ACHILLION PHARMACEUTICALS INC (Form: 8-K, Received: 12/22/2010 17:25:14)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 16, 2010

Achillion Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware	001-33095	52-2113479
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

300 George Street New Haven, CT		06511
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (203) 624-7000

N/A

(Former name or former address, if changed since last report)

Check the appropriate box if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).

¨	Pre-commencement communications pursuant to Rule 14a-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Executive Officer Compensation, Bonuses and Equity Grants

On December 16, 2010, the Compensation Committee of the Board of Directors (the “Compensation Committee”) of Achillion Pharmaceuticals, Inc. (the “Company”) authorized the payment of annual bonus awards to the Company’s principal executive officer, principal financial officer and Named Executive Officers (as defined in Item 402(a)(3) of Regulation S-K) for work performed by each such officer during the year ended December 31, 2010 (the “2010 Bonus Award”) and approved annual base salaries and annual performance-based cash incentive target percentages to be effective as of January 1, 2011. The 2010 Bonus Award for each officer was based on the Company’s overall performance in fiscal year 2010, as well as each officer’s performance, and primarily considered the target bonus amounts previously established by the Company’s Board of Directors (30% of the base salary for each vice president or senior vice president, and 50% of the base salary for the Company’s chief executive officer). In determining the bonus amount for Mr. Kishbauch, the Compensation Committee considered, among other things, the advancement of the Company’s drug candidate pipeline in 2010, the new additions to that pipeline, the successful completion of two significant financing events in a difficult financing environment, Mr. Kishbauch’s continued strong leadership and the career development of key executive officers. Based upon these factors, the Committee awarded Mr. Kishbauch an incentive bonus for 2010 that exceeded his previously-determined target. In addition to receiving bonus awards, each executive officer was granted an incentive stock option to purchase shares of the Company’s common stock at a purchase price equal to $3.10 per share, the fair market value on the date of grant. Such options are subject to the provisions of the Company’s 2006 Stock Incentive Plan (the “Plan”) and are subject to a four-year vesting schedule. The following table sets forth the 2010 cash bonus and equity option awards and the 2011 annual base salary and target bonus amounts for each such officer:


Name of Executive Officer	2010 Bonus Award		No. Shares Subject to 2010 Performance Equity Grant		2011 Base Salary		2011 Performance Based Cash- Incentive Percentage
Michael D. Kishbauch	$	240,000		541,000	$	450,000		60	%
Milind S. Deshpande, Ph.D.	$	116,000		200,000	$	359,975		40	%
Gautam Shah, Ph.D.	$	87,450		188,000	$	300,200		35	%
Mary Kay Fenton	$	90,406		188,000	$	287,625		35	%
Elizabeth Olek, D.O	$	85,325		188,000	$	288,500		35	%
Joseph Truitt	$	83,677		188,000	$	283,000		35	%

Director Compensation

On December 16, 2010, upon recommendation of the Compensation Committee of the Board of Directors, the Board of Directors of the Company adopted a new director compensation policy, effective January 1, 2011. Pursuant to this director compensation policy, each non-employee director of the Company will receive (i) a fee of $2,000 for each Board meeting that each such non-employee director attends in person, (ii) a fee of $1,000 for each Board meeting at which the director participates telephonically and (iii) reimbursement for all expenses incurred in attending Board and committee meetings in person. In addition, each non-employee director will receive an annual retainer of $30,000, payable in quarterly installments. Directors who serve on the Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee will receive a fee of $1,000 for each such committee meeting attended outside of regularly scheduled meetings of the full Board. The Chairperson of the Board of Directors will receive an additional retainer of $25,000, the Chairperson of the Audit Committee will receive an additional annual retainer of $10,000, and each of the Chairpersons of the Compensation Committee and Nominating and Corporate Governance Committees will receive an additional annual retainer of $5,000.

In addition to the foregoing cash compensation, effective immediately, each non-employee director will receive (i) upon initial election to the Board of Directors, a nonstatutory stock option for the purchase of 30,000 shares of the Company’s common stock which vests immediately upon election and (ii) an annual stock option grant for the purchase of 20,000 shares of the Company’s common stock which vests as to 25% on the date of grant and as to an additional 2.08% at the end of each monthly period thereafter. All such stock options will be granted pursuant to the provisions of the Company’s 2006 Stock Incentive Plan and at an exercise price equal to the fair market value on the date of grant.

Also, in addition to the annual stock option grant to our Board of Directors under our Director’s Compensation policy, and pursuant to the recommendation of the Compensation Committee, the Board of Directors granted each director a nonqualified stock option to purchase 30,000 shares of the Company’s common stock at a purchase price equal to $3.10, the fair market value on the date of grant. These stock options vest as to 25% on the date of grant and as to an additional 2.08% at the end of each monthly period thereafter. The number of shares granted reflects the directors’ considerable strategic efforts during 2010 and represent a one-time grant in lieu of higher cash compensation.

Item 9.01.

Financial Statements and Exhibits

(d)

Exhibits


99.1		Form of Nonstatutory Stock Option Agreement Under the 2006 Stock Incentive Plan

99.2		Form of Incentive Stock Option Agreement for Executives Under the 2006 Stock Incentive Plan

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	ACHILLION PHARMACEUTICALS, INC.

Date: December 22, 2010	By:	/ S / M ARY K AY F ENTON
		Mary Kay Fenton Chief Financial Officer

Exhibit Index


99.1		Form of Nonstatutory Stock Option Agreement Under the 2006 Stock Incentive Plan

99.2		Form of Incentive Stock Option Agreement for Executives Under the 2006 Stock Incentive Plan

Exhibit 99.1

Achillion Pharmaceuticals, Inc.

Nonstatutory Stock Option Agreement

Granted Under 2006 Stock Incentive Plan

1.	Grant of Option .

This agreement evidences the grant by Achillion Pharmaceuticals, Inc. a Delaware corporation (the “Company”), on [ ], (the “Grant Date”) to[ ], a director of the Company (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2006 Stock Incentive Plan (the “Plan”), a total of [ ] shares (the “Shares”) of common stock, $ 0.001 par value per share, of the Company (“Common Stock”) at $[ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on [ ] (the “Final Exercise Date”).

It is intended that the option evidenced by this agreement shall not be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

2.	Vesting Schedule .

This option will become exercisable (“vest”) as to 25% of the original number of Shares on the Grant Date and as to an additional 2.0833% of the original number of Shares at the end of each successive one-month period following the Grant Date until the third anniversary of the Grant Date.

The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan.

3.	Exercise of Option .

(a) Form of Exercise . Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. A form of Notice of Stock Option Exercise is attached as Exhibit A . The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share or for fewer than ten whole shares.

(b) Continuous Relationship with the Company Required . Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee or officer or director of, or consultant or advisor to, the Company or any other entity the employees, officers, directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”).

(c) Termination of Relationship with the Company . If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right to exercise this option shall terminate immediately upon written notice to the Participant from the Company describing such violation.

(d) Exercise Period Upon Death or Disability . If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee), provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.

(e) Termination for Cause . If, prior to the Final Exercise Date, the Participant’s employment or other relationship with the Company is terminated by the Company for Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of such termination of employment or other relationship. If the Participant is party to an employment, consulting or severance agreement with the Company that contains a definition of “cause” for termination of employment or other relationship, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant shall be considered to have been discharged for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that discharge for cause was warranted.

4.	Withholding .

No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option.

5.	Nontransferability of Option .

This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by the Participant.

6.	Provisions of the Plan .

This option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this option.

IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.


	Achillion Pharmaceuticals, Inc.

Dated:	By:

		Name:
		Title:

PARTICIPANT’S ACCEPTANCE

The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2006 Stock Incentive Plan.


PARTICIPANT:



Address:

Exhibit A

NOTICE OF STOCK OPTION EXERCISE

Date:

Achillion Pharmaceuticals, Inc.

300 George Street

New Haven, Connecticut 06511

Attention: Treasurer

Dear Sir or Madam:

I am the holder of stock options granted to me under the Achillion (the “Company”) 2006 Stock Option Plan on __________ for the purchase of __________ shares of Common Stock of the Company at a purchase price of $__________ per share.

I hereby exercise my option to purchase _________ shares of Common Stock (the “Shares”). The option price and vested amount is in accordance with my Non-Qualified Stock Option Agreement. I have included $ ____________ as payment for the purchased shares. Please register my stock certificate as follows:


Name(s):



Address:

Tax I.D. #:

I request that the newly issued shares be (please check one):

_______ (a)

Issued directly to me, at the address listed above, in the form of physical stock certificates.

_______ (b)

Held at Computershare, Achillion’s transfer agent, under Direct Registration (DRS). Shares of stock held in DRS can be sold through Computershare, issued as physical certificates, or forwarded to a broker. You will receive periodic statements from Computershare with account details

_______ (c)

Issued directly to my brokerage account for deposit into my account (deposit information is below).

Brokerage Account Information

1.	The name of the brokerage firm: ______________________________

2.	The brokerage’s DTC number (contact your broker for the number): ______________________

3.	Your broker’s contact information. Name:______________________, phone number: ___________________, & email address: _________________________________

Very truly yours,

(Signature)

Instructions to Option Holders for Filling Out Notice of Exercise

1.	First paragraph . Indicate the date on which you were granted the option, the number of shares and the exercise price of the option.

2.	Second paragraph . Indicate the number of shares you wish to purchase, the method of payment (cash, check, etc.) and the amount of payment.

3.	Name . Enter name(s) to appear on stock certificate: (a) Your name only or (b) Your name and another name (i.e., John Doe and Jane Doe, Joint Tenants With Right of Survivorship).

4.	You must include your tax I.D. number.

Exhibit 99.2

[form for executives]

Achillion Pharmaceuticals, Inc.

Incentive Stock Option Agreement

Granted Under 2006 Stock Incentive Plan

1.	Grant of Option .

This agreement evidences the grant by Achillion Pharmaceuticals, Inc. a Delaware corporation (the “Company”), on [ ], 2010 (the “Grant Date”) to [ ], an employee of the Company (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2006 Stock Incentive Plan (the “Plan”), a total of [ ] shares (the “Shares”) of common stock, [ ] par value per share, of the Company (“Common Stock”) at $ [ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on [ ] (the “Final Exercise Date”).

It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

2.	Vesting Schedule .

(a) This option will become exercisable (“vest”) as to [ ]% of the original number of Shares on the first anniversary of the Grant Date and as to an additional [ ]% of the original number of Shares at the end of each successive three-month period following the first anniversary of the Grant Date until the fourth anniversary of the Grant Date.

(b) The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan.

(c) Upon the occurrence of a Corporate Transaction (as defined below), the vesting of this option under Section 2(a) above shall be accelerated in part so that the option shall become exercisable for an additional number of shares equal to 25% of the original number Shares subject to this Agreement.

(d) If, within 12 months following a Corporate Transaction, the Participant’s employment with the Company is terminated by the Company (other than for Cause, Disability or death) or by the Participant for Good Reason, then the vesting of this option under Section 2(a) above shall be accelerated in full so that the option shall become exercisable for 100% of the Shares.

(e) For purposes of this Agreement, the terms “Corporate Transaction”, “Cause”, “Good Reason”, “Disabled” and “Disability” shall have the meanings ascribed to them in the [ ], between the Participant and the Company, as such agreement may be amended and/or restated from time to time.

3.	Exercise of Option .

(a) Form of Exercise . Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. A form of Notice of Stock Option Exercise is attached to this agreement as Exhibit A . The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share or for fewer than ten whole shares.

(b) Continuous Relationship with the Company Required . Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee or officer of, or consultant or advisor to, the Company or any parent or subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an “Eligible Participant”).

(d) Exercise Period Upon Death or Disability . If the Participant dies or becomes disabled prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “Cause”, this option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee), provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.

(e) Termination for Cause . If, prior to the Final Exercise Date, the Participant’s employment is terminated by the Company for Cause, the right to exercise this option shall terminate immediately upon the effective date of such termination of employment. The Participant shall be considered to have been discharged for Cause if the Company determines, within 30 days after the Participant’s resignation, that discharge for cause was warranted.

4.	Tax Matters .

(a) Withholding . No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option.

(b) Disqualifying Disposition . If the Participant disposes of Shares acquired upon exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition.

5.	Nontransferability of Option .

6.	Provisions of the Plan .

This option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this option.

IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.


	Achillion Pharmaceuticals, Inc.

Dated:	By:

		Name:
		Title:

PARTICIPANT’S ACCEPTANCE

The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2006 Stock Incentive Plan.


PARTICIPANT:



Address:


Date:

Exhibit A

NOTICE OF STOCK OPTION EXERCISE

Date:

Achillion Pharmaceuticals, Inc.

300 George Street

New Haven, Connecticut 06511

Attention: Treasurer

Dear Sir or Madam:

I am the holder of a stock option granted to me under the Achillion (the “Company”) 2006 Stock Option Plan on for the purchase of shares of Common Stock of the Company at a purchase price of $ per share.

I hereby exercise my option to purchase shares of Common Stock (the “Shares”). The option price and vested amount is in accordance with my Incentive Stock Option Agreement. I have included $ as payment for the purchased shares. Please register my stock certificate as follows:


Name(s):



Address:

Tax I.D. #:

I request that the newly issued shares be (please check one):


		(a)		Issued directly to me, at the address listed above, in the form of physical stock certificates.

		(b)		Held at Computershare, Achillion’s transfer agent, under Direct Registration (DRS). Shares of stock held in DRS can be sold through Computershare, issued as physical certificates, or forwarded to a broker. You will receive periodic statements from Computershare with account details

		(c)		Issued directly to my brokerage account for deposit into my account (deposit information is below).

Exhibit A

Brokerage Account Information

1. The name of the brokerage firm:

2. The brokerage’s DTC number (contact your broker for the number):

3. Your broker’s contact information. Name: , phone number: , & email address:

Very truly yours,

(Signature)

Exhibit A

Instructions to Option Holders for Filling Out Notice of Exercise

1. First paragraph . Indicate the date on which you were granted the option, the number of shares and the exercise price of the option.

2. Second paragraph . Indicate the number of shares you wish to purchase, the method of payment (cash, check, etc.) and the amount of payment.

3. Name . Enter name(s) to appear on stock certificate: (a) Your name only or (b) Your name and another name (i.e., John Doe and Jane Doe, Joint Tenants With Right of Survivorship).

4. You must include your tax I.D. number.