance
Criteria
” means the criteria that the Committee selects for purposes of
establishing the Performance Goal or Performance Goals for a Participant for a
Performance Period. The Performance Criteria that will be used to establish
Performance Goals are limited to the following: net earnings (either before or
after interest, taxes, depreciation and amortization), net losses, sales or
revenue, operating earnings, operating cash flow, return on net assets, return
on stockholders’ equity, return on assets, return on capital, stockholder
returns, gross or net profit margin, earnings per share, price per share of
Stock, and market share, 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 Committee shall, within the time prescribed by Section 162(m) of the
Code, define in an objective fashion the manner of calculating the Performance
Criteria it selects to use for such Performance Period for such
Participant.
(v) “
Performance
Goals
” means, for a Performance Period, the goals established in writing
by the Committee for the Performance Period based upon the Performance Criteria.
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
Committee, in its discretion, may, within the time prescribed by Section 162(m)
of the Code, adjust or modify the calculation of Performance Goals for such
Performance Period in order to prevent the dilution or enlargement of the rights
of Participants (i) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event, or development, or (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 in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.
(w) “
Performance
Period
” means the one or more periods of time, which may be of varying
and overlapping durations, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to, and the payment of, a Performance-Based
Award.
(x) “
Performance
Share
” means a right granted to a Participant pursuant to Article 8, to
receive cash, Stock, or other Awards, the payment of which is contingent upon
achieving certain performance goals established by the Committee.
(y) “
Plan
”
means this Sunesis Pharmaceuticals, Inc. 2005 Equity Incentive Award Plan, as it
may be amended from time to time.
(z) “
Public Trading
Date
” means the first date upon which Stock is listed (or approved for
listing) upon notice of issuance on any securities exchange or designated (or
approved for designation) upon notice of issuance as a national market security
on an interdealer quotation system.
(aa) “
Qualified
Performance-Based Compensation
” means any compensation that is intended
to qualify as “qualified performance-based compensation” as described in
Section 162(m)(4)(C) of the Code.
(bb) “
Restricted
Stock
” means Stock awarded to a Participant pursuant to Article 6 that is
subject to certain restrictions and to risk of forfeiture.
(cc) “
Restricted Stock
Unit
” means a right to receive a specified number of shares of Stock
during specified time periods pursuant to Article 8.
(dd) “
Stock
”
means the common stock of the Company and such other securities of the Company
that may be substituted for Stock pursuant to Article 11.
(ee) “
Stock
Appreciation Right
” or “
SAR
” means
a right granted pursuant to Article 7 to receive a payment equal to the excess
of the Fair Market Value of a specified number of shares of Stock on the date
the SAR is exercised over the Fair Market Value on the date the SAR was granted
as set forth in the applicable Award Agreement.
(ff) “
Stock
Payment
” means (a) a payment in the form of shares of Stock, or (b) an
option or other right to purchase shares of Stock, as part of any bonus,
deferred compensation or other arrangement, made in lieu of all or any portion
of the compensation, granted pursuant to Article 8.
(gg) “
Subsidiary
”
means any corporation or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or indirectly by the
Company.
ARTICLE
3
SHARES
SUBJECT TO THE PLAN
3.1
Number of
Shares
.
(a) Subject
to Article 11, the aggregate number of shares of Stock which may be issued or
transferred pursuant to Awards under the Plan shall be one million seven hundred
seventy-nine thousand three hundred ninety-six (1,779,396) shares, plus the
number of shares of Common Stock subject to each option granted under the
Sunesis Pharmaceuticals, Inc. 1998 Stock Plan and the Sunesis Pharmaceuticals,
Inc. 2001 Stock Plan (the “
Existing
Plans
”) before the Public Trading Date that expire or are canceled
without having been exercised in full or shares of Stock that are repurchased by
the Company pursuant to the terms of such options.
In addition to the
foregoing, subject to Article 11, commencing on the first day of the Company’s
2006 fiscal year and on the first day of each fiscal year thereafter during the
term of the Plan, the number of shares of Stock which may be issued or
transferred pursuant to Awards under the Plan shall be increased by that number
of shares of Stock equal to the least of (i) four percent (4%) of the
Company’s outstanding shares of Stock on such date, (ii) one million
eighty-two thousand three hundred fifty-two (1,082,352) shares of Stock or
(iii) a lesser amount determined by the
Board.
Notwithstanding anything to the contrary herein, the maximum aggregate number of
shares of Stock that may be issued or transferred pursuant to Awards under the
Plan during the term of the Plan is eleven million two hundred ninety-four
thousand one hundred twelve (11,294,112) shares, subject to Article 11. The
payment of Dividend Equivalents in conjunction with any outstanding Awards shall
not be counted against the shares available for issuance under the
Plan.
(b) To
the extent that an Award terminates, expires, or lapses for any reason, any
shares of Stock subject to the Award shall again be available for the grant of
an Award pursuant to the Plan. Additionally, any shares of Stock tendered or
withheld to satisfy the grant or exercise price or tax withholding obligation
pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange
rule, shares of Stock issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the
Company or any Subsidiary shall not be counted against shares of Stock available
for grant pursuant to this Plan.
(c) Notwithstanding
the provisions of this Section 3.1 no shares of Stock may again be optioned,
granted or awarded if such action would cause an Incentive Stock Option to fail
to qualify as an Incentive Stock Option under Code Section 422.
3.2
Stock Distributed
.
Any Stock distributed pursuant to an Award may consist, in whole or in part, of
authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.
3.3
Limitation on Number of
Shares Subject to Awards
. Notwithstanding any provision in the Plan to
the contrary, and subject to Article 11, the maximum number of shares of Stock
with respect to one or more Awards that may be granted to any one Participant
during a calendar year shall be two hundred thirty-five thousand two hundred
ninety-four (235,294).
ARTICLE
4
ELIGIBILITY
AND PARTICIPATION
4.1
Eligibility
.
(a) General.
Persons eligible to participate in this Plan include Employees, consultants to
the Company or any Subsidiary and all members of the Board, as determined by the
Committee.
(b) Foreign
Participants. In order to assure the viability of Awards granted to Participants
employed in foreign countries, the Committee may provide for such special terms
as it may consider necessary or appropriate to accommodate differences in local
law, tax policy, or custom. Moreover, the Committee may approve such supplements
to, or amendments, restatements, or alternative versions of, the Plan as it may
consider necessary or appropriate for such purposes without thereby affecting
the terms of the Plan as in effect for any other purpose;
provided, however
, that no such supplements, amendments, restatements, or alternative versions
shall increase the share limitations contained in Sections 3.1 and 3.3 of the
Plan.
4.2
Actual Participation
.
Subject to the provisions of the Plan, the Committee may, from time to time,
select from among all eligible individuals, those to whom Awards shall be
granted and shall determine the nature and amount of each Award. No individual
shall have any right to be granted an Award pursuant to this Plan.
ARTICLE
5
STOCK
OPTIONS
5.1
General
. The
Committee is authorized to grant Options to Participants on the following terms
and conditions:
(a) Exercise
Price. The exercise price per share of Stock subject to an Option shall be
determined by the Committee and set forth in the Award Agreement;
provided
that
the exercise price for any Option shall not be less than par value of a share of
Stock on the date of grant.
(b) Time
And Conditions Of Exercise. The Committee shall determine the time or times at
which an Option may be exercised in whole or in part,
provided
that
the term of any Option granted under the Plan shall not exceed ten years,
and
provided
further,
that in the case of a Non-Qualified Stock Option,
such Option shall be exercisable for one year after the date of the
Participant’s death, provided that this one (1) year period does not exceed the
Option’s ten (10) year term, as described above. The Committee shall also
determine the performance or other conditions, if any, that must be satisfied
before all or part of an Option may be exercised.
(c) Payment.
The Committee shall determine the methods by which the exercise price of an
Option may be paid, the form of payment, including, without limitation, cash,
promissory note bearing interest at no less than such rate as shall then
preclude the imputation of interest under the Code, shares of Stock held for
longer than six months having a Fair Market Value on the date of delivery equal
to the aggregate exercise price of the Option or exercised portion thereof, or
other property acceptable to the Committee (including through the delivery of a
notice that the Participant has placed a market sell order with a broker with
respect to shares of Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net proceeds of
the sale to the Company in satisfaction of the Option exercise price,
provided
that
payment of such proceeds is then made to the Company upon settlement of such
sale), and the methods by which shares of Stock shall be delivered or deemed to
be delivered to Participants. Notwithstanding any other provision of the Plan to
the contrary, no Participant who is a member of the Board or an “executive
officer” of the Company within the meaning of Section 13(k) of the Exchange Act
shall be permitted to pay the exercise price of an Option in any method which
would violate Section 13(k).
(d) Evidence
Of Grant. All Options shall be evidenced by a written Award Agreement between
the Company and the Participant. The Award Agreement shall include such
additional provisions as may be specified by the Committee.
5.2
Incentive Stock
Options
. Incentive Stock Options shall be granted only to
Employees
who are employed by the Company or any subsidiary corporation within the meaning
of Code Section 424(f) and the terms of any Incentive Stock Options granted
pursuant to the Plan must comply with the following additional provisions of
this Section 5.2:
(a) Exercise
Price. The exercise price per share of Stock shall be set by the Committee,
provided
that the exercise
price for any Incentive Stock Option shall not be less than 100% of the Fair
Market Value on the date of grant.
(b) Expiration
Of Option. An Incentive Stock Option may not be exercised to any extent by
anyone after the first to occur of the following events:
(1) Ten
years from the date it is granted, unless an earlier time is set in the Award
Agreement.
(2) One
year after the date of the Participant’s termination of employment or service on
account of Disability or death, unless in the case of death a shorter or longer
period is designated in the Award Agreement. Upon the Participant’s Disability
or death, any Incentive Stock Options exercisable at the Participant’s
Disability or death may be exercised by the Participant’s legal representative
or representatives, by the person or persons entitled to do so pursuant to the
Participant’s last will and testament, or, if the Participant fails to make
testamentary disposition of such Incentive Stock Option or dies intestate, by
the person or persons entitled to receive the Incentive Stock Option pursuant to
the applicable laws of descent and distribution.
(c) Individual
Dollar Limitation. The aggregate Fair Market Value (determined as of the time
the Option is granted) of all shares of Stock with respect to which Incentive
Stock Options are first exercisable by a Participant in any calendar year may
not exceed $100,000.00 or such other limitation as imposed by Section 422(d) of
the Code, or any successor provision. To the extent that Incentive Stock Options
are first exercisable by a Participant in excess of such limitation, the excess
shall be considered Non-Qualified Stock Options.
(d) Ten
Percent Owners. An Incentive Stock Option shall be granted to any individual
who, at the date of grant, owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company (or any
parent and subsidiary corporations, within the meaning of Code Section 424(e)
and (f)) only if such Option is granted at a price that is not less than 110% of
Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.
(e) Transfer
Restriction. The Participant shall give the Company prompt notice of any
disposition of shares of Stock acquired by exercise of an Incentive Stock Option
within (1) two years from the date of grant of such Incentive Stock Option or
(2) one year after the transfer of such shares of Stock to the
Participant.
(f) Expiration
Of Incentive Stock Options. No Award of an Incentive Stock Option may be made
pursuant to this Plan after the Expiration Date (as defined in Section
13.2).
(g) Right
To Exercise. During a Participant’s lifetime, an Incentive Stock Option may be
exercised only by the Participant.
5.3
Granting Of Options To
Independent Directors
.
(a) During
the term of the Plan, a person who first becomes a Non-Employee Director after
the Public Trading Date automatically shall be granted an Option to purchase
30,000 shares of Stock (an “Initial Option”). Following the Public Trading Date
and commencing on the Company’s 2006 annual meeting of the stockholders,
Non-Employee Directors automatically shall be granted an Option to purchase
10,000 shares of Stock effective as of each annual meeting of the stockholders
(an “Annual Option”);
provided
, he or
she continues to serve as member of the Board as of such date. For the avoidance
of doubt, an Non-Employee Director elected for the first time to the Board at an
annual meeting of stockholders shall only receive an Initial Option in
connection with such election, and shall not receive an Annual Option on the
date following such meeting as well. Members of the Board who are employees of
the Company who subsequently retire from the Company and remain on the Board
will not receive an Initial Option grant but to the extent they are otherwise
eligible, will receive, at each annual meeting of stockholders after his or her
retirement from employment with the Company, an Annual Option
grant.
(b) Options
granted to Non-Employee Directors shall be Non-Qualifed Stock Options. The per
Share price of each Option granted to an Non-Employee Director shall equal 100%
of the Fair Market Value of a share of Common Stock on the date the Option is
granted. Initial Options shall become vested and exercisable in two (2) equal
annual installments over the two (2) year period commencing with the date of
grant. Annual Options shall become vested and exercisable in twelve (12) equal
monthly installments over the twelve (12) month period following their date of
grant. The term of each Option granted to an Non-Employee Director shall be ten
(10) years from the date the Option is granted. Upon a Director’s termination of
membership on the Board for any reason, his or her Option granted under Section
5.3(a) shall remain exercisable for twelve (12) months following his or her
termination of membership on the Board (or such longer period as the Board may
determine in its discretion on or after the date of grant of such Option).
Unless otherwise determined by the Board on or after the date of grant of such
Option, no portion of an Option granted under Section 5.3(a) which is
unexercisable at the time of an Non-Employee Director’s termination of
membership on the Board shall thereafter become exercisable.
ARTICLE
6
RESTRICTED
STOCK AWARDS
6.1
Grant of Restricted
Stock
. The Committee is authorized to make Awards of Restricted Stock to
any Participant selected by the Committee in such amounts and subject to such
terms and conditions as determined by the Committee. All Awards of Restricted
Stock shall be evidenced by a written Restricted Stock Award
Agreement.
6.2
Issuance and
Restrictions
. Restricted Stock shall be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation,
limitations
on the right to vote Restricted Stock or the right to receive dividends on the
Restricted Stock). These restrictions may lapse separately or in combination at
such times, pursuant to such circumstances, in such installments, or otherwise,
as the Committee determines at the time of the grant of the Award or
thereafter.
6.3
Forfeiture
. Except as
otherwise determined by the Committee at the time of the grant of the Award or
thereafter, upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited;
provided, however
, that the Committee may provide in any Restricted Stock Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to Restricted Stock.
6.4
Certificates For Restricted
Stock
. Restricted Stock granted pursuant to the Plan may be evidenced in
such manner as the Committee shall determine. If certificates representing
shares of Restricted Stock are registered in the name of the Participant,
certificates must bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Restricted Stock, and the Company may, at
its discretion, retain physical possession of the certificate until such time as
all applicable restrictions lapse.
ARTICLE
7
STOCK
APPRECIATION RIGHTS
7.1
Grant of Stock
Appreciation
Rights
.
A Stock Appreciation
Right may be granted to any Participant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with
the grant of an Option, (b) with respect to a previously granted Option, or
(c) independent of an Option. A Stock Appreciation Right shall be subject
to such terms and conditions not inconsistent with the Plan as the Committee
shall impose and shall be evidenced by an Award Agreement.
7.2
Coupled Stock Appreciation
Rights
.
(a) A
Coupled Stock Appreciation Right (“
CSAR
”)
shall be related to a particular Option and shall be exercisable only when and
to the extent the related Option is exercisable.
(b) A
CSAR may be granted to a Participant for no more than the number of shares
subject to the simultaneously or previously granted Option to which it is
coupled.
(c) A
CSAR shall entitle the Participant (or other person entitled to exercise the
Option pursuant to the Plan) to surrender to the Company unexercised a portion
of the Option to which the CSAR relates (to the extent then exercisable pursuant
to its terms) and to receive from the Company in exchange therefor an amount
determined by multiplying the difference obtained by subtracting the Option
exercise price from the Fair Market Value of a share of Stock on the date of
exercise of the CSAR by the number of shares of Stock with respect to which the
CSAR
shall
have been exercised, subject to any limitations the Committee may
impose.
7.3
Independent Stock
Appreciation Rights
.
(a) An
Independent Stock Appreciation Right (“
ISAR
”)
shall be unrelated to any Option and shall have a term set by the Committee. An
ISAR shall be exercisable in such installments as the Committee may determine.
An ISAR shall cover such number of shares of Stock as the Committee may
determine. The exercise price per share of Stock subject to each ISAR shall be
set by the Committee;
provided, however
, that, the Committee in its sole and absolute discretion may provide that the
ISAR may be exercised subsequent to a termination of employment or service, as
applicable, or following a Change of Control of the Company, or because of the
Participant’s retirement, death or disability, or otherwise.
(b) An
ISAR shall entitle the Participant (or other person entitled to exercise the
ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR
(to the extent then exercisable pursuant to its terms) and to receive from the
Company an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the ISAR from the Fair Market Value
of a share of Stock on the date of exercise of the ISAR by the number of shares
of Stock with respect to which the ISAR shall have been exercised, subject to
any limitations the Committee may impose.
7.4
Payment and Limitations on
Exercise
.
(a) Payment
of the amounts determined under Section 7.2(c) and 7.3(b) above shall be in
cash, in Stock (based on its Fair Market Value as of the date the Stock
Appreciation Right is exercised) or a combination of both, as determined by the
Committee.
(b) To
the extent any payment under Section 7.2(c) or 7.3(b) is effected in Stock it
shall be made subject to satisfaction of all provisions of Article 5 above
pertaining to Options.
ARTICLE
8
OTHER
TYPES OF AWARDS
8.1
Performance Share
Awards
.
Any
Participant selected by the Committee may be granted one or more Performance
Share awards which may be denominated in a number of shares of Stock or in a
dollar value of shares of Stock and which may be linked to any one or more of
the Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates or over
any period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular
Participant.
8.2
Dividend
Equivalents
.
(a) Any
Participant selected by the Committee may be granted Dividend Equivalents based
on the dividends declared on the shares of Stock that are subject to any
Award, to
be credited as of dividend payment dates, during the period between the date the
Award is granted and the date the Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Stock by such formula and at such time and subject
to such limitations as may be determined by the Committee.
(b) Dividend
Equivalents granted with respect to Options or SARs that are intended to be
Qualified Performance-Based Compensation shall be payable, with respect to
pre-exercise periods, regardless of whether such Option or SAR is subsequently
exercised.
8.3
Stock
Payments
.
Any
Participant selected by the Committee may receive Stock Payments in the manner
determined from time to time by the Committee. The number of shares shall be
determined by the Committee and may be based upon the Performance Criteria or
other specific performance criteria determined appropriate by the Committee,
determined on the date such Stock Payment is made or on any date
thereafter.
8.4
Restricted Stock
Units
.
Any
Participant selected by the Committee may be granted an award of Restricted
Stock Units in the manner determined from time to time by the Committee. The
number of Restricted Stock Units shall be determined by the Committee and may be
linked to the Performance Criteria or other specific performance criteria
determined to be appropriate by the Committee, in each case on a specified date
or dates or over any period or periods determined by the Committee. Stock
underlying a Restricted Stock Unit award will not be issued until the Restricted
Stock Unit award has vested, pursuant to a vesting schedule or performance
criteria set by the Committee. Unless otherwise provided by the Committee, a
Participant awarded Restricted Stock Units shall have no rights as a Company
stockholder with respect to such Restricted Stock Units until such time as the
Restricted Stock Units have vested and the Stock underlying the Restricted Stock
Units has been issued.
8.5
Term
.
The term
of any Award of Performance Shares, Dividend Equivalents, Stock Payments or
Restricted Stock Units shall be set by the Committee in its
discretion.
8.6
Exercise or Purchase
Price
.
The
Committee may establish the exercise or purchase price of any Award of
Performance Shares, Restricted Stock Units or Stock Payments;
provided, however
, that such price shall not be less than the par value of a share of Stock,
unless otherwise permitted by applicable state law.
8.7
Exercise Upon Termination of
Employment or Service
.
An Award of Performance
Shares, Dividend Equivalents, Restricted Stock Units and Stock Payments shall
only be exercisable or
payable
while the Participant is an Employee, consultant to the Company or a member of
the Board, as applicable; provided, however, that the Committee in its sole and
absolute discretion may provide that an Award of Performance Shares, Dividend
Equivalents, Stock Payments or Restricted Stock Units may be exercised or paid
subsequent to a termination of employment or service, as applicable, or
following a Change of Control of the Company, or because of the Participant’s
retirement, death or disability, or otherwise; provided, however, that any such
provision with respect to Performance Shares shall be subject to the
requirements of Section 162(m) of the Code that apply to Qualified
Performance-Based Compensation.
8.8
Form of
Payment
.
Payments
with respect to any Awards granted under this Article 8 shall be made in cash,
in Stock or a combination of both, as determined by the Committee.
8.9
Award Agreement
. All
Awards under this Article 8 shall be subject to such additional terms and
conditions as determined by the Committee and shall be evidenced by a written
Award Agreement.
ARTICLE
9
PERFORMANCE-BASED
AWARDS
9.1
Purpose
. The purpose
of this Article 9 is to provide the Committee the ability to qualify Awards
other than Options and SARs and that are granted pursuant to Articles 6 and 8 as
Qualified Performance-Based Compensation. If the Committee, in its discretion,
decides to grant a Performance-Based Award to a Covered Employee, the provisions
of this Article 9 shall control over any contrary provision contained in
Articles 6 or 8;
provided, however
, that the Committee may in its discretion grant Awards to Covered Employees
that are based on Performance Criteria or Performance Goals but that do not
satisfy the requirements of this Article 9.
9.2
Applicability
. This
Article 9 shall apply only to those Covered Employees selected by the Committee
to receive Performance-Based Awards. The designation of a Covered Employee as a
Participant for a Performance Period shall not in any manner entitle the
Participant to receive an Award for the period. Moreover, designation of a
Covered Employee as a Participant for a particular Performance Period shall not
require designation of such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a Participant
shall not require designation of any other Covered Employees as a Participant in
such period or in any other period.
9.3
Procedures With Respect to
Performance-Based Awards
. To the extent necessary to comply with the
Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Articles 6 and 8 which may be
granted to one or more Covered Employees, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in
writing, (i) designate one or more Covered Employees, (ii) select the
Performance
Criteria applicable to the Performance Period, (iii) establish the Performance
Goals, and amounts of such Awards, as applicable, which may be earned for such
Performance Period, and (iv) specify the relationship between Performance
Criteria and the Performance Goals and the amounts of such Awards, as
applicable, to be earned by each Covered Employee for such Performance Period.
Following the completion of each Performance Period, the Committee shall certify
in writing whether the applicable Performance Goals have been achieved for such
Performance Period. In determining the amount earned by a Covered Employee, the
Committee shall have the right to reduce or eliminate (but not to increase) the
amount payable at a given level of performance to take into account additional
factors that the Committee may deem relevant to the assessment of individual or
corporate performance for the Performance Period.
9.4
Payment of Performance-Based
Awards
. Unless otherwise provided in the applicable Award Agreement, a
Participant must be employed by the Company or a Subsidiary on the day a
Performance-Based Award for such Performance Period is paid to the Participant.
Furthermore, a Participant shall be eligible to receive payment pursuant to a
Performance-Based Award for a Performance Period only if the Performance Goals
for such period are achieved. In determining the amount earned under a
Performance-Based Award, the Committee may reduce or eliminate the amount of the
Performance-Based Award earned for the Performance Period, if in its sole and
absolute discretion, such reduction or elimination is appropriate.
9.5
Additional
Limitations
. Notwithstanding any other provision of the Plan, any Award
which is granted to a Covered Employee and is intended to constitute Qualified
Performance-Based Compensation shall be subject to any additional limitations
set forth in Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as qualified performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
amended to the extent necessary to conform to such
requirements.
ARTICLE
10
PROVISIONS
APPLICABLE TO AWARDS
10.1
Stand-Alone and Tandem
Awards
. Awards granted pursuant to the Plan may, in the discretion of the
Committee, be granted either alone, in addition to, or in tandem with, any other
Award granted pursuant to the Plan. Awards granted in addition to or in tandem
with other Awards may be granted either at the same time as or at a different
time from the grant of such other Awards.
10.2
Award Agreement
.
Awards under the Plan shall be evidenced by Award Agreements that set forth the
terms, conditions and limitations for each Award which may include the term of
an Award, the provisions applicable in the event the Participant’s employment or
service terminates, and the Company’s authority to unilaterally or bilaterally
amend, modify, suspend, cancel or rescind an Award.
10.3
Limits on Transfer
.
No right or interest of a Participant in any Award may be pledged, encumbered,
or hypothecated to or in favor of any party other than the Company or a
Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Company or a Subsidiary. Except as otherwise
provided by the Committee, no Award shall be assigned, transferred, or otherwise
disposed of by a Participant other than by will or the laws of descent and
distribution. The Committee by express provision in the Award or an amendment
thereto may permit an Award (other than an Incentive Stock Option) to be
transferred to, exercised by and paid to certain persons or entities related to
the Participant, including but not limited to members of the Participant’s
family, charitable institutions, or trusts or other entities whose beneficiaries
or beneficial owners are members of the Participant’s family and/or charitable
institutions, or to such other persons or entities as may be expressly approved
by the Committee, pursuant to such conditions and procedures as the Committee
may establish. Any permitted transfer may be subject to the condition that the
Committee receive evidence satisfactory to it that the transfer is being made
for estate and/or tax planning purposes (or to a “blind trust” in connection
with the Participant’s termination of employment or service with the Company or
a Subsidiary to assume a position with a governmental, charitable, educational
or similar non-profit institution) and on a basis consistent with the Company’s
lawful issue of securities.
10.4
Beneficiaries
.
Notwithstanding Section 10.3, a Participant may, in the manner determined by the
Committee, designate a beneficiary to exercise the rights of the Participant and
to receive any distribution with respect to any Award upon the Participant’s
death. A beneficiary, legal guardian, legal representative, or other person
claiming any rights pursuant to the Plan is subject to all terms and conditions
of the Plan and any Award Agreement applicable to the Participant, except to the
extent the Plan and Award Agreement otherwise provide, and to any additional
restrictions deemed necessary or appropriate by the Committee. If the
Participant is married and resides in a community property state, a designation
of a person other than the Participant’s spouse as his beneficiary with respect
to more than 50% of the Participant’s interest in the Award shall not be
effective without the prior written consent of the Participant’s spouse. If no
beneficiary has been designated or survives the Participant, payment shall be
made to the person entitled thereto pursuant to the Participant’s will or the
laws of descent and distribution. Subject to the foregoing, a beneficiary
designation may be changed or revoked by a Participant at any time provided the
change or revocation is filed with the Committee.
10.5
Stock Certificates
.
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 Board has
determined, with advice of counsel, 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 or traded. All Stock certificates delivered
pursuant to the Plan are subject to any stop-transfer orders and other
restrictions as the Committee deems necessary or advisable to comply with
federal, state, or foreign jurisdiction, securities or other laws, rules and
regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Committee
may place legends on any Stock certificate to reference restrictions applicable
to the Stock. In addition to the terms and conditions provided herein, the Board
may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to
comply with any such laws, regulations, or requirements. The Committee
shall
have the right to require any Participant 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
Committee.
ARTICLE
11
CHANGES
IN CAPITAL STRUCTURE
11.1
Adjustments
. In the
event of any stock dividend, stock split, combination or exchange of shares,
merger, consolidation, spin-off, recapitalization or other distribution (other
than normal cash dividends) of Company assets to stockholders, or any other
change affecting the shares of Stock or the share price of the Stock, the
Committee shall make such proportionate adjustments, if any, as the Committee in
its discretion may deem appropriate to reflect such change with respect to (i)
the aggregate number and type of shares that may be issued under the Plan
(including, but not limited to, adjustments of the limitations in Sections 3.1
and 3.3); (ii) the terms and conditions of any outstanding Awards (including,
without limitation, any applicable performance targets or criteria with respect
thereto); and (iii) the grant or exercise price per share for any outstanding
Awards under the Plan. Any adjustment affecting an Award intended as Qualified
Performance-Based Compensation shall be made consistent with the requirements of
Section 162(m) of the Code.
11.2
Effect of a Change of
Control When Awards Are Not Assumed
. If a Change of Control occurs and a
Participant’s Awards are not assumed by the surviving or successor entity or its
parent or Subsidiary and such successor does not substitute substantially
similar awards for those outstanding under the Plan, such Awards shall become
fully exercisable and/or payable as applicable, and all forfeiture restrictions
on such Awards shall lapse. Upon, or in anticipation of, a Change of Control,
the Committee may cause any and all Awards outstanding hereunder to terminate at
a specific time in the future and shall give each Participant the right to
exercise such Awards during a period of time as the Committee, in its sole and
absolute discretion, shall determine. The Committee shall have sole discretion
to determine whether an Award has been assumed by the surviving or successor
entity or its parent or Subsidiary or whether such successor has substituted
substantially similar awards for those outstanding under the Plan in connection
with a Change of Control.
11.3
Effect of Change of Control
When Awards Are Assumed; Termination Following Change of
Control
.
(a) In
the event of a Change of Control where a Participant’s Awards are assumed by the
surviving or successor entity or its parent or Subsidiary or such successor
substitutes substantially similar awards for those outstanding under the Plan,
then fifty percent (50%) of such Participant’s unvested Awards shall become
fully exercisable and/or payable as applicable, and all forfeiture restrictions
on such Awards shall lapse, immediately prior to such Change of
Control.
(b) In
the event of a Change of Control where a Participant’s Awards are assumed by the
surviving or successor entity or its parent or Subsidiary or such successor
substitutes substantially similar awards for those outstanding under the Plan,
if within twelve (12) months
following
such Change of Control (i) the Participant’s employment or service with the
surviving or successor entity or its parent or Subsidiary is terminated without
Cause or (ii) such Participant voluntarily terminates such Participant’s
employment or service with Good Reason, then such Participant’s remaining
unvested Awards (including any substituted awards) shall become fully
exercisable and/or payable as applicable, and all forfeiture restrictions on
such Awards (including any substituted awards) shall lapse, on the date of
termination. Such Awards (including any substituted awards) shall remain
exercisable, as applicable, until the earlier of the expiration date of the
Award or three (3) months following such Participant’s cessation of employment
or service.
11.4
Outstanding Awards - Certain
Mergers
. Subject to any required action by the stockholders of the
Company, in the event that the Company shall be the surviving corporation in any
merger or consolidation (except a merger or consolidation as a result of which
the holders of shares of Stock receive securities of another corporation), each
Award outstanding on the date of such merger or consolidation shall pertain to
and apply to the securities that a holder of the number of shares of Stock
subject to such Award would have received in such merger or
consolidation.
11.5
Outstanding Awards - Other
Changes
. In the event of any other change in the capitalization of the
Company or corporate change other than those specifically referred to in this
Article 11, the Committee may, in its absolute discretion, make such adjustments
in the number and class of shares subject to Awards outstanding on the date on
which such change occurs and in the per share grant or exercise price of each
Award as the Committee may consider appropriate to prevent dilution or
enlargement of rights.
11.6
No Other Rights
.
Except as expressly provided in the Plan, no Participant shall have any rights
by reason of any subdivision or consolidation of shares of stock of any class,
the payment of any dividend, any increase or decrease in the number of shares of
stock of any class or any dissolution, liquidation, merger, or consolidation of
the Company or any other corporation. Except as expressly provided in the Plan
or pursuant to action of the Committee under the Plan, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number of shares of Stock subject to an Award or
the grant or exercise price of any Award.
ARTICLE
12
ADMINISTRATION
12.1
Committee
. Unless and
until the Board delegates administration to a Committee as set forth below, the
Plan shall be administered by the Board. The Board may delegate administration
of the Plan to a Committee or Committees of one or more members of the Board,
and the term “Committee” shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be
to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. Notwithstanding the foregoing, however, from and after the
Public Trading Date, a Committee of the Board shall administer the Plan and the
Committee shall consist solely of two or more members of the Board each of whom
is both an “outside director,” within the meaning of Section 162(m) of the Code,
and a Non-Employee Director. Within the scope of such authority, the Board or
the Committee may (i) delegate to a committee of one or more members of the
Board who are not “outside directors,” within the meaning of Section 162(m) of
the Code the authority to grant awards under the Plan to eligible persons who
are either (1) not then “covered employees,” within the meaning of Section
162(m) of the Code and are not expected to be “covered employees” at the time of
recognition of income resulting from such award or (2) not persons with respect
to whom the Company wishes to comply with Section 162(m) of the Code and/or (ii)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors, the authority to grant awards under the Plan to eligible
persons who are not then subject to Section 16 of the Exchange Act. The Board
may abolish the Committee at any time and/or revest in the Board the
administration of the Plan. Appointment of Committee members shall be effective
upon acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may only be
filled by the Board.
12.2
Action by the
Committee
. A majority of the Committee shall constitute a quorum. The
acts of a majority of the members present at any meeting at which a quorum is
present, and acts approved in writing by a majority of the Committee in lieu of
a meeting, shall be deemed the acts of the Committee. Each member of the
Committee is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by any officer or other employee of the
Company or any Subsidiary, the Company’s independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the
Plan.
12.3
Authority of
Committee
. Subject to any specific designation in the Plan, the Committee
has the exclusive power, authority and discretion to:
(a) Designate
Participants to receive Awards;
(b) Determine
the type or types of Awards to be granted to each Participant;
(c) Determine
the number of Awards to be granted and the number of shares of Stock to which an
Award will relate;
(d) Determine
the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any
reload provision, any restrictions or limitations on the Award, any schedule for
lapse of forfeiture restrictions or restrictions on the exercisability of an
Award, and accelerations or waivers thereof, any provisions related to
non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines;
provided, however
, that the Committee shall not have the authority to accelerate the vesting or
waive the
forfeiture
of any Performance-Based Awards;
(e) Determine
whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock, other
Awards, or other property, or an Award may be canceled, forfeited, or
surrendered;
(f) Prescribe
the form of each Award Agreement, which need not be identical for each
Participant;
(g) Decide
all other matters that must be determined in connection with an
Award;
(h) Establish,
adopt, or revise any rules and regulations as it may deem necessary or advisable
to administer the Plan;
(i) Interpret
the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and
(j) Make
all other decisions and determinations that may be required pursuant to the Plan
or as the Committee deems necessary or advisable to administer the
Plan.
12.4
Decisions Binding
.
The Committee’s interpretation of the Plan, any Awards granted pursuant to the
Plan, any Award Agreement and all decisions and determinations by the Committee
with respect to the Plan are final, binding, and conclusive on all
parties.
ARTICLE
13
EFFECTIVE
AND EXPIRATION DATE
13.1
Effective Date
. The
Plan is effective as the Public Trading Date;
provided
that the Plan has
been approved by the Company’s stockholders prior to such date.
13.2
Expiration Date
. The
Plan will expire on, and no Award may be granted pursuant to the Plan after, the
earlier of the tenth anniversary of (i) the date this Plan is approved by the
Company’s stockholders or (ii) the date this Plan is approved by the Board (the
“
Expiration Date
”). Any Awards that are outstanding on the Expiration
Date shall remain in force according to the terms of the Plan and the applicable
Award Agreement. Each Award Agreement shall provide that it will expire on the
tenth anniversary of the date of grant of the Award to which it
relates.
ARTICLE
14
AMENDMENT,
MODIFICATION, AND TERMINATION
14.1
Amendment, Modification, and
Termination
. With the approval of the Board, at any time and from time to
time, the Committee may terminate, amend or modify the Plan;
provided, however
, that (i) to the extent necessary and desirable to comply with any applicable
law, regulation, or stock exchange rule, the Company shall obtain stockholder
approval of any
Plan
amendment in such a manner and to such a degree as required, and (ii)
shareholder approval is required for any amendment to the Plan that (A)
increases the number of shares available under the Plan (other than any
adjustment as provided by Article 11), (B) permits the Committee to grant
Options with an exercise price that is below Fair Market Value on the date of
grant, or (C) permits the Committee to extend the exercise period for an Option
beyond ten years from the date of grant.
14.2
Awards Previously
Granted
. No termination, amendment, or modification of the Plan shall
adversely affect in any material way any Award previously granted pursuant to
the Plan without the prior written consent of the Participant.
ARTICLE
15
GENERAL
PROVISIONS
15.1
No Rights to Awards
.
No Participant, employee, or other person shall have any claim to be granted any
Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Participants, employees, and other persons
uniformly.
15.2
No Stockholders
Rights
. No Award gives the Participant any of the rights of a stockholder
of the Company unless and until shares of Stock are in fact issued to such
person in connection with such Award.
15.3
Withholding
. The
Company or any Subsidiary shall have the authority and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy federal, state, local and foreign taxes (including the Participant’s
FICA obligation) required by law to be withheld with respect to any taxable
event concerning a Participant arising as a result of this Plan. The Committee
may in its discretion and in satisfaction of the foregoing requirement allow a
Participant to elect to have the Company withhold shares of Stock otherwise
issuable under an Award (or allow the return of shares of Stock) having a Fair
Market Value equal to the sums required to be withheld. Notwithstanding any
other provision of the Plan, the number of shares of Stock which may be withheld
with respect to the issuance, vesting, exercise or payment of any Award (or
which may be repurchased from the Participant of such Award within six months
after such shares of Stock were acquired by the Participant from the Company) in
order to satisfy the Participant’s federal, state, local and foreign income and
payroll tax liabilities with respect to the issuance, vesting, exercise or
payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal, state, local and foreign income tax and payroll tax purposes that are
applicable to such supplemental taxable income.
15.4
No Right to Employment or
Services
. Nothing in the Plan or any Award Agreement shall interfere with
or limit in any way the right of the Company or any Subsidiary to terminate any
Participant’s employment or services at any time, nor confer upon any
Participant any right to continue in the employ or service of the Company or any
Subsidiary.
15.5
Unfunded Status of
Awards
. The Plan is intended to be an “unfunded” plan for
incentive
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award Agreement shall
give the Participant any rights that are greater than those of a general
creditor of the Company or any Subsidiary.
15.6
Indemnification
. To
the extent allowable pursuant to applicable law, each member of the Committee or
of the Board shall be indemnified and held harmless by the Company from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by such member in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action or failure to act pursuant to the Plan and
against and from any and all amounts paid by him or her in satisfaction of
judgment in such action, suit, or proceeding against him or her,
provided
he
or she gives the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled
pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
15.7
Relationship to Other
Benefits
. No payment pursuant to the Plan shall be taken into account in
determining any benefits pursuant to any pension, retirement, savings, profit
sharing, group insurance, welfare or other benefit plan of the Company or any
Subsidiary except to the extent otherwise expressly provided in writing in such
other plan or an agreement thereunder.
15.8
Expenses
. The
expenses of administering the Plan shall be borne by the Company and its
Subsidiaries.
15.9
Titles and Headings
.
The titles and headings of the Sections in the Plan are for convenience of
reference only and, in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.
15.10
Fractional Shares
. No
fractional shares of Stock shall be issued and the Committee shall determine, in
its discretion, whether cash shall be given in lieu of fractional shares or
whether such fractional shares shall be eliminated by rounding up or down as
appropriate.
15.11
Limitations Applicable to
Section 16 Persons
. Notwithstanding any other provision of the Plan, the
Plan, and any Award granted or awarded to any Participant who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations
set forth in any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent permitted
by applicable law, the Plan and Awards granted or awarded hereunder shall be
deemed amended to the extent necessary to conform to such applicable exemptive
rule.
15.12
Government And Other
Regulations
. The obligation of the Company to make
payment
of awards in Stock or otherwise shall be subject to all applicable laws, rules,
and regulations, and to such approvals by government agencies as may be
required. The Company shall be under no obligation to register pursuant to the
Securities Act of 1933, as amended, any of the shares of Stock paid pursuant to
the Plan. If the shares paid pursuant to the Plan may in certain circumstances
be exempt from registration pursuant to the Securities Act of 1933, as amended,
the Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
15.13
Governing Law
. The
Plan and all Award Agreements shall be construed in accordance with and governed
by the laws of the State of Delaware.
22
EXHIBIT
10.32
SUNESIS
PHARMACEUTICALS, INC.
2006
EMPLOYMENT COMMENCEMENT INCENTIVE PLAN
ADOPTED
BY THE BOARD OF DIRECTORS ON NOVEMBER 29, 2005
EFFECTIVE
AS OF JANUARY 1, 2006
(AMENDED
AND RESTATED ON SEPTEMBER 13, 2006,
DECEMBER
6, 2006, DECEMBER 5, 2007, DECEMBER 18, 2008 AND APRIL 3, 2009)
ARTICLE
1
PURPOSE
1.1 General.
(a)
Eligible Stock Award
Recipients.
Only Eligible Participants may receive Awards under the
Plan.
(b)
General Purpose.
The purpose
of the Plan is to promote the success and enhance the value of Sunesis
Pharmaceuticals, Inc. (the “
Company
”)
by linking the personal interests of Eligible Participants to those of Company
stockholders and by providing such individuals with an incentive for outstanding
performance to generate superior returns to Company stockholders. The Plan is
further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of Eligible Participants upon whose
judgment, interest, and special effort the successful conduct of the Company’s
operation will be largely dependent.
ARTICLE
2
DEFINITIONS
AND CONSTRUCTION
2.1
Definitions.
The
following words and phrases shall have the following meanings:
(a)
“
Award
”
means an Option, a Restricted Stock award, a Stock Appreciation Right award, a
Performance Share award, a Dividend Equivalents award, a Stock Payment award, or
a Restricted Stock Unit award granted to an Eligible Participant pursuant to the
Plan.
(b)
“
Award
Agreement
”
means any written agreement, contract, or other instrument or document
evidencing an Award.
(c)
“
Board
”
means the Board of Directors of the Company.
(d)
“
Cause
”
includes one or more of the following: (i) the commission of an act of fraud,
embezzlement or dishonesty by a Participant that has a material adverse impact
on
the
Company or any successor or parent or Subsidiary thereof; (ii) a conviction of,
or plea of “guilty” or “no contest” to, a felony by a Participant; (iii) any
unauthorized use or disclosure by a Participant of confidential information or
trade secrets of the Company or any successor or parent or Subsidiary thereof
that has a material adverse impact on any such entity or (iv) any other
intentional misconduct by a Participant that has a material adverse impact on
the Company or any successor or parent or Subsidiary thereof. However, if the
term or concept of “Cause” has been defined in an agreement between a
Participant and the Company or any successor or parent or Subsidiary thereof,
then “Cause” shall have the definition set forth in such agreement. The
foregoing definition shall not in any way preclude or restrict the right of the
Company or any successor or parent or Subsidiary thereof to discharge or dismiss
any Participant in the service of such entity for any other acts or omissions,
but such other acts or omissions shall not be deemed, for purposes of this Plan,
to constitute grounds for termination for Cause.
(e)
“
Change of
Control
” means and includes each of the following:
(1)
the
acquisition, directly or indirectly, by any “person” or “group” (as those terms
are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the
rules thereunder) of “beneficial ownership” (as determined pursuant to Rule
13d-3 under the Exchange Act) of securities entitled to vote generally in the
election of directors (“voting securities”) of the Company that represent 50% or
more of the combined voting power of the Company’s then outstanding voting
securities, other than:
(A)
an
acquisition by a trustee or other fiduciary holding securities under any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any person controlled by the Company or by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any person controlled
by the Company, or
(B)
an
acquisition of voting securities by the Company or a corporation owned, directly
or indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the stock of the Company;
Notwithstanding
the foregoing, the following event shall not constitute an “acquisition” by any
person or group for purposes of this subsection (e): an acquisition of the
Company’s securities by the Company that causes the Company’s voting securities
beneficially owned by a person or group to represent 50% or more of the combined
voting power of the Company’s then outstanding voting securities;
provided, however
, that if a
person or group shall become the beneficial owner of 50% or more of the combined
voting power of the Company’s then outstanding voting securities by reason of
share acquisitions by the Company as described above and shall, after such share
acquisitions by the Company, become the beneficial owner of any additional
voting securities of the Company, then such acquisition shall constitute a
Change of Control; or
(2)
during
any period of two consecutive years, individuals who, at the beginning of such
period, constitute the Board together with any new director(s) (other than a
director designated by a person who shall have entered into an agreement with
the Company to effect a transaction described in clauses (1) or (3) of this
subsection (e)) whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at
least
two-thirds of the directors then still in office who either were directors at
the beginning of the two year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or
(3)
the
consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination or (y) a sale or
other disposition of all or substantially all of the Company’s assets or (z) the
acquisition of assets or stock of another entity, in each case other than a
transaction:
(A)
which
results in the Company’s voting securities outstanding immediately before the
transaction continuing to represent (either by remaining outstanding or by being
converted into voting securities of the Company or the person that, as a result
of the transaction, controls, directly or indirectly, the Company or owns,
directly or indirectly, all or substantially all of the Company’s assets or
otherwise succeeds to the business of the Company (the Company or such person,
the “
Successor
Entity
”)) directly or indirectly, at least a majority of the combined
voting power of the Successor Entity’s outstanding voting securities immediately
after the transaction, and
(B)
after
which no person or group beneficially owns voting securities representing 50% or
more of the combined voting power of the Successor Entity;
provided, however
, that no
person or group shall be treated for purposes of this clause (B) as beneficially
owning 50% or more of combined voting power of the Successor Entity solely as a
result of the voting power held in the Company prior to the consummation of the
transaction; or
(4)
the
Company’s stockholders approve a liquidation or dissolution of the
Company.
The
Committee shall have full and final authority, which shall be exercised in its
discretion, to determine conclusively whether a Change of Control of the Company
has occurred pursuant to the above definition, and the date of the occurrence of
such Change of Control and any incidental matters relating
thereto. Notwithstanding the foregoing, a transaction shall not
constitute a Change of Control if it is a transaction effected primarily for the
purpose of financing the Company with cash, whether such transaction is
effectuated by a merger, equity financing or otherwise (unless otherwise
determined by the Committee in its discretion).
(f)
“
Code
”
means the Internal Revenue Code of 1986, as amended.
(g)
“
Committee
”
means the Board or a committee of the Board described in Article
11.
(h)
“
Director
”
means a member of the Board.
(i)
“
Disability
”
means, for purposes of the Plan, that the Participant qualifies to receive
long-term disability payments under the Company’s long-term disability insurance
program, as it may be amended from time to time.
(j)
“
Dividend
Equivalents
” means a right granted to a Participant pursuant to
Article 8
to receive the equivalent value (in cash or Stock) of dividends paid on
Stock.
(k)
“
Eligible
Participant
” means any Employee who has not previously been an Employee
or Director of the Company or a Subsidiary, or is commencing employment with the
Company or a Subsidiary following a bona fide period of non-employment by the
Company or a Subsidiary, if he or she is granted an Award in connection with his
or her commencement of employment with the Company or a Subsidiary and such
grant is an inducement material to his or her entering into employment with the
Company or a Subsidiary. The Board may in its discretion adopt procedures from
time to time to ensure that an Employee is eligible to participate in the Plan
prior to the granting of any Awards to such Employee under the Plan (including,
without limitation, a requirement, that each such Employee certify to the
Company prior to the receipt of an Award under the Plan that he or she has not
been previously employed by the Company or a Subsidiary, or if previously
employed, has had a bona fide period of non-employment, and that the grant of
Awards under the Plan is an inducement material to his or her agreement to enter
into employment with the Company or a Subsidiary).
(l)
“
Employee
”
means any officer or other employee (as defined in accordance with Section
3401(c) of the Code) of the Company or any Subsidiary.
(m)
“
Exchange
Act
” means the Securities Exchange Act of 1934, as amended.
(n)
“
Fair Market
Value
” means, as of any date, the value of Stock determined as
follows:
(1)
If
the Stock is listed on any established stock exchange or a national market
system, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system for such date, or if no bids or sales were reported for such date, then
the closing sales price (or the closing bid, if no sales were reported) on the
trading date immediately prior to such date during which a bid or sale occurred,
in each case, as reported in The Wall Street Journal or such other source as the
Committee deems reliable;
(2)
If
the Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean of the closing
bid and asked prices for the Stock on such date, or if no closing bid and asked
prices were reported for such date, the date immediately prior to such date
during which closing bid and asked prices were quoted for the Stock, in each
case, as reported in The Wall Street Journal or such other source as the
Committee deems reliable; or
(3)
In
the absence of an established market for the Stock, the Fair Market Value
thereof shall be determined in good faith by the Committee.
(o)
“
Good
Reason
” means a Participant’s voluntary resignation following any one or
more of the following that is effected without the Participant’s written
consent: (i) a change in his or her position following the Change of Control
that materially reduces his or her duties or responsibilities, (ii) a reduction
in his or her base salary following a Change of Control, unless the base
salaries of all similarly situated individuals are similarly reduced, or (iii) a
relocation
of such Participant’s place of employment following a Change of Control by more
than fifty (50) miles from such Participant’s place of employment prior to a
Change of Control. However, if the term or concept of “Good Reason” has been
defined in an agreement between a Participant and the Company or any successor
or parent or Subsidiary thereof, then “Good Reason” shall have the definition
set forth in such agreement.
(p)
“
Incentive Stock
Option
” means an Option that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto. Incentive Stock
Options may not be granted under the Plan.
(q)
“
Independent
Director
” means a Director who is not an Employee of the Company and who
qualifies as “independent” within the meaning of NASD Rule 4200(a)(15), if the
Company’s securities are traded on the Nasdaq National Market, or the
requirements of any other established stock exchange on which the Company’s
securities are traded, as such rules or requirements may be amended from time to
time.
(r)
“
NASD
”
means the National Association of Securities Dealers, Inc.
(s)
“
Non-Qualified
Stock Option
” means an Option that is not intended to be an Incentive
Stock Option.
(t)
“
Option
”
means a right granted to a Participant pursuant to Article 5 of the Plan to
purchase a specified number of shares of Stock at a specified price during
specified time periods. An Option must be a Non-Qualified Stock
Option.
(u)
“
Participant
”
means an Eligible Participant who has been granted an Award pursuant to the
Plan.
(v)
“
Performance
Share
” means a right granted to a Participant pursuant to Article 8, to
receive cash, Stock, or other Awards, the payment of which is contingent upon
achieving certain performance goals established by the Committee.
(w)
“
Plan
”
means this Sunesis Pharmaceuticals, Inc. 2006 Employment Commencement Incentive
Plan, as it may be amended from time to time.
(x)
“
Restricted
Stock
” means Stock awarded to a Participant pursuant to Article 6 that is
subject to certain restrictions and to risk of forfeiture.
(y)
“
Restricted Stock
Unit
” means a right to receive a specified number of shares of Stock
during specified time periods pursuant to Article 8.
(z)
“
Stock
”
means the common stock of the Company and such other securities of the Company
that may be substituted for Stock pursuant to Article 10.
(aa)
“
Stock
Appreciation Right
” or “
SAR
” means
a right granted pursuant to Article 7 to receive a payment equal to the excess
of the Fair Market Value of a specified number of shares of Stock on the date
the SAR is exercised over the Fair Market Value on the date the SAR was granted
as set forth in the applicable Award Agreement.
(bb)
“
Stock
Payment
” means (a) a payment in the form of shares of Stock, or (b) an
option or other right to purchase shares of Stock, as part of any bonus,
deferred compensation or other arrangement, made in lieu of all or any portion
of the compensation, granted pursuant to Article 8.
(cc)
“
Subsidiary
”
means any corporation or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or indirectly by the
Company.
ARTICLE
3
SHARES
SUBJECT TO THE PLAN
3.1 Number
of Shares.
(a)
Subject
to Article 10, the aggregate number of shares of Stock which may be issued or
transferred pursuant to Awards under the Plan shall be 625,000
shares.
The
payment of Dividend Equivalents in conjunction with any outstanding Awards shall
not be counted against the shares available for issuance under the
Plan.
(b)
To
the extent that an Award terminates, expires, or lapses for any reason, any
shares of Stock subject to the Award shall again be available for the grant of
an Award pursuant to the Plan. Additionally, any shares of Stock tendered or
withheld to satisfy the grant or exercise price or tax withholding obligation
pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange
rule, shares of Stock issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the
Company or any Subsidiary shall not be counted against shares of Stock available
for grant pursuant to the Plan.
3.2
Stock Distributed.
Any Stock
distributed pursuant to an Award may consist, in whole or in part, of authorized
and unissued Stock, treasury Stock or Stock purchased on the open
market.
ARTICLE
4
ELIGIBILITY
AND PARTICIPATION
4.1
Eligibility
.
(a)
General
. Awards may be granted
only to Eligible Participants. All Options granted under the Plan shall be
Non-Qualified Stock Options.
(b)
Foreign Participants
. In order
to assure the viability of Awards granted to Participants employed in foreign
countries, the Committee may provide for such special terms as it may consider
necessary or appropriate to accommodate differences in local law, tax policy, or
custom. Moreover, the Committee may approve such supplements to, or amendments,
restatements, or alternative versions of, the Plan as it may consider necessary
or appropriate for
such
purposes without thereby affecting the terms of the Plan as in effect for any
other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Sections 3.1 of the Plan.
4.2
Actual Participation.
Subject
to the provisions of the Plan, the Committee may, from time to time, select from
among all eligible individuals, those to whom Awards shall be granted and shall
determine the nature and amount of each Award. No individual shall have any
right to be granted an Award pursuant to the Plan.
ARTICLE
5
STOCK
OPTIONS
5.1
General.
Options may be
granted to Eligible Participants on the following terms and
conditions:
(a)
Exercise Price
. The exercise
price per share of Stock subject to an Option shall be determined by the
Committee and set forth in the Award Agreement;
provided
that the exercise
price for any Option shall not be less than Fair Market Value of a share of
Stock on the date of grant.
(b)
Time And Conditions Of
Exercise
. The Committee shall determine the time or times at which an
Option may be exercised in whole or in part;
provided
, that the term of
any Option granted under the Plan shall not exceed ten years; and
provided, further
, that such
Option shall be exercisable for not less than one year after the date of the
Participant’s death. The Committee shall also determine the performance or other
conditions, if any, that must be satisfied before all or part of an Option may
be exercised.
(c)
Payment
. The Committee shall
determine the methods by which the exercise price of an Option may be paid, the
form of payment, including, without limitation, cash, promissory note bearing
interest at no less than such rate as shall then preclude the imputation of
interest under the Code, shares of Stock held for longer than six months having
a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof, or other property acceptable
to the Committee (including through the delivery of a notice that the
Participant has placed a market sell order with a broker with respect to shares
of Stock then issuable upon exercise of the Option, and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price;
provided
, that payment of
such proceeds is then made to the Company upon settlement of such sale), and the
methods by which shares of Stock shall be delivered or deemed to be delivered to
Participants. Notwithstanding any other provision of the Plan to the contrary,
no Participant who is a member of the Board or an “executive officer” of the
Company within the meaning of Section 13(k) of the Exchange Act shall be
permitted to pay the exercise price of an Option in any method which would
violate Section 13(k).
(d)
Evidence Of Grant
. All Options
shall be evidenced by a written Award Agreement between the Company and the
Participant. The Award Agreement shall include such additional provisions as may
be specified by the Committee.
ARTICLE
6
RESTRICTED
STOCK AWARDS
6.1
Grant of Restricted Stock.
Restricted Stock may be awarded to any Eligible Participant in such
amounts and subject to such terms and conditions as determined by the Committee.
All Awards of Restricted Stock shall be evidenced by a written Restricted Stock
Award Agreement.
6.2
Issuance and Restrictions.
Restricted Stock shall be subject to such restrictions on transferability
and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to
receive dividends on the Restricted Stock). These restrictions may lapse
separately or in combination at such times, pursuant to such circumstances, in
such installments, or otherwise, as the Committee determines at the time of the
grant of the Award or thereafter.
6.3
Forfeiture.
Except as
otherwise determined by the Committee at the time of the grant of the Award or
thereafter, upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited;
provided, however
, that the
Committee may provide in any Restricted Stock Award Agreement that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.
6.4
Certificates For Restricted Stock.
Restricted Stock granted pursuant to the Plan may be evidenced in such
manner as the Committee shall determine. If certificates representing shares of
Restricted Stock are registered in the name of the Participant, certificates
must bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and the Company may, at its
discretion, retain physical possession of the certificate until such time as all
applicable restrictions lapse.
ARTICLE
7
STOCK
APPRECIATION RIGHTS
7.1
Grant of Stock Appreciation Rights.
A Stock Appreciation Right may be granted to any Eligible Participant
selected by the Committee. A Stock Appreciation Right may be granted (a) in
connection and simultaneously with the grant of an Option, (b) with respect to a
previously granted Option, or (c) independent of an Option. A Stock Appreciation
Right shall be subject to such terms and conditions not inconsistent with the
Plan as the Committee shall impose and shall be evidenced by an Award
Agreement.
7.2
Coupled Stock Appreciation
Rights
.
(a)
A
Coupled Stock Appreciation Right (“
CSAR
”)
shall be related to a particular Option and shall be exercisable only when and
to the extent the related Option is exercisable.
(b)
A
CSAR may be granted to a Participant for no more than the number of shares
subject to the simultaneously or previously granted Option to which it is
coupled.
(c)
A
CSAR shall entitle the Participant (or other person entitled to exercise the
Option pursuant to the Plan) to surrender to the Company unexercised a portion
of the Option to which the CSAR relates (to the extent then exercisable pursuant
to its terms) and to receive from the Company in exchange therefor an amount
determined by multiplying the difference obtained by subtracting the Option
exercise price from the Fair Market Value of a share of Stock on the date of
exercise of the CSAR by the number of shares of Stock with respect to which the
CSAR shall have been exercised, subject to any limitations the Committee may
impose.
7.3
Independent Stock Appreciation
Rights
.
(a)
An
Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option
and shall have a term set by the Committee. An ISAR shall be exercisable in such
installments as the Committee may determine. An ISAR shall cover such number of
shares of Stock as the Committee may determine. The exercise price per share of
Stock subject to each ISAR shall be set by the Committee;
provided, however
, that, the
Committee in its sole and absolute discretion may provide that the ISAR may be
exercised subsequent to a termination of employment or service, as applicable,
or following a Change of Control, or because of the Participant’s retirement,
death or Disability, or otherwise.
(b)
An
ISAR shall entitle the Participant (or other person entitled to exercise the
ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR
(to the extent then exercisable pursuant to its terms) and to receive from the
Company an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the ISAR from the Fair Market Value
of a share of Stock on the date of exercise of the ISAR by the number of shares
of Stock with respect to which the ISAR shall have been exercised, subject to
any limitations the Committee may impose.
7.4
Payment and Limitations on
Exercise
.
(a)
Payment
of the amounts determined under Section 7.2(c) and 7.3(b) above shall be in
cash, in Stock (based on its Fair Market Value as of the date the Stock
Appreciation Right is exercised) or a combination of both, as determined by the
Committee.
(b)
To
the extent any payment under Section 7.2(c) or 7.3(b) is effected in Stock it
shall be made subject to satisfaction of all provisions of Article 5 above
pertaining to Options.
ARTICLE
8
OTHER
TYPES OF AWARDS
8.1
Performance Share Awards.
Any
Eligible Participant selected by the Committee may be granted one or more
Performance Share awards which may be denominated in a number of shares of Stock
or in a dollar value of shares of Stock and which may be linked to any one or
more specific performance criteria determined appropriate by the Committee, in
each case on a
specified
date or dates or over any period or periods determined by the Committee. In
making such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular
Participant.
8.2
Dividend Equivalents.
Any
Eligible Participant selected by the Committee may be granted Dividend
Equivalents based on the dividends declared on the shares of Stock that are
subject to any Award, to be credited as of dividend payment dates, during the
period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such
formula and at such time and subject to such limitations as may be determined by
the Committee.
8.3
Stock Payments.
Any Eligible
Participant selected by the Committee may receive Stock Payments in the manner
determined from time to time by the Committee. The number of shares shall be
determined by the Committee and may be based upon specific performance criteria
determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.
8.4
Restricted Stock Units.
Any
Eligible Participant selected by the Committee may be granted an award of
Restricted Stock Units in the manner determined from time to time by the
Committee. The number of Restricted Stock Units shall be determined by the
Committee and may be linked to the Performance Criteria or other specific
performance criteria determined to be appropriate by the Committee, in each case
on a specified date or dates or over any period or periods determined by the
Committee. Stock underlying a Restricted Stock Unit award will not be issued
until the Restricted Stock Unit award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Participant awarded Restricted Stock Units shall have no rights as
a Company stockholder with respect to such Restricted Stock Units until such
time as the Restricted Stock Units have vested and the Stock underlying the
Restricted Stock Units has been issued.
8.5
Term
. The term of
any Award of Performance Shares, Dividend Equivalents, Stock Payments or
Restricted Stock Units shall be set by the Committee in its
discretion.
8.6
Exercise or Purchase Price.
The Committee may establish the exercise or purchase price of any Award
of Performance Shares, Restricted Stock Units or Stock Payments; provided,
however, that such price shall not be less than the par value of a share of
Stock, unless otherwise permitted by applicable state law.
8.7
Exercise Upon Termination of
Employment or Service.
An Award of Performance Shares, Dividend
Equivalents, Restricted Stock Units and Stock Payments shall only be exercisable
or payable while the Participant is an Employee or Director of the Company or a
Subsidiary; provided, however, that the Committee in its sole and absolute
discretion may provide that an Award of Performance Shares, Dividend
Equivalents, Stock Payments or Restricted Stock Units may be exercised or paid
subsequent to a termination of employment or service, as applicable, or
following a Change of Control, or because of the Participant’s retirement, death
or Disability, or otherwise.
8.8
Form of Payment.
Payments with
respect to any Awards granted under this Article 8 shall be made in cash, in
Stock or a combination of both, as determined by the Committee.
8.9
Award Agreement.
All Awards
under this Article 8 shall be subject to such additional terms and conditions as
determined by the Committee and shall be evidenced by a written Award
Agreement.
ARTICLE
9
PROVISIONS
APPLICABLE TO AWARDS
9.1
Stand-Alone and Tandem Awards
.
Awards granted pursuant to the Plan may, in the discretion of the Committee, be
granted either alone, in addition to, or in tandem with, any other Award granted
pursuant to the Plan. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
9.2
Award Agreement.
Awards under
the Plan shall be evidenced by Award Agreements that set forth the terms,
conditions and limitations for each Award which may include the term of an
Award, the provisions applicable in the event the Participant’s employment or
service terminates, and the Company’s authority to unilaterally or bilaterally
amend, modify, suspend, cancel or rescind an Award.
9.3
Limits on Transfer.
No right
or interest of a Participant in any Award may be pledged, encumbered, or
hypothecated to or in favor of any party other than the Company or a Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Company or a Subsidiary. No Award shall be
assigned, transferred, or otherwise disposed of by a Participant other than by
will or the laws of descent and distribution.
9.4
Beneficiaries.
Notwithstanding
Section 9.3, a Participant may, in the manner determined by the Committee,
designate a beneficiary to exercise the rights of the Participant and to receive
any distribution with respect to any Award upon the Participant’s death. A
beneficiary, legal guardian, legal representative, or other person claiming any
rights pursuant to the Plan is subject to all terms and conditions of the Plan
and any Award Agreement applicable to the Participant, except to the extent the
Plan and Award Agreement otherwise provide, and to any additional restrictions
deemed necessary or appropriate by the Committee. If the Participant is married
and resides in a community property state, a designation of a person other than
the Participant’s spouse as his beneficiary with respect to more than 50% of the
Participant’s interest in the Award shall not be effective without the prior
written consent of the Participant’s spouse. If no beneficiary has been
designated or survives the Participant, payment shall be made to the person
entitled thereto pursuant to the Participant’s will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
9.5
Stock Certificates.
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 Board has
determined, with advice of counsel, 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 or traded. All Stock certificates delivered
pursuant to the Plan are subject to any stop-transfer orders and other
restrictions as the Committee deems necessary or advisable to comply with
federal, state, or foreign jurisdiction, securities or other laws, rules and
regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Committee
may place legends on any Stock certificate to reference restrictions applicable
to the Stock. In addition to the terms and conditions provided herein, the Board
may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to
comply with any such laws, regulations, or requirements. The Committee shall
have the right to require any Participant 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
Committee.
ARTICLE
10
CHANGES
IN CAPITAL STRUCTURE
10.1
Adjustments.
In the event of
any stock dividend, stock split, combination or exchange of shares, merger,
consolidation, spin-off, recapitalization or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other change
affecting the shares of Stock or the share price of the Stock, the Committee
shall make such proportionate adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change with respect to (i) the
aggregate number and type of shares that may be issued under the Plan
(including, but not limited to, adjustments of the limitations in Sections 3.1);
(ii) the terms and conditions of any outstanding Awards (including, without
limitation, any applicable performance targets or criteria with respect
thereto); and (iii) the grant or exercise price per share for any outstanding
Awards under the Plan.
10.2
Effect of a Change of Control When
Awards Are Not Assumed.
If a Change of Control occurs and a Participant’s
Awards are not assumed by the surviving or successor entity or its parent or
Subsidiary and such successor does not substitute substantially similar awards
for those outstanding under the Plan, such Awards shall become fully exercisable
and/or payable as applicable, and all forfeiture restrictions on such Awards
shall lapse. Upon, or in anticipation of, a Change of Control, the Committee may
cause any and all Awards outstanding hereunder to terminate at a specific time
in the future and shall give each Participant the right to exercise such Awards
during a period of time as the Committee, in its sole and absolute discretion,
shall determine. The Committee shall have sole discretion to determine whether
an Award has been assumed by the surviving or successor entity or its parent or
Subsidiary or whether such successor has substituted substantially similar
awards for those outstanding under the Plan in connection with a Change of
Control.
10.3 Effect
of Change of Control When Awards Are Assumed; TerminationFollowing Change of
Control.
(a)
In
the event of a Change of Control where a Participant’s Awards are assumed by the
surviving or successor entity or its parent or Subsidiary or such successor
substitutes substantially similar awards for those outstanding under the Plan,
then fifty percent (50%) of such Participant’s unvested Awards shall become
fully exercisable and/or payable as applicable, and all forfeiture restrictions
on such Awards shall lapse, immediately prior to such Change of
Control.
(b)
In
the event of a Change of Control where a Participant’s Awards are assumed by the
surviving or successor entity or its parent or Subsidiary or such successor
substitutes substantially similar awards for those outstanding under the Plan,
if within twelve (12) months following such Change of Control (i) the
Participant’s employment or service with the surviving or successor entity or
its parent or Subsidiary is terminated without Cause or (ii) such Participant
voluntarily terminates such Participant’s employment or service with Good
Reason, then such Participant’s remaining unvested Awards (including any
substituted awards) shall become fully exercisable and/or payable as applicable,
and all forfeiture restrictions on such Awards (including any substituted
awards) shall lapse, on the date of termination. Such Awards (including any
substituted awards) shall remain exercisable, as applicable, until the earlier
of the expiration date of the Award or three (3) months following such
Participant’s cessation of employment or service.
10.4
Outstanding Awards - Certain Mergers.
Subject to any required action by the stockholders of the Company, in the
event that the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Stock receive securities of another corporation), each Award
outstanding on the date of such merger or consolidation shall pertain to and
apply to the securities that a holder of the number of shares of Stock subject
to such Award would have received in such merger or consolidation.
10.5
Outstanding Awards - Other Changes.
In the event of any other change in the capitalization of the Company or
corporate change other than those specifically referred to in this Article 10,
the Committee may, in its absolute discretion, make such adjustments in the
number and class of shares subject to Awards outstanding on the date on which
such change occurs and in the per share grant or exercise price of each Award as
the Committee may consider appropriate to prevent dilution or enlargement of
rights.
10.6
No Other Rights.
Except as
expressly provided in the Plan, no Participant shall have any rights by reason
of any subdivision or consolidation of shares of stock of any class, the payment
of any dividend, any increase or decrease in the number of shares of stock of
any class or any dissolution, liquidation, merger, or consolidation of the
Company or any other corporation. Except as expressly provided in the Plan or
pursuant to action of the Committee under the Plan, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number of shares of Stock subject to an Award or the grant
or exercise price of any Award.
ARTICLE
11
ADMINISTRATION
11.1
Committee.
Unless and until
the Board delegates administration to the Committee as set forth below, the Plan
shall be administered by the Board, which shall, in such event, constitute the
“Committee” for the purposes of the Plan. Any action taken by the Board in
connection with the administration of the Plan shall not be deemed approved by
the Board unless such actions are approved by a majority of the Independent
Directors. The Board may delegate administration of the Plan to the Committee,
and the term “Committee” shall apply to any person or persons to whom such
authority has been delegated;
provided, however
, that such
Committee be comprised of a majority of or solely two or more Independent
Directors. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in the Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the
Board.
The Board
may abolish the Committee at any time and revest in the Board the administration
of the Plan. Any action taken by the Board in connection with the administration
of the Plan shall continue to not be deemed approved by the Board unless such
actions are approved by a majority of the Independent Directors. Appointment of
Committee members shall be effective upon acceptance of appointment. Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee may only be filled by the Board.
11.2
Action by the Committee.
A
majority of the Committee shall constitute a quorum. The acts of a majority of
the members present at any meeting at which a quorum is present, and acts
approved in writing by a majority of the Committee in lieu of a meeting, shall
be deemed the acts of the Committee. Each member of the Committee is entitled
to, in good faith, rely or act upon any report or other information furnished to
that member by any officer or other employee of the Company or any Subsidiary,
the Company’s independent certified public accountants, or any executive
compensation consultant or other professional retained by the Company to assist
in the administration of the Plan.
11.3
Authority of Committee.
Subject to any specific designation in the Plan, the Committee has the
exclusive power, authority and discretion to:
(a)
Adopt
procedures from time to time in the Committee’s discretion to ensure that an
Employee is eligible to participate in the Plan prior to the granting of any
Awards to such Employee under the Plan (including, without limitation, a
requirement, if any, that each such Employee certify to the Company prior to the
receipt of an Award under the Plan that he or she has not been previously
employed by the Company or a Subsidiary, or if previously employed, has had a
bona fide period of non-employment, and that the grant of Awards under the Plan
is an inducement material to his or her agreement to enter into employment with
the Company or a Subsidiary);
(b)
Designate
Participants to receive Awards;
(c)
Determine
the type or types of Awards to be granted to each Participant;
(d)
Determine
the number of Awards to be granted and the number of shares of Stock to which an
Award will relate;
(e)
Determine
the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any
reload provision, any restrictions or limitations on the Award, any schedule for
lapse of forfeiture restrictions or restrictions on the exercisability of an
Award, and accelerations or waivers thereof, any provisions related to
non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines;
(f)
Determine
whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in cash, Stock, other
Awards, or other property, or an Award may be canceled, forfeited, or
surrendered;
(g)
Prescribe
the form of each Award Agreement, which need not be identical for each
Participant;
(h)
Decide
all other matters that must be determined in connection with an
Award;
(i)
Establish,
adopt, or revise any rules and regulations as it may deem necessary or advisable
to administer the Plan;
(j)
Interpret
the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and
(k)
Make
all other decisions and determinations that may be required pursuant to the Plan
or as the Committee deems necessary or advisable to administer the
Plan.
12.4
Decisions
Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant
to the Plan, any Award Agreement and all decisions and determinations by the
Committee with respect to the Plan are final, binding, and conclusive on all
parties.
ARTICLE
12
EFFECTIVE
AND EXPIRATION DATE
12.1
Effective Date.
The Plan is
effective as of the date of its adoption by the Board (the “
Effective
Date
”).
12.2
Expiration Date.
The Plan will
expire on, and no Award may be granted pursuant to the Plan after December 31,
2015 (the “
Expiration
Date
”). Any Awards that are outstanding on the Expiration Date shall
remain in force according to the terms of the Plan and the applicable Award
Agreement. Each Award Agreement shall provide that it will expire on the
tenth
anniversary of the date of grant of the Award to which it relates.
ARTICLE
13
AMENDMENT,
MODIFICATION, AND TERMINATION
13.1
Amendment, Modification, and
Termination.
With the approval of the Board, at any time and from time to
time, the Committee may terminate, amend or modify the Plan;
provided, however
, that to
the extent necessary and desirable to comply with any applicable law,
regulation, or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
13.2
Awards Previously Granted.
No
termination, amendment, or modification of the Plan shall adversely affect in
any material way any Award previously granted pursuant to the Plan without the
prior written consent of the Participant.
ARTICLE
14
GENERAL
PROVISIONS
14.1
No Rights to Awards.
No
Participant, employee, or other person shall have any claim to be granted any
Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Participants, employees, and other persons
uniformly.
14.2
No Stockholders Rights.
No
Award gives the Participant any of the rights of a stockholder of the Company
unless and until shares of Stock are in fact issued to such person in connection
with such Award.
14.3
Withholding.
The Company or
any Subsidiary shall have the authority and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, local and foreign taxes (including the Participant’s FICA
obligation) required by law to be withheld with respect to any taxable event
concerning a Participant arising as a result of the Plan. The Committee may in
its discretion and in satisfaction of the foregoing requirement allow a
Participant to elect to have the Company withhold shares of Stock otherwise
issuable under an Award (or allow the return of shares of Stock) having a Fair
Market Value equal to the sums required to be withheld. Notwithstanding any
other provision of the Plan, the number of shares of Stock which may be withheld
with respect to the issuance, vesting, exercise or payment of any Award (or
which may be repurchased from the Participant of such Award within six months
after such shares of Stock were acquired by the Participant from the Company) in
order to satisfy the Participant’s federal, state, local and foreign income and
payroll tax liabilities with respect to the issuance, vesting, exercise or
payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal, state, local and foreign income tax and payroll tax purposes that are
applicable to such supplemental taxable income.
14.4
No Right to Employment or Services.
Nothing in the Plan or any Award Agreement shall interfere with or limit
in any way the right of the Company or any Subsidiary to
terminate
any Participant’s employment or services at any time, nor confer upon any
Participant any right to continue in the employ or service of the Company or any
Subsidiary.
14.5
Unfunded Status of Awards.
The
Plan is intended to be an “unfunded” plan for incentive compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award Agreement shall give the Participant
any rights that are greater than those of a general creditor of the Company or
any Subsidiary.
14.6
Indemnification.
To the extent
allowable pursuant to applicable law, each member of the Committee or of the
Board shall be indemnified and held harmless by the Company from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by such
member in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action or failure to act pursuant to the Plan and
against and from any and all amounts paid by him or her in satisfaction of
judgment in such action, suit, or proceeding against him or her;
provided
, he or she gives the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled pursuant to the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them
harmless.
14.7
Relationship to Other Benefits.
No payment pursuant to the Plan shall be taken into account in
determining any benefits pursuant to any pension, retirement, savings, profit
sharing, group insurance, welfare or other benefit plan of the Company or any
Subsidiary except to the extent otherwise expressly provided in writing in such
other plan or an agreement thereunder.
14.8
Expenses.
The expenses of
administering the Plan shall be borne by the Company and its
Subsidiaries.
14.9
Titles and Headings.
The
titles and headings of the Articles and Sections in the Plan are for convenience
of reference only and, in the event of any conflict, the text of the Plan,
rather than such titles or headings, shall control.
14.10
Fractional Shares.
No
fractional shares of Stock shall be issued and the Committee shall determine, in
its discretion, whether cash shall be given in lieu of fractional shares or
whether such fractional shares shall be eliminated by rounding up or down as
appropriate.
14.11
Limitations Applicable to Section 16
Persons.
Notwithstanding any other provision of the Plan, the Plan, and
any Award granted or awarded to any Participant who is then subject to Section
16 of the Exchange Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act (including
any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such
applicable
exemptive rule.
14.12
Government And Other Regulations.
The obligation of the Company to make payment of awards in Stock or
otherwise shall be subject to all applicable laws, rules, and regulations, and
to such approvals by government agencies as may be required. The Company shall
be under no obligation to register pursuant to the Securities Act of 1933, as
amended, any of the shares of Stock paid pursuant to the Plan. If the shares
paid pursuant to the Plan may in certain circumstances be exempt from
registration pursuant to the Securities Act of 1933, as amended, the Company may
restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
14.13
Governing Law.
The Plan and
all Award Agreements shall be construed in accordance with and governed by the
laws of the State of Delaware.
14.14
SECTION 409A OF THE CODE.
In
the event any provision of the Plan, or the application thereof, is or becomes
inconsistent with Section 409A of the Code and any regulations promulgated
thereunder, such provision shall be void or unenforceable or in the sole
discretion of the Committee shall be deemed amended to comply with Section 409A
and any regulations promulgated thereunder. The other provisions of the Plan
shall remain in full force and effect.
ARTICLE
15
GENERAL
PROVISIONS
15.1
STOCKHOLDER APPROVAL NOT REQUIRED.
It is expressly intended that approval of the Company’s stockholders not
be required as a condition of the effectiveness of the Plan, and the Plan’s
provisions shall be interpreted in a manner consistent with such intent for all
purposes. Specifically, Rule 4350(i) promulgated by the NASD generally requires
stockholder approval for stock option plans or other equity compensation
arrangements adopted by companies whose securities are listed on the Nasdaq
National Market pursuant to which stock awards or stock may be acquired by
officers, directors, employees, or consultants of such companies. NASD Rule
4350(i)(1)(A)(iv) provides an exception to this requirement for issuances of
securities to a person not previously an employee or director of the issuer, or
following a bona fide period of non-employment, as an inducement material to the
individual’s entering into employment with the issuer;
provided
, such issuances are
approved by either the issuer’s compensation committee comprised of a majority
of independent directors or a majority of the issuer’s independent directors.
Awards under the Plan may only be made to Eligible Participants who have not
previously been an Employee or director of the Company or a Subsidiary, or
following a bona fide period of non-employment by the Company or a Subsidiary,
as an inducement material to the Eligible Participant’s entering into employment
with the Company or a Subsidiary. Awards under the Plan will be approved by (i)
the Company’s Compensation Committee comprised of a majority of the Company’s
Independent Directors or (ii) a majority of the Company’s Independent Directors.
Accordingly, pursuant to NASD Rule 4350(i)(1)(A)(iv), the issuance of Awards and
the shares of Common Stock issuable upon exercise or vesting of such Awards
pursuant to the Plan are not subject to the approval of the Company’s
stockholders.