UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
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¨ | Preliminary Proxy Statement | |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
x | Definitive Proxy Statement | |
¨ | Definitive Additional Materials | |
¨ | Soliciting Material Pursuant to §240.14a-12 |
Emergent BioSolutions Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
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April 7, 2014
Dear Fellow Stockholders:
You are cordially invited to attend the Emergent BioSolutions Inc. 2014 annual meeting of stockholders to be held on May 22, 2014 at 9:00 a.m., Eastern time, at the Sheraton Rockville Hotel, 920 King Farm Boulevard, Rockville, Maryland 20850. Details about the meeting, nominees for the board of directors and other matters to be acted on are included in the notice of 2014 annual meeting and proxy statement that follow.
We hope you plan to attend the annual meeting. Please vote your shares, whether or not you plan to attend the meeting, by proxy using one of the methods described in our proxy statement or the Notice of Internet Availability of Proxy Materials. Your proxy may be revoked at any time before it is exercised as explained in our proxy statement.
If you plan to attend the meeting, please bring photo identification for admission. In addition, if your shares are held in the name of a broker, bank or other nominee, please bring with you a proxy, letter or account statement from your broker, bank or nominee confirming your ownership of Emergent BioSolutions Inc. stock so that you can be admitted to the meeting. If your shares are held of record by a broker, bank or other nominee and you wish to vote in person at the meeting, you must obtain a legal proxy from your broker, bank or other nominee conferring to you its rights to vote the shares at the meeting.
On behalf of the board of directors and management, it is my pleasure to express our appreciation for your support.
Sincerely,
Fuad El-Hibri
Executive Chairman of the Board of Directors
YOUR VOTE IS IMPORTANT.
PLEASE TAKE TIME TO VOTE AS SOON AS POSSIBLE.
EMERGENT BIOSOLUTIONS INC.
2273 RESEARCH BOULEVARD, SUITE 400
ROCKVILLE, MARYLAND 20850
NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 22, 2014
To Our Stockholders:
The 2014 Annual Meeting of Stockholders of Emergent BioSolutions Inc. will be held on May 22, 2014 at 9:00 a.m., Eastern time, at the Sheraton Rockville Hotel, 920 King Farm Boulevard, Rockville Maryland 20850. The annual meeting is being held for the following purposes, which are more fully described in the proxy statement that accompanies this notice:
1. | To elect four Class II directors to hold office for a term expiring at our 2017 annual meeting of stockholders and until their respective successors are duly elected and qualified. |
2. | To ratify the appointment by the audit committee of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2014. |
3. | To approve the amendment of our stock incentive plan. |
4. | To approve, on an advisory basis, the compensation of our named executive officers. |
5. | To act upon any other matter that may properly come before the meeting or any adjournment or postponement of the meeting. |
As of the date of this notice, the company has received no notice of any matters, other than those set forth above, that may properly be presented at the annual meeting. If any other matters are properly presented for consideration at the meeting, the persons named as proxies on the enclosed proxy card, or their duly constituted substitutes, will be deemed authorized to notice of and to vote the shares represented by proxy or otherwise act on those matters in accordance with their judgment.
The close of business on March 24, 2014 has been established as the record date for determining those stockholders entitled to vote at the annual meeting.
Your vote is very important. Please read the proxy statement and then, whether or not you expect to attend the annual meeting, and no matter how many shares you own, vote your shares as promptly as possible. You can vote by proxy over the internet, by telephone or by mail by following the instructions provided in the proxy statement and on the proxy card. Submitting your proxy now will help ensure a quorum and avoid added proxy solicitation costs. If you attend the meeting, you may vote in person, even if you have previously submitted a proxy. However, if your shares are held of record by a broker, bank or other nominee and you wish to vote in person at the meeting, you must obtain a legal proxy from your broker, bank or other nominee conferring to you its rights to vote the shares at the meeting.
You may revoke your proxy at any time before the vote is taken by delivering to the companys Corporate Secretary a written revocation, submitting a proxy with a later date or by voting your shares in person at the meeting, in which case your prior proxy will be disregarded.
By Order of the Board of Directors,
A.B. Cruz III
Executive Vice President, General Counsel and Corporate Secretary
Rockville, Maryland
April 7, 2014
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOUR VOTE IS IMPORTANT.
IN ORDER TO ENSURE THE REPRESENTATION OF YOUR SHARES AT THE ANNUAL
MEETING, PLEASE VOTE BY PROXY AS SOON AS POSSIBLE.
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EMERGENT BIOSOLUTIONS INC.
2273 Research Boulevard, Suite 400
Rockville, Maryland 20850
PROXY STATEMENT
2014 Annual Meeting of Stockholders
This proxy statement and the accompanying proxy card are being furnished to you by the Board of Directors of Emergent BioSolutions Inc. to solicit your proxy to vote your shares at our 2014 annual meeting of stockholders and at any adjournment or postponement of the meeting. The annual meeting will be held on May 22, 2014 at 9:00 a.m., Eastern time, at the Sheraton Rockville Hotel, 920 King Farm Boulevard, Rockville, Maryland 20850. This proxy statement and the enclosed proxy card and 2013 annual report are being sent to stockholders on or about April 7, 2014.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Why am I receiving this annual meeting information and proxy?
You are receiving this annual meeting information and proxy from us because you owned shares of common stock of Emergent BioSolutions as of March 24, 2014, the record date for the 2014 annual meeting. The Emergent BioSolutions Board of Directors has made these materials available to you in connection with the boards solicitation of proxies for use at our 2014 annual meeting.
This proxy statement describes matters on which you may vote and provides you with other important information so that you can make informed decisions. You are requested to vote on the proposals described in this proxy statement and are invited to attend the annual meeting.
What does it mean to vote by proxy?
It means that you give someone else the right to vote your shares in accordance with your instructions. In this way, you ensure that your vote will be counted even if you are unable to attend the annual meeting. When you submit your proxy by internet, by telephone or by mail, you appoint each of Daniel J. Abdun-Nabi, our president and chief executive officer, Robert G. Kramer, our executive vice president, corporate services, chief financial officer and treasurer, and A.B. Cruz III, our executive vice president, general counsel and corporate secretary, or their respective substitutes or nominees, as your representatives your proxies at the meeting to vote your shares in accordance with your instructions. If you give your proxy but do not include specific instructions on how to vote, the individuals named as proxies will vote your shares as the board recommends, as noted below, and as the named proxies may determine in their discretion with respect to any other matters properly presented at the meeting.
Who is entitled to vote at the annual meeting?
Holders of Emergent BioSolutions common stock as of the close of business on the record date, March 24, 2014, may vote at the 2014 annual meeting, either by proxy or in person. As of the close of business on March 24, 2014, there were 37,303,029 shares of Emergent BioSolutions common stock outstanding and entitled to vote. The common stock is the only authorized voting security of the company, and each share of common stock is entitled to one vote on each matter properly brought before the 2014 annual meeting.
How does the Board of Directors recommend I vote on each of the proposals?
The board recommends that you vote your shares in the following manner:
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FOR the election of each of our director nominees (Proposal 1); |
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FOR the ratification of the appointment of Ernst & Young LLP as the companys independent registered public accounting firm for fiscal year 2014 (Proposal 2); |
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FOR the approval of the amendment of our stock incentive plan (Proposal 3); and |
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FOR approval of the advisory vote on executive compensation (Proposal 4). |
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
You may own shares of Emergent BioSolutions common stock in two different ways:
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Record Ownership . If your stock is represented by one or more stock certificates registered in your name or if you have a Direct Registration System account in your name evidencing shares held in book-entry form, then you have a stockholder account with our transfer agent, American Stock Transfer & Trust Company, and you are a stockholder of record. |
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Beneficial Ownership . If your shares are held in a brokerage account or by a bank or other nominee, those shares are held in street name and you are considered the beneficial owner of the shares. As the beneficial owner of those shares, you have the right to direct your broker, bank or other nominee how to vote your shares, and you will receive separate instructions from your broker, bank or other nominee describing how to vote your shares. You also are invited to attend the annual meeting. However, because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a legal proxy from the broker, bank or other nominee that holds your shares giving you the right to vote the shares at the meeting. Note that a legal proxy from your broker, bank or other nominee is not the form of proxy available on www.voteproxy.com. |
How can I vote my shares before the annual meeting?
Even if you plan to attend the annual meeting, we recommend that you vote before the meeting, as described below, so that your vote will be counted if you later decide not to attend the meeting. Voting by internet or by telephone is fast and convenient and your vote is immediately confirmed and tabulated. Submitting a proxy by internet, telephone or mail prior to the annual meeting will not affect your right to attend the annual meeting and vote in person.
If you hold shares in your own name as a stockholder of record , regardless of whether you received your annual meeting materials through the mail or via the internet, you may vote before the annual meeting:
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By Internet . To vote by internet, go to http://materials.proxyvote.com/29089Q and follow the instructions you find on this website. Your proxy will be voted according to your instructions. If you vote by internet, you do not need to mail in a proxy card. |
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By Telephone . To vote by phone, call 1-800-PROXIES (1-800-776-9437) toll-free from the United States or 1-718-921-8500 from foreign countries and follow the instructions. If you vote by telephone, you do not need to mail in a proxy card. |
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By Mail . If you received your proxy materials by mail, you may vote by completing, signing and returning your proxy card in the enclosed postage-paid envelope. |
If you vote by internet or by telephone, please do not mail in your proxy card (unless you intend for it to revoke your prior internet or telephone vote). Your internet or telephone vote will authorize the named proxies to vote your shares in the same manner as if you completed, signed and returned your proxy card. If you sign and
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return your proxy card or vote over the internet or by telephone but do not provide voting instructions on some or all of the proposals, your shares will be voted by the persons named in the proxy card on all uninstructed proposals in accordance with the recommendations of the board of directors given above.
If you are a beneficial owner of shares held in street name , your broker, bank or other nominee will provide you with materials and instructions for voting your shares. Please check with your broker, bank or other nominee and follow its voting procedures to vote your shares. Most brokers and nominees offer voting procedures by internet, telephone and mail.
If I am the beneficial owner of shares held in street name by my broker, will my broker automatically vote my shares for me?
If you beneficially hold your shares in street name through a brokerage account and you do not submit specific voting instructions to your broker, your broker may generally vote your shares in its discretion on matters designated as routine under rules applicable to broker-dealers. However, a broker cannot vote shares held in street name on matters designated by these rules as non-routine, unless the broker receives specific voting instructions from the beneficial holder.
The proposal to ratify the appointment of the companys independent registered public accounting firm for fiscal year 2014 is considered routine under these rules. All of the other proposals to be submitted for a vote of stockholders at the annual meeting are considered non-routine and, therefore, are matters on which a broker may not exercise its voting discretion. Accordingly, if you hold your shares in street name through a brokerage account and you do not instruct your broker how to vote with respect to these other proposals, your broker is not permitted to vote on those proposals and your shares will be considered broker non-votes on these proposals and will not be taken into account in determining the outcome of the vote on the matter. As a result, we strongly encourage you to utilize the voting procedures made available to you through your broker or other nominee and exercise your right to vote as a stockholder.
What is a broker non-vote and how would it affect the vote?
A broker non-vote occurs when a nominee, such as a bank or broker holding shares on behalf of a beneficial owner, does not receive voting instructions from the beneficial owner of the shares and does not have discretionary voting power with respect to the proposal. Brokers will not have discretionary voting power to vote your shares without your voting instructions on any of the items being considered at the 2014 annual meeting, except for the proposal to ratify the appointment of the independent registered public accounting firm. Accordingly, if you fail to provide your bank, broker or other nominee with voting instructions on the other proposals being considered, such failure will result in a broker non-vote with respect to your shares on these proposals.
Because the approval requirement for Proposal 1 (the election of directors) is a plurality of the votes cast ( i.e. , the nominees who receive the most votes will be the nominees elected by stockholders), a broker non-vote will not affect the outcome of this vote. On all of the other proposals , the affirmative vote of a majority of the votes cast is required for approval. Broker non-votes are not considered votes cast on the matter and, therefore, will not be taken into account in determining the outcome of the vote on the matter.
What does it mean if I receive more than one proxy card from the company?
It means that you have more than one account for your Emergent BioSolutions shares. Please vote by internet or telephone using each of the identification numbers, or complete and submit all proxies to ensure that all of your shares are voted.
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What is householding and how does it affect me?
The Securities and Exchange Commission has adopted rules that permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or proxy statement and annual report addressed to those stockholders. This process, commonly referred to as householding, potentially provides extra convenience for stockholders and cost savings for companies. Because we utilize the householding rules for proxy materials, stockholders who share the same address generally will receive only one copy of the Notice of Internet Availability of Proxy Materials or proxy statement and annual report, unless we receive contrary instructions from any stockholder at that address. If you prefer to receive multiple copies of the Notice of Internet Availability of Proxy Materials or proxy statement and annual report at the same address, additional copies will be provided to you promptly upon request. If you are a stockholder of record, you may obtain additional copies upon written or oral request to Emergent BioSolutions Inc., Attn: Investor Relations, 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850; Telephone: (301) 795-1800. Eligible stockholders of record receiving multiple copies of the Notice of Internet Availability of Proxy Materials or proxy statement and annual report can request householding by contacting us in the same manner.
If you are a beneficial owner and hold your shares in a brokerage or custody account, you can request additional copies of the Notice of Internet Availability of Proxy Materials or proxy statement and annual report or you can request householding by notifying your broker, bank or other nominee.
Can I vote in person at the annual meeting?
Yes. If you hold shares in your own name as a stockholder of record, you may attend the annual meeting and cast your vote at the meeting by properly completing and submitting a ballot at the annual meeting. If you are the beneficial owner of shares held in street name, you must first obtain a legal proxy from your broker, bank or other nominee and submit that legal proxy along with a properly completed ballot at the meeting. Under a legal proxy, the bank, broker or other nominee confers to you all of its rights as a record holder to grant proxies or to vote at the meeting.
What do I need to bring to be admitted to the annual meeting?
All stockholders must present a form of personal photo identification in order to be admitted to the meeting. In addition, if your shares are held in the name of your broker, bank or other nominee and you wish to attend the annual meeting, you must bring an account statement or letter from the broker, bank or other nominee indicating that you were the owner of the shares on March 24, 2014.
How can I change my vote or revoke my proxy?
If you hold shares in your own name as a stockholder of record , you may change your vote or revoke your proxy at any time before voting begins by:
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Notifying our Corporate Secretary in writing that you are revoking your proxy; |
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Delivering another proxy (either by internet, telephone or mail) that is dated after the proxy you wish to revoke; or |
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Attending the annual meeting and voting in person by properly completing and submitting a ballot. (Attendance at the meeting, in and of itself, will not cause your previously granted proxy to be revoked unless you vote at the meeting.) |
Any written notice of revocation should be delivered to: Emergent BioSolutions Inc., 2273 Research Boulevard, Suite 400, Rockville, MD 20850, Attention: A.B. Cruz III, Corporate Secretary. Alternatively, you may hand deliver a written revocation notice, or a later dated proxy, to the Corporate Secretary at the annual meeting before the voting begins.
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If you are the beneficial owner of shares held in street name , please check with your broker or other nominee and follow the procedures your broker or nominee provides if you wish to change your vote with respect to those shares.
What are the voting requirements to elect directors and approve the other proposals described in the proxy statement?
The vote required to elect directors and approve each of the matters scheduled for a vote at the annual meeting is set forth below:
Proposal | Vote Required | |
1. Election of directors | Plurality of votes cast | |
2. Ratification of appointment of Ernst & Young LLP | Majority of votes cast | |
3. Approval of amendment of stock incentive plan | Majority of votes cast | |
4. Advisory vote on executive compensation | Majority of votes cast |
Votes may be cast by proxy or in person. A plurality of the votes cast at the meeting means that the nominees who receive the most votes will be the nominees elected by stockholders.
What is the quorum for the annual meeting and what happens if a quorum is not present?
In order to conduct business at the annual meeting, the holders of at least a majority of the total number of shares of Emergent BioSolutions common stock issued and outstanding and entitled to vote as of the March 24, 2014 record date, or 18,651,515 shares, must be present in person or represented by proxy. This requirement is called a quorum. If you vote by internet or by telephone, or submit a properly executed proxy card, your shares will be included for purposes of determining the existence of a quorum. Proxies marked abstain and broker non-votes also will be counted in determining the presence of a quorum. If the shares present in person or represented by proxy at the annual meeting are not sufficient to constitute a quorum, the annual meeting may be adjourned to a different time and place to permit further solicitations of proxies sufficient to constitute a quorum.
What is an abstention and how would it affect the vote?
An abstention occurs when a stockholder submits a proxy with explicit instructions to decline to vote regarding a particular matter (or to withhold voting authority in the election of directors). Abstentions are counted as present for purposes of determining a quorum. A vote to withhold voting authority with respect to the election of directors is neither a vote cast for a nominee nor a vote cast against the nominee and, therefore, will have no effect on the outcome of the vote. However, because an abstention is considered a vote cast but it is not a vote for a particular matter, it will have the same effect as a vote against the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm, the approval of the amendment of the stock incentive plan and the advisory vote on the compensation of our named executive officers.
Does the company offer an opportunity to receive future proxy materials electronically?
Yes. If you vote on the internet, simply follow the prompts for enrolling in electronic proxy delivery service. This will reduce our printing and postage costs, as well as the number of paper documents you will receive.
If you are a stockholder of record, you may enroll in this service at the time you vote your proxy or at any time after the annual meeting and can read additional information about this option and request electronic delivery by going to www.proxyvote.com. If you hold shares beneficially, please contact your broker or other nominee to enroll for electronic proxy delivery.
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Who will conduct the proxy solicitation and who will bear the cost?
The costs of soliciting proxies will be borne by us. The solicitation is being made primarily through the mail and electronic mail, but our directors, officers and employees may also engage in the solicitation of proxies in person, by telephone, electronic transmission or by other means. No compensation will be paid by us in connection with the solicitation of proxies, except that we may reimburse brokers, custodians, nominees and other record holders for their reasonable out-of-pocket expenses in forwarding proxy materials to beneficial owners.
Who will count the votes?
Our transfer agent American Stock Transfer & Trust Company will tabulate the votes cast by internet, telephone and mail. A representative from our transfer agent will tabulate any votes cast at the annual meeting and will serve as the inspector of elections at the annual meeting.
Where can I find the voting results of the meeting?
We will publish the voting results in a Form 8-K filed with the Securities and Exchange Commission within four business days after the annual meeting. You can read or print a copy of that report by going to either the companys website at www.emergentbiosolutions.com under the section Investors SEC Filings or the Securities and Exchange Commissions website at www.sec.gov.
If you have any questions about voting your shares or attending the annual meeting, please contact our Investor Relations department at (301) 795-1800.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2014 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 2014
The companys proxy statement for the 2014 annual meeting of stockholders and the companys annual report on Form 10-K for the fiscal year ended December 31, 2013 are available at http://materials.proxyvote.com/29089Q.
General
Our by-laws provide that the number of directors shall be fixed from time to time by the board of directors. The board has established the number of directors at nine. The board of directors is divided into three classes, with one class being elected each year and members of each class serving for staggered three-year terms. Zsolt Harsanyi, Ph.D., General George Joulwan, Louis W. Sullivan, M.D. and Marvin L. White are Class II directors with terms expiring at this annual meeting of stockholders. Daniel J. Abdun-Nabi, Dr. Sue Bailey and John E. Niederhuber, M.D. are Class III directors with terms expiring at the 2015 annual meeting of stockholders. Fuad El-Hibri and Ronald B. Richard are Class I directors with terms expiring at the 2016 annual meeting of stockholders. For more information regarding the members of our board of directors, please see Directors and Nominees beginning on page 14.
Our board of directors believes that good corporate governance is important to ensure that Emergent BioSolutions is managed for the long-term benefit of our stockholders. This section describes key corporate governance guidelines and practices that our board has adopted. Complete copies of our corporate governance guidelines, committee charters and code of conduct and business ethics are available on our website at www.emergentbiosolutions.com under Investors Governance.
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Corporate Governance Guidelines
Our board of directors has adopted corporate governance guidelines to assist in the exercise of its duties and responsibilities and to serve the best interests of Emergent BioSolutions and our stockholders. These guidelines, which provide a framework for the conduct of the boards business, include the following:
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the board of directors principal responsibility is to oversee the management of Emergent BioSolutions; |
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a majority of the members of the board of directors shall be independent directors; |
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the independent directors shall meet regularly in executive session; |
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directors shall have full and free access to management and, as necessary and appropriate, independent advisors; |
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new directors shall participate in an orientation program and all directors are expected to participate in continuing director education on an ongoing basis; and |
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at least annually, the board of directors and its committees will conduct a self-evaluation to determine whether they are functioning effectively. |
Under applicable New York Stock Exchange rules, a director will qualify as independent only if our board of directors affirmatively determines that such director has no material relationship with us, either directly or as a partner, shareholder or officer of an organization that has a relationship with us. Our board of directors has established guidelines to assist it in determining whether a director has such a material relationship. Under these guidelines, a director is not considered to have a material relationship with us if our board of directors determines that such director is independent under Section 303A.02(b) of the NYSE Listed Company Manual, even if such director:
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is an executive officer of another company which is indebted to us, or to which we are indebted, unless the total amount of either companys indebtedness to the other is more than 1% of the total consolidated assets of the company with which such director serves as an executive officer; or |
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serves as an officer, director or trustee of a tax-exempt organization to which we make contributions, unless our discretionary charitable contributions to the organization are more than the greater of $1 million or 2% of that organizations consolidated gross revenues. Our matching of employee charitable contributions would not be included in the amount of our contributions for this purpose. |
In addition, ownership of a significant amount of our stock, by itself (as under NYSE listing standards), does not constitute a material relationship. For relationships not covered by the guidelines set forth above, the determination of whether a material relationship exists is made by the other members of our board of directors who are independent.
Our board of directors has determined that Dr. Bailey, Dr. Harsanyi, General Joulwan, Dr. Niederhuber, Mr. Richard, Dr. Sullivan and Mr. White meet the foregoing standards, that none of these directors has a material relationship with us and that each of these directors is independent as determined under Section 303A.02 of the NYSE Listed Company Manual.
Board of Directors Meetings and Attendance
Our board of directors met ten times during the fiscal year ended December 31, 2013, either in person or by teleconference. During 2013, no director attended fewer than 75% of the total number of meetings of the board of directors and of the committees of which the director was a member during 2013.
Our corporate governance guidelines provide that directors are expected to attend the annual meeting of stockholders. All members of our board of directors at the time of the 2013 annual meeting of stockholders attended the annual meeting.
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The Boards Role in Risk Oversight
Our board of directors is actively engaged in oversight of the risks we face, and consideration of the appropriate responses to those risks. The audit committee of our board of directors periodically discusses risk management, including guidelines and policies to govern the process by which our exposure to risk is handled, with our senior management. The audit committee also reviews and comments on a periodic risk assessment performed by management. After the audit committee performs its review and comment function, it reports any significant findings to our board of directors. The board of directors is responsible for oversight of our risk management programs and, in performing this function, receives periodic risk assessment and mitigation initiatives for information and approval as necessary.
Our board of directors has established five standing committees audit, compensation, nominating and corporate governance, scientific review and strategic operations each of which operates under a written charter that has been approved by our board of directors. Current copies of each committees charter are available on our website at www.emergentbiosolutions.com under Investors Governance. Alternatively, you can request a copy of any of these documents by writing to Emergent BioSolutions Inc., Attn: Investor Relations, 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850.
Our board of directors has determined that all of the members of each of the audit, compensation, and nominating and corporate governance committees are independent as defined under the rules of the NYSE, including, in the case of all members of the audit committee, the independence requirements of Rule 10A-3 under the Exchange Act.
Audit Committee
The audit committees responsibilities include:
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appointing, approving the compensation of and assessing the independence of our independent registered public accounting firm; |
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overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from our independent registered public accounting firm; |
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reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures; |
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monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics; |
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overseeing our internal audit function; |
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assisting the board in overseeing our compliance with legal and regulatory requirements; |
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periodically discussing our risk management policies, and reviewing and commenting on a periodic risk assessment by management; |
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establishing policies regarding hiring employees from our independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns; |
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meeting independently with our internal auditing staff, independent registered public accounting firm and management; |
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reviewing and approving or ratifying any related person transactions; and |
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preparing the audit committee report required by Securities and Exchange Commission rules, which is included beginning on page 21 of this proxy statement. |
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The members of our audit committee are Dr. Harsanyi, Mr. Richard and Mr. White. Mr. White chairs the committee. Our board of directors has determined that each of the members of the committee is independent in accordance with NYSE listing standards and that Dr. Harsanyi and Mr. White meet the criteria of the Securities and Exchange Commission for an audit committee financial expert. Our audit committee met ten times during 2013, either in person or by teleconference.
Compensation Committee
The compensation committees responsibilities include:
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annually reviewing and approving corporate goals and objectives relevant to the compensation of our executive officers; |
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determining the compensation of our chief executive officer and executive chairman; |
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reviewing and approving the compensation of our other named executive officers; |
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overseeing the evaluation of our senior executives; |
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overseeing and administering our cash and equity incentive plans and employee stock purchase plan; |
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reviewing and discussing annually with management our Compensation Discussion and Analysis, which is included beginning on page 33 of this proxy statement; and |
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preparing the compensation committee report required by Securities and Exchange Commission rules, which is included beginning on page 47 of this proxy statement. |
The processes and procedures followed by our compensation committee in considering and determining executive compensation are described below under Executive Compensation Executive Compensation Processes.
The members of our compensation committee are Dr. Sullivan, General Joulwan, Dr. Niederhuber and Mr. White. Dr. Sullivan chairs the committee. Our board of directors has determined that each of the members of the committee is independent in accordance with NYSE listing standards. Our compensation committee met seven times during 2013, either in person or by teleconference.
Nominating and Corporate Governance Committee
The nominating and corporate governance committees responsibilities include:
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identifying individuals qualified to become members of the board of directors; |
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recommending to the board of directors the persons to be nominated for election as directors and to each of the boards committees; |
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reviewing and making recommendations to our board of directors with respect to director compensation; |
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reviewing and making recommendations to the board of directors with respect to management succession planning; |
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developing and recommending to the board of directors corporate governance principles; |
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overseeing director education activities; and |
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overseeing an annual evaluation of the board of directors. |
The processes and procedures followed by our nominating and corporate governance committee in identifying and evaluating director candidates and in making recommendations regarding director compensation are described below under the headings Director Nomination Process and Director Compensation, respectively.
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The members of our nominating and corporate governance committee are Mr. Richard, Dr. Sullivan and Dr. Bailey. Mr. Richard chairs the committee. Our board of directors has determined that each of the members of the committee is independent in accordance with NYSE listing standards. Our nominating and corporate governance committee met six times during 2013, either in person or by teleconference.
Scientific Review Committee
The scientific review committees responsibilities include:
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reviewing, evaluating and advising the board of directors regarding existing products and technology platforms; |
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reviewing, evaluating and advising the board of directors regarding the priorities with respect to our research and development programs in light of corporate strategy; and |
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providing advice and guidance to management with respect to proposed acquisitions, in-licensing, collaborations and alliances. |
The members of our scientific review committee are Dr. Bailey, Dr. Harsanyi and Dr. Niederhuber. Dr. Bailey chairs the committee. Our scientific review committee met five times during 2013, each time in person.
Strategic Operations Committee
The strategic operations committees responsibilities include evaluating and making recommendations to the board of directors with respect to:
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our mission, core strategy, strategic plan objectives/success criteria, and the strategic processes; |
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significant acquisition and disposition opportunities; |
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our financial plans and programs and capital structure; |
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our corporate investment policies; and |
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our corporate social responsibility activities. |
The members of the strategic operations committee are Mr. El-Hibri, Mr. Abdun-Nabi, Dr. Harsanyi, Mr. Richard and Mr.White. Mr. El-Hibri chairs the committee. Our strategic operations committee met five times during 2013, each time in person.
The process followed by our nominating and corporate governance committee to identify and evaluate director candidates includes requests to members of our board of directors and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the committee and the board of directors.
In considering whether to recommend any particular candidate for inclusion in the board of directors slate of recommended director nominees, our nominating and corporate governance committee considers the candidates integrity, business acumen, knowledge of our business and industry, experience, diligence, conflicts of interest and the ability to act in the interests of all stockholders. The committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. The committee does not have a formal policy with respect to diversity, but believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow it to fulfill its responsibilities. Additionally, our corporate governance guidelines state that it is a goal of the board of directors to strive for diversity in the composition of the membership of the board of directors.
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Stockholders may recommend to our nominating and corporate governance committee individuals for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to Nominating and Corporate Governance Committee, c/o Corporate Secretary, Emergent BioSolutions Inc., 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850. Assuming that appropriate biographical and background material has been provided on a timely basis, the nominating and corporate governance committee will evaluate candidates recommended by stockholders by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.
Governance Structure and Lead Director
In December 2011, the board of directors determined to separate the positions of chief executive officer and board chairman, appointing Mr. El-Hibri as executive chairman of the board and Mr. Abdun-Nabi as chief executive officer, effective April 1, 2012. Mr. El-Hibri previously served as our chief executive officer and chairman of our board of directors from June 2004 through March 2012. The board of directors believes this separate governance structure is optimal because it enables Mr. Abdun-Nabi to focus his entire energy on running the company while affording us the benefits of continued leadership and other contributions from Mr. El-Hibri.
Our corporate governance guidelines provide that in the event the chairman of our board of directors is not an independent director, a majority of the boards independent directors may appoint an independent director, who has been nominated by the nominating and corporate governance committee, to serve as lead director. Because Mr. El-Hibri is not an independent director, our independent directors, based on the recommendation of the nominating and corporate governance committee, appointed Mr. Richard as the lead director in May 2013 for a term expiring May 2015. As lead director, Mr. Richard serves as the presiding director at all executive sessions of our non-management or independent directors, facilitates communications between Mr. El-Hibri and other members of the board of directors, determines the need for special meetings of the board of directors and consults with Mr. El-Hibri on matters relating to corporate governance and board performance.
Communicating with the Independent Directors
Our board of directors will give appropriate attention to written communications that are submitted by stockholders and other interested parties and will respond if and as appropriate. The lead director, with the assistance of our corporate secretary, is primarily responsible for monitoring communications from stockholders and other interested parties and for providing copies or summaries to the other directors as the lead director considers appropriate.
Under procedures approved by a majority of our independent directors, communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the lead director considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we receive repetitive or duplicative communications.
Stockholders and other interested parties who wish to send communications on any topic to our board of directors, lead director or independent directors as a group should address such communications to the Board of Directors, Lead Director or Independent Directors, as applicable, c/o Corporate Secretary, Emergent BioSolutions Inc., 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850. The Corporate Secretary will review all such correspondence and forward to the board, lead director or independent directors a summary and/or copies of any such correspondence that deals with the functions of the board or its committees or that he otherwise determines requires their attention.
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The following table sets forth information regarding the beneficial ownership of our common stock as of March 24, 2014 by (1) each of our directors and director nominees, (2) each of our named executive officers, (3) all of our executive officers and directors as a group and (4) each stockholder known by us to beneficially own 5% or more of our outstanding common stock. There were 37,303,029 shares of our common stock outstanding on March 24, 2014.
Name of Beneficial Owner |
Outstanding Shares
Beneficially Owned(1) |
Right to Acquire
Beneficial Ownership(2) |
Total Shares
Beneficially Owned |
Percentage of
Shares Beneficially Owned |
||||||||||||
Directors and director nominees |
||||||||||||||||
Dr. Sue Bailey |
7,200 | 58,400 | 65,600 | * | ||||||||||||
Zsolt Harsanyi, Ph.D. |
7,200 | 46,800 | 54,000 | * | ||||||||||||
George Joulwan |
| | | * | ||||||||||||
John E. Niederhuber, M.D. |
9,000 | 28,800 | 37,800 | * | ||||||||||||
Ronald B. Richard |
7,200 | 100,000 | 107,200 | * | ||||||||||||
Louis W. Sullivan, M.D. |
7,200 | 125,956 | 133,156 | * | ||||||||||||
Marvin White |
9,000 | 28,800 | 37,800 | * | ||||||||||||
Named executive officers |
||||||||||||||||
Fuad El-Hibri(3) |
5,986,539 | 341,400 | 6,327,939 | 16.8 | % | |||||||||||
Daniel J. Abdun-Nabi |
57,304 | 219,657 | 276,961 | * | ||||||||||||
Robert G. Kramer |
74,714 | 18,002 | 92,716 | * | ||||||||||||
Steven Chatfield, Ph.D. |
12,027 | 46,126 | 58,153 | * | ||||||||||||
Adam Havey |
10,606 | 46,930 | 57,536 | * | ||||||||||||
Barry Labinger |
| | | * | ||||||||||||
All executive officers and directors as a group (12 persons)(4) |
6,175,963 | 1,014,745 | 7,190,708 | 18.8 | % | |||||||||||
5% or greater stockholders |
||||||||||||||||
Bank of New York Mellon(5) |
3,181,058 | | 3,181,058 | 8.5 | % | |||||||||||
BlackRock, Inc.(6) |
2,972,435 | | 2,972,435 | 8.0 | % | |||||||||||
Intervac, L.L.C. |
4,344,250 | | 4,344,250 | 11.6 | % |
* | Represents beneficial ownership of less than 1% of common stock. |
(1) | Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to shares of our common stock. The information set forth in the table above is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares deemed beneficially owned in this table does not constitute an admission of beneficial ownership of those shares. Except as otherwise noted, to our knowledge, the persons and entities named in the table above have sole voting and investment power with respect to all of the shares of common stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise indicated, the address of each of the beneficial owners named in the table above is c/o Emergent BioSolutions Inc., 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850. |
(2) | Consists of shares of common stock subject to stock options exercisable as of, or within 60 days of March 24, 2014, and shares of common stock issuable under restricted stock unit awards that vest within 60 days of March 24, 2014. Shares of common stock subject to stock options that are exercisable as of or within 60 days of March 24, 2014 and shares of common stock issuable under restricted stock unit awards that vest within 60 days of March 24, 2014 are deemed to be outstanding and beneficially owned by the person holding the option or restricted stock unit for the purpose of calculating the percentage ownership of that person, but are not deemed outstanding for the purpose of calculating the percentage ownership of any other person. |
(3) |
Mr. El-Hibri has a beneficial ownership interest in 6,327,939 shares of our common stock through his direct holdings in certain entities, shares held directly and subject to stock options, and shares held by trusts |
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indirectly controlled by Mr. El-Hibri, which represent approximately 16.8% of our outstanding common stock. In accordance with the rules and regulations of the SEC, Mr. El-Hibris beneficial ownership is deemed to consist of the following shares of our common stock: |
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2,350,331 shares held by Intervac, L.L.C.; |
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1,524,155 shares held by BioVac, L.L.C.; |
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2,064,518 shares held directly by Mr. El-Hibri; |
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341,400 shares of common stock subject to stock options exercisable within 60 days of March 24, 2014; and |
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47,535 shares held by trusts indirectly controlled by Mr. El-Hibri. |
For more information regarding beneficial ownership and voting of these shares, see Certain Stockholder Ownership below.
(4) | Effective April 1, 2013, Dr. Chatfield became our executive vice president, strategic investments division and, in this new position, Dr. Chatfield was no longer considered an executive officer of the company. Dr. Chatfield retired from the company effective March 31, 2014. |
(5) | The Bank of New York Mellon Corporation reported sole voting and dispositive power with respect to 3,181,058 shares of our common stock as of December 31, 2013 in a Schedule 13G filed with the SEC on January 28, 2014. The address of The Bank of New York Mellon Corporation is One Wall Street, 31st Floor, New York, New York 10286. |
(6) | BlackRock, Inc. reported sole voting and dispositive power with respect to 2,972,435 shares of our common stock as of December 31, 2013 in a Schedule 13G filed with the SEC on January 29, 2014. The address of BlackRock, Inc. is 40 East 52nd Street, New York, New York 10022. |
Certain Stockholder Ownership
Mr. El-Hibri and his wife, as tenants by the entirety, hold 89.2% of the ownership interests in BioVac, L.L.C. and have the power to vote and dispose of all shares of our common stock held by BioVac. Mr. El-Hibri disclaims beneficial ownership of these shares for purposes of Section 16 of the Exchange Act or otherwise, except to the extent of his pecuniary interest in 1,359,546 shares.
Mr. El-Hibris holdings through Intervac, L.L.C. include 1,638,403 shares of our common stock held by Mr. El-Hibri and his wife, as tenants by the entirety, through their 37.7% equity interest in Intervac, L.L.C.; 127,721 shares held by Mr. El-Hibris wife; and 584,207 shares held by trusts indirectly controlled by Mr. El-Hibri or his wife. Mr. El-Hibri disclaims beneficial ownership, for purposes of Section 16 of the Exchange Act or otherwise, of those shares held solely by his wife and those shares held by the trusts.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that our executive officers and directors, and holders of more than 10% of our common stock, file reports of ownership and changes in ownership with the SEC and provide us with copies of such reports. We have reviewed such reports received by us and written representations from our directors and executive officers. Based solely on such review, we believe that all ownership reports were timely filed during 2013, except for a late filing of a Form 4 for each of Mr. Abdun-Nabi and Mr. Labinger.
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PROPOSAL 1 ELECTION OF DIRECTORS
Background
At the 2014 annual meeting, stockholders will have an opportunity to vote for the election of Zsolt Harsanyi, Ph.D., General George Joulwan, Louis W. Sullivan, M.D., and Marvin L. White to serve as Class II directors. If elected, the terms of each of these four director nominees would expire at the 2017 annual meeting of stockholders. The persons named in our proxy card will vote to elect these four nominees as Class II directors, unless you withhold authority to vote for the election of any or all of these nominees by indicating as such in your proxy. Each of the nominees has indicated his willingness to serve, if elected. However, if either of the nominees should be unable or unwilling to serve, the proxies may be voted for a substitute nominee designated by our board of directors, or our board of directors may reduce the number of directors.
Board Recommendation
The Board of Directors recommends a vote FOR the election of each of the Class II director nominees.
The following paragraphs provide information as of the date of this proxy statement about each Class II director nominee and each member of our board of directors whose term continues after the 2014 annual meeting. The information presented includes information about each such director, including age, all positions and offices held with us, length of service as a director, principal occupation and employment for the past five years and the names of other publicly held companies of which he or she has served as a director during the past five years. For information about the number of shares of common stock beneficially owned by our directors as of March 24, 2014, please see Stock Ownership Information beginning on page 12.
Terms to Expire at the 2014 Annual Meeting (Class II Director Nominees)
Zsolt Harsanyi, Ph.D., age 70, a director since 2004
Dr. Harsanyi has served as a director since August 2004. Dr. Harsanyi has served as chairman of the board of N-Gene Research Laboratories, Inc., a privately-held biopharmaceutical company, since March 2011. Prior to that, Dr. Harsanyi served as chief executive officer and chairman of the board of directors of Exponential Biotherapies Inc., a private biotechnology company, from December 2004 to February 2011. Dr. Harsanyi served as president of Porton International plc, a pharmaceutical and vaccine company, from January 1983 to December 2004. Dr. Harsanyi was a founder of Dynport Vaccine Company LLC in September 1996. Prior to joining Porton International, Dr. Harsanyi was vice president of corporate finance at E.F. Hutton, Inc. Previously, Dr. Harsanyi directed the first assessment of biotechnology for the U.S. Congress Office of Technology Assessment, served as a consultant to the Presidents Commission for the Study of Ethical Problems in Medicine and Biomedical and Behavioral Research and was on the faculties of Microbiology and Genetics at Cornell Medical College. Dr. Harsanyi received a Ph.D. from Albert Einstein College of Medicine and a B.A. from Amherst College. We believe Dr. Harsanyis qualifications to serve on our board of directors include his industry experience, including his senior executive and financial positions.
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General George Joulwan (Ret.), age 74, a director since 2013
General George A. Joulwan (Ret.) has served as a director since July 2013. General Joulwan was recommended to the nominating and corporate governance committee for election as a director by our executive chairman, Fuad El-Hibri, and our chief executive officer, Daniel Abdun-Nabi, following a referral from our executive vice president, corporate affairs, Allen Shofe. The committee subsequently recommended General Joulwan to the board following a rigorous interview and evaluation process. General Joulwans distinguished military career spans 36 years from 1961 to his retirement in 1997. In 1998 General Joulwan founded, and currently serves as president of, One Team, Inc., which provides business consulting services. Previously, General Joulwan served as Senior Advisor of Global USA Inc., which provides government relations and business consulting services, from January 1998 to October 1998. General Joulwan served as a director of General Dynamics Corporation from 1998 through 2012, and currently serves on several private company and charitable boards. He was a professor at the United States Military Academy at West Point and served on the Board of Trustees for the United States Military Academy. General Joulwan is a graduate of West Point Academy and holds a Masters degree in Political Science from Loyola University in Chicago. As a retired U.S. Army general, we believe General Joulwan brings a unique perspective to our board. Through his extensive and distinguished military career, he has developed critical leadership and management skills that we believe make him a significant contributor to our board. In addition, we believe General Joulwans foreign policy experience, knowledge of the government and the military provide valuable insight into international defense markets and the global defense industry.
Louis W. Sullivan, M.D., age 80, a director since 2006
Dr. Sullivan has served as a director since June 2006. Dr. Sullivan has served as president emeritus of Morehouse School of Medicine since July 2002. Dr. Sullivan served as president of Morehouse School of Medicine from 1981 to 1989 and from 1993 to 2002. From 1989 to 1993, Dr. Sullivan was Secretary of the Department of Health and Human Services. Dr. Sullivan serves on the boards of directors of United Therapeutics Corporation, BioSante Pharmaceuticals and Henry Schein, Inc., all publicly held biotechnology companies. He was a founder and chairman of Medical Education for South African Blacks, Inc., a trustee of Africare, a director of the National Center on Addiction and Substance Abuse at Columbia University and chairman of the board of trustees of the National Health Museum, a non-profit institution developing a museum of health sciences. Dr. Sullivan received his M.D. from Boston University and a B.S. from Morehouse College. We believe Dr. Sullivans qualifications to serve on our board of directors include his extensive service on various other boards and service with public institutions, as well as his medical background and prior senior positions in other organizations.
Marvin L. White, age 52, a director since 2010
Mr. White has served as a director since June 2010. Mr. White serves as the president and chief executive officer of The MLW Advisory Group, LLC, a management advisory company targeting the needs of healthcare and related companies. From 2008 to 2014, Mr. White served as system vice president and chief financial officer of St. Vincent Health, and was responsible for finance, materials management, accounting, patient financial services and managed care for all 19 hospitals and 36 joint ventures. Prior to joining St. Vincent Health in 2008, Mr. White was executive director and chief financial officer of LillyUSA, a subsidiary of Eli Lilly and Company, where he also held leadership positions in Corporate Finance and Investment Banking in the Corporate Strategy Group. He serves on the boards of Marian University, HealthLease Properties REIT, Washington Prime Group and the Center for Leadership Development, and has been active with Saving Orphans through Healthcare and Outreach (SOHO) and with the United Way. Mr. White earned his B.A. in Accounting from Wilberforce University, and an M.B.A. in Finance from Indiana University. We believe Mr. Whites prior and current financial experience and service on other boards make him strongly qualified to serve on our board of directors.
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Terms to Expire at the 2015 Annual Meeting (Class III Directors)
Daniel J. Abdun-Nabi, age 59, a director since 2009
Mr. Abdun-Nabi has served as our president and chief executive officer since April 2012. From May 2007 to March 2012, Mr. Abdun-Nabi served as our president and chief operating officer. Mr. Abdun-Nabi previously served as our secretary from December 2004 to January 2008, our senior vice president, corporate affairs and general counsel from December 2004 to April 2007 and our vice president and general counsel from May 2004 to December 2004. Mr. Abdun-Nabi served as general counsel for IGEN International, Inc., a biotechnology company, and its successor BioVeris Corporation, from September 1999 to May 2004. Prior to joining IGEN, Mr. Abdun-Nabi served as senior vice president, legal affairs, general counsel and secretary of North American Vaccine, Inc. Mr. Abdun-Nabi received an M.L.T. in taxation from Georgetown University Law Center, a J.D. from the University of San Diego School of Law and a B.A. in political science from the University of Massachusetts, Amherst. We believe Mr. Abdun-Nabis qualifications to serve on our board of directors include his extensive experience in senior management positions and his demonstrated business judgment, including his long service as a senior executive of the company.
Dr. Sue Bailey, age 70, a director since 2007
Dr. Bailey has served as a director since June 2007. Dr. Bailey served as a news analyst for NBC Universal, a media and entertainment company, from November 2001 to August 2006. Previously, Dr. Bailey served as Administrator, National Highway Traffic Safety Administration, as Assistant Secretary of Defense (Health Affairs) and as Deputy Assistant Secretary of Defense (Clinical Services). Dr. Bailey is a former faculty member at Georgetown Medical School and U.S. Navy officer, having achieved the rank of Lt. Commander, U.S. Navy Reserve. Dr. Bailey received her D.O. from Philadelphia College of Osteopathic Medicine and a B.S. from the University of Maryland. We believe Dr. Baileys qualifications to serve on our board of directors include her medical background and prior senior positions in government.
Dr. John E. Niederhuber, age 75, a director since 2010
Dr. Niederhuber has served as a director since August 2010. He previously served as the director of the National Cancer Institute, or NCI, from 2005 to 2010. Dr. Niederhuber joined Inova Health System in August 2010 as Executive Vice President and CEO of the Inova Institute for Translational Research and Personalized Medicine. Dr. Niederhuber is also an adjunct investigator at NCIs Center for Cancer Research, studying factors in the tumor microenvironment that lead to increased malignancy. He currently serves on the board of directors of Novelos Therapeutics, Inc. Prior to joining NCI, Dr. Niederhuber was Director of the University of Wisconsin Comprehensive Cancer Center and a professor of surgery and oncology (member of the McArdle Laboratory) at the University of Wisconsin School of Medicine from 1997 to 2005. He chaired the Department of Surgery at Stanford University from 1991 to 1997 and held professorships at the Johns Hopkins University School of Medicine from 1987 to 1991 and at the University of Michigan from 1973 to 1987. Dr. Niederhuber is a graduate of Bethany College in West Virginia and the Ohio State University School of Medicine. He trained in surgery at the University of Michigan. We believe that Dr. Niederhubers medical background in oncology and extensive experience with public institutions that deal with oncology make him uniquely qualified to serve on our board of directors.
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Terms to Expire at the 2016 Annual Meeting (Class I Directors)
Fuad El-Hibri, age 56, a director since 2004
Mr. El-Hibri has served as the executive chairman of our board of directors since April 2012. From June 2004 to March 2012, Mr. El-Hibri served as chief executive officer and as chairman of our board of directors. Mr. El-Hibri previously served as president from March 2006 to April 2007. Mr. El-Hibri served as chief executive officer and chairman of the board of directors of BioPort Corporation from May 1998 until June 2004, when, as a result of our corporate reorganization, BioPort became a wholly owned subsidiary of Emergent BioSolutions and was subsequently renamed as Emergent BioDefense Operations Lansing Inc. Mr. El-Hibri is chairman of East West Resources Corporation, a venture capital and business consulting firm, a position he has held since June 1990. He served as president of East West Resources from September 1990 to January 2004. Mr. El-Hibri is a member of the board of directors of the U.S. Chamber of Commerce, a member of the advisory board of the Yale Healthcare Conference, a member of the board of directors of the International Biomedical Research Alliance, an academic joint venture among the National Institutes of Health, or NIH, Oxford University and Cambridge University. He also serves as chairman of the El-Hibri Charitable Foundation. Mr. El-Hibri has also served as a member of the board of trustees of American University from 2004 to 2010. Mr. El-Hibri received a masters degree in public and private management from Yale University and a B.A. in economics from Stanford University. We believe Mr. El-Hibris qualifications to serve on our board of directors include his service on other boards as well as his prior business experience, including as our chief executive officer and a director.
Ronald B. Richard, age 58, a director since 2005
Mr. Richard has served as a director since January 2005. Mr. Richard has served as the president and chief executive officer of the Cleveland Foundation, the nations oldest community foundation, since June 2003. From August 2002 to February 2003, Mr. Richard served as president of Stem Cell Preservation, Inc., a start-up medical research company. After leaving Stem Cell Preservation and prior to joining Emergent BioSolutions, Mr. Richard served as a strategic business advisor for IGEN International, Inc., a biotechnology company. Mr. Richard served as chief operating officer of In-Q-Tel, a venture capital fund that provides technologies to the Central Intelligence Agency, from March 2001 to August 2002. Prior to joining In-Q-Tel, Mr. Richard served in various senior management positions at Matsushita Electric (Panasonic), a consumer electronics company. Mr. Richard is a former U.S. foreign service officer. He served in Osaka/Kobe, Japan and as a desk officer for North Korean, Greek and Turkish affairs at the U.S. Department of State in Washington, D.C. Mr. Richard previously served as chairman of the board of trustees of the International Biomedical Research Alliance, an academic joint venture among the NIH, Oxford University and Cambridge University. Mr. Richard received an M.A. in international relations from Johns Hopkins University School of Advanced International Studies and a B.A. in history from Washington University. He holds an honorary doctorate in humane letters from Notre Dame College. We believe Mr. Richards qualifications to serve on our board of directors include his past and current industry experience, including his prior senior management positions, including positions in the biotechnology industry.
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The compensation of our directors is established by our nominating and corporate governance committee based on market practice information provided by our independent compensation consultant. This compensation is periodically reviewed with respect to cash retainers, meeting fees and equity incentives. The following table sets forth information for the fiscal year ended December 31, 2013 regarding the compensation of our directors who are not also named executive officers.
Name |
Fees Earned or Paid
in Cash |
Stock Awards | Option Awards |
All Other
Compensation |
Total | |||||||||||||||
Dr. Sue Bailey |
$ | 92,000 | $ | 51,300 | $ | 43,301 | $ | | $ | 186,601 | ||||||||||
Zsolt Harsanyi, Ph.D |
$ | 101,500 | $ | 51,300 | $ | 43,301 | $ | | $ | 196,101 | ||||||||||
General George Joulwan |
$ | 24,745 | $ | 94,554 | $ | 80,637 | $ | | $ | 199,936 | ||||||||||
John E. Niederhuber, M.D. |
$ | 81,000 | $ | 51,300 | $ | 43,301 | $ | | $ | 175,601 | ||||||||||
Ronald B. Richard |
$ | 144,000 | $ | 51,300 | $ | 43,301 | $ | | $ | 238,601 | ||||||||||
Louis W. Sullivan, M.D. |
$ | 91,500 | $ | 51,300 | $ | 43,301 | $ | | $ | 186,101 | ||||||||||
Marvin L. White |
$ | 118,500 | $ | 51,300 | $ | 43,301 | $ | | $ | 213,101 |
(1) | The amounts in the Stock Awards and Option Awards columns reflect the grant date fair value of equity awards granted to the directors named in the table above for the fiscal year ended December 31, 2013, calculated in accordance with SEC rules. The assumptions we used to calculate these amounts are discussed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. As of December 31, 2013 Dr. Bailey, Dr. Harsanyi, Gen. Joulwan, Dr. Niederhuber, Mr. Richard, Dr. Sullivan and Mr. White held outstanding stock options to purchase 62,000, 50,400, 10,800, 32,400, 103,600, 129,556, and 32,400 shares of our common stock and restricted stock units with respect to 7,200, 7,200, 5,400, 7,200, 7,200, 7,200 and 7,200 shares of our common stock, respectively. |
Under our director compensation program, we pay each of our non-employee directors an annual retainer of $35,000 for service as a director. Each non-employee director also receives a fee for each board and committee meeting attended. The board and audit committee meeting fees are $2,000 for attendance in person and $1,500 for attendance by telephone. The compensation, nominating and corporate governance, scientific review and strategic operations committee meeting fees are $2,000 for attendance in person and $1,000 for attendance by telephone. The lead director receives an additional annual cash retainer of $30,000, the chair of the audit committee receives an additional annual cash retainer of $20,000, and the chair of the compensation, nominating and corporate governance, and scientific review committees each receives an additional annual cash retainer of $15,000. There is no additional cash retainer for the chair of our strategic operations committee, Fuad El-Hibri. Each member of our audit committee, other than the chair, receives an additional annual cash retainer of $5,000. Each member of our compensation, nominating and corporate governance, and scientific review committees, other than the chair, receives an additional annual cash retainer of $3,000. Each member of our strategic operations committee, other than Fuad El-Hibri and Daniel Abdun-Nabi, receives an additional cash retainer of $3,000. We reimburse our non-employee directors for out-of-pocket expenses incurred in connection with attending our board and committee meetings.
Our director compensation program also provides for the award of both stock options and restricted stock units on an annual basis to directors. Grants of stock options and restricted stock units are made by the board of directors effective on the date of the annual meeting of stockholders. Grants of equity awards are made in the following amounts:
|
an option to purchase 10,800 shares of common stock and a restricted stock unit award for 5,400 shares of common stock upon commencement of service on our board of directors; and |
|
an option to purchase 7,200 shares of common stock and a restricted stock unit award for 3,600 shares of common stock on the date of each of our annual meetings of stockholders, provided that the director continues serving as a director after the annual meeting and has served on our board of directors for at least six months. |
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The stock options and restricted stock units vest in three equal instalments on the first, second and third annual anniversaries of the date of grant. The stock options have exercise prices equal to the closing sales price per share of our common stock on the NYSE on the trading day immediately preceding the date of grant. Options granted prior to 2012 expire ten years from the date of grant. Options granted in 2012 and after expire seven years from the date of grant.
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PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP currently serves as our independent registered public accounting firm. After consideration of the firms qualifications and past performance, the audit committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014.
Under New York Stock Exchange and Securities and Exchange Commission rules, and the audit committee charter, the audit committee is directly responsible for the selection, appointment, compensation, and oversight of the companys independent registered public accounting firm and is not required to submit this appointment to a vote of the stockholders. The board of directors, however, considers the appointment of the independent registered public accounting firm to be an important matter of stockholder concern and is submitting the appointment of Ernst & Young for ratification by our stockholders as a matter of good corporate practice. One or more representatives of Ernst & Young is expected to be present at the annual meeting and will have an opportunity to make a statement and respond to appropriate questions from stockholders. In the event that our stockholders fail to ratify the appointment of Ernst & Young, it will be considered as a direction to the audit committee to consider the appointment of a different firm. Even if the appointment is ratified, the audit committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the company and its stockholders.
Required Vote and Board Recommendation
Ratification of the appointment of Ernst & Young as the companys independent registered public accounting firm requires the affirmative vote of a majority of the votes cast on the matter. Abstentions are considered votes cast and, therefore, will have the effect of a vote against the matter.
The Board of Directors recommends a vote FOR the ratification of the appointment of Ernst & Young LLP.
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The audit committee has reviewed our audited financial statements for the fiscal year ended December 31, 2013 and discussed them with our management and our independent registered public accounting firm.
The audit committee also has received from, and discussed with, our independent registered public accounting firm various communications that our independent registered public accounting firm is required to provide to the audit committee, including the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards , Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The audit committee has received the written disclosures and the letter from our independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firms communications with the audit committee concerning independence, and has discussed with our independent registered public accounting firm their independence.
Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2013.
By the Audit Committee of the Board of Directors of
Emergent BioSolutions Inc.
Marvin L. White, Chair
Zsolt Harsanyi, Ph.D.
Ronald B. Richard
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Independent Registered Public Accounting Firms Fees
The following table summarizes the fees of Ernst & Young LLP, our independent registered public accounting firm, billed to us for each of the last two fiscal years for audit and other services. For 2013, audit fees include an estimate of amounts not yet billed. None of the fees described in the following table were approved using the de minimis exception under SEC rules.
2013
Summary |
2012
Summary |
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Audit Fees(1) |
$ | 1,680,229 | $ | 1,337,551 | ||||
Audit-Related Fees(2) |
655,985 | 98,289 | ||||||
Tax Fees(3) |
353,988 | 262,611 | ||||||
All Other Fees |
| | ||||||
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|
|
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$ | 2,690,202 | $ | 1,698,451 | |||||
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(1) | Audit fees consist of fees for the audit of our consolidated financial statements and other professional services provided in connection with statutory and regulatory filings or engagements, along with fees associated with comfort letter and consents required in connection with financing transactions. |
(2) | Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit, the review of our financial statements and acquisition-related services, which are not reported under Audit Fees. |
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(3) | Tax fees consist of fees for tax compliance, tax advice and tax planning services. Tax compliance services, which relate to preparation of tax returns and claims for refunds, accounted for $127,462 of the total tax fees billed in 2013 and $93,800 of the total tax fees billed in 2012. Tax advice and tax planning services relate to assistance with tax credit and deduction studies and calculations, tax advice related to acquisitions, and audit support. |
Pre-Approval Policies and Procedures
Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. These policies generally provide that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the audit committee or the engagement is entered into pursuant to the pre-approval procedures described below.
From time to time, our audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.
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PROPOSAL 3 APPROVAL OF AMENDMENT OF STOCK INCENTIVE PLAN
The board of directors believes that our continued growth and profitability depends, in large part, on our ability to maintain a competitive position by attracting, retaining and motivating key employees with experience and ability. We believe that our stock-based compensation programs are central to this objective. We anticipate that the shares currently available under our existing stock-based compensation plans will be insufficient to meet our needs beyond the end of this year, thus impairing our ability to attract and retain key employees through the grant of stock-based awards.
On March 20, 2014, upon the recommendation of the compensation committee, the board of directors adopted our Third Amended and Restated 2006 Stock Incentive Plan, or the Amended Plan, subject to stockholder approval. The board of directors adopted the Amended Plan to:
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increase the number of shares of our common stock available for issuance under the Second Amended and Restated 2006 Stock Incentive Plan by 4,000,000 shares, subject to adjustment in the event of stock splits and other similar events; |
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provide that shares of common stock delivered to us by participants to satisfy tax withholding obligations with respect to restricted stock, restricted stock units, and other stock unit awards will be added back to the number of shares available for future grant of awards, but shares delivered to satisfy tax withholding obligations with respect to options or stock appreciation rights will not be so added back; |
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clarify that shares of common stock purchased by us on the open market using proceeds from the exercise of an award will in no event increase the number of shares available for future grant of awards; |
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modify the fungible share ratio by providing that each share subject to an award of restricted stock, restricted stock units, other stock unit awards, or performance awards will deplete the applicable share reserve by 2.3 shares, whereas prior to the amendment this ratio was 1.86; |
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increase the maximum number of shares of common stock with respect to which awards may be granted to any participant under the Amended Plan to 1,000,000 shares per fiscal year; |
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provide that the maximum number of shares with respect to which awards may be granted to non-employee directors shall be 5% of the total number of shares of common stock available for issuance under the Amended Plan; |
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provide that awards to non-employee directors will be granted and administered by a committee of the board of directors, all of the members of which are independent directors as defined by Section 303A.02 of the New York Stock Exchange Listed Company Manual; |
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exclude awards granted in connection with an acquisition by us from the minimum vesting provisions otherwise applicable to awards granted under the Amended Plan; |
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provide that all dividends, including ordinary cash dividends, paid with respect to shares of restricted stock will be paid to the participant only if and when such shares vest and any dividend equivalents provided with respect to restricted stock unit awards and performance awards shall be subject to the same restrictions on transfer and forfeitability as the awards with respect to which they are paid; |
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establish additional performance conditions for awards intended to be exempt from the deduction limitations of Section 162(m) of the Internal Revenue Code as performance-based compensation; and |
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extend the term of the Amended Plan until December 31, 2021. |
We believe that our stock-based compensation programs have been integral to our success in the past and will be important to our ability to succeed in the future. Therefore, we consider approval of the Amended Plan vital to our future success.
As described above, the Amended Plan increases the number of shares of common stock available for issuance under the Second Amended and Restated 2006 Stock Incentive Plan by 4,000,000 shares. During the
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first quarter of 2014, we performed a dilution analysis against our proxy peer group described below in Compensation Discussion and Analysis in the year that our peers sought approval from their stockholders for a new stock plan or additional shares under an existing stock incentive plan. We analyzed the number of stock incentive awards outstanding, the shares remaining available for grant under existing plans, and the additional shares being requested under the new or amended plan. Including the incremental dilution to our stockholders from the additional 4,000,000 shares proposed to be added to the Amended Plan (which would be approximately 11% based on 37,303,029 shares outstanding as of March 24, 2014), we believe that the total potential dilution to our stockholders is in line with the 50th percentile range of our peer group. As of March 24, 2014, approximately 24% of outstanding stock options were underwater (meaning that the exercise prices of such options exceed the current trading price of our common stock).
Description of the Amended Plan
This summary is qualified in its entirety by reference to the Amended Plan, a copy of which is attached to this proxy statement as Appendix A. You can request a copy of the Amended Plan by writing to Emergent BioSolutions Inc., Attn: Investor Relations, 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850. A copy of the Amended Plan, which is attached to the electronic copy of this proxy statement filed with the SEC, also may be accessed from the SECs home page (www.sec.gov).
Types of Awards
The Amended Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, other stock unit awards and performance awards, collectively referred to as Awards.
Any shares of common stock made subject to Awards of incentive stock options, nonstatutory stock options or stock appreciation rights will be counted against the maximum aggregate number of shares of common stock available for issuance under the Amended Plan as one share of common stock for every one share of common stock granted. Any shares of common stock made subject to Awards of restricted stock, restricted stock units, other stock unit awards or performance awards will be counted against the maximum aggregate number of shares of common stock available for issuance under the Amended Plan as (1) one share of common stock for every one share of common stock granted if such award was granted prior to May 21, 2009, (2) 1.5 shares of common stock for every one share of common stock granted if such award was granted on or after May 21, 2009 but prior to May 17, 2012, (3) 1.86 shares of common stock for every one share of common stock granted if such award was granted on or after May 17, 2012 but prior to May 22, 2014, and (4) 2.3 shares of common stock for every one share of common stock granted if such award was granted on or after May 22, 2014.
Any shares of common stock made subject to Awards of incentive stock options, nonstatutory stock options or stock appreciation rights that are returned to the Amended Plan will be returned as one share of common stock for every one share of common stock granted. Any shares of common stock made subject to Awards of restricted stock, restricted stock units, other stock unit awards or performance awards that are returned to the Amended Plan prior to May 22, 2014 will be returned as (1) one share of common stock for every one share of common stock granted prior to May 21, 2009, (2) 1.5 shares of common stock for every one share of common stock granted on or subsequent to May 21, 2009 and prior to May 17, 2012 and (3) 1.86 shares of common stock for every one share of common stock granted on or subsequent to May 21, 2012 and prior to May 22, 2014. Beginning on May 22, 2014, any shares of common stock subject to Awards of restricted stock, restricted stock units, other stock unit awards or performance awards that are returned to the Amended Plan will be returned as 2.3 shares of common stock for every one share of common subject to the Award, regardless of when the Award was granted.
Stock Options . Stock options entitle recipients to purchase a specified number of shares of common stock at a specified option price and subject to such other terms and conditions as are specified in connection with the option grant. Options may be granted at an exercise price that is no less than 100% of the fair market value of the common stock on the date of grant. Only employees may be granted incentive stock options. Options granted
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prior to March 6, 2012 may not be granted for a term in excess of ten years. Options granted on or after March 6, 2012 may not be granted for a term in excess of seven years. The Amended Plan permits the following forms of payment of the exercise price of options: (i) payment by cash or check, (ii) subject to certain conditions, payment in connection with a cashless exercise through a broker, (iii) subject to certain conditions, surrender to us of shares of common stock, (iv) delivery to us of a promissory note or any other lawful consideration, or (v) any combination of these forms of payment.
Stock Appreciation Rights . Stock appreciation rights entitle recipients to receive the appreciation in the value of the common stock over the value of the common stock on the date of grant of the stock appreciation right. Stock appreciation rights will be settled by the delivery of shares of common stock. Stock appreciation rights may be issued in tandem with options or as stand-alone rights. The base amount specified on the date of grant to calculate appreciation will be no less than 100% of the fair market value of a share of common stock on the date of grant. The maximum term of any stock appreciation right granted prior to March 6, 2012 will be no more than ten years from the date of grant, and of any stock appreciation right granted on or after March 6, 2012 will be no more than seven years from the date of the grant.
Restricted Stock and Restricted Stock Unit Awards . Restricted stock Awards entitle recipients to acquire shares of common stock, subject to our right to repurchase all or part of such shares from the recipient in the event that the conditions specified in the applicable Award are not satisfied prior to the end of the applicable restriction period established for such Award. Alternatively, instead of issuing common stock that is subject to repurchase, the board of directors may grant Awards known as restricted stock units that entitle recipients to receive unrestricted shares of common stock in the event that the conditions specified in the applicable Award are satisfied prior to the end of the applicable restriction period established for such Award.
Other Stock Unit Awards . Under the Amended Plan, the board of directors has the right to grant other Awards based upon the common stock or other property having such terms and conditions as the board of directors may determine, including the grant of shares and/or cash based upon certain conditions such as performance-based conditions.
Vesting . Awards granted to any participant other than non-employee directors that vest solely based on the passage of time shall not vest (i) prior to the first anniversary of the date of grant; (ii) as to more than one-third of the Award prior to the second anniversary of the date of grant; and (iii) as to more than two-thirds of the Award prior to the third anniversary of the date of grant. Awards granted to non-employee directors that vest solely based on the passage of time shall not vest: (i) prior to the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant; (ii) as to more than one-third of the Award prior to the earlier of the second anniversary of the date of grant and the date of the second annual meeting held after the date of grant; and (iii) as to more than two-thirds of the Award prior to the earlier of the third anniversary of the date of grant and the date of the third annual meeting held after the date of grant. Notwithstanding the foregoing, the board or the committee, either at the time the Award is granted or at any time thereafter, may allow an Award to accelerate and become vested, in whole or in part, prior to the vesting date specified above, in the event of the death or disability of the Participant, the termination of the participants employment by, or service to, us under specified circumstances, with respect to Awards granted in connection with an acquisition by us, or as a result of a merger, consolidation, sale, reorganization, recapitalization, or change in control of us. Awards that do not vest solely based on the passage of time shall not vest prior to the first anniversary of the date of grant (or, in the case of Awards to non-employee directors, the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant). The foregoing vesting restrictions only apply to Awards granted on or after March 6, 2012. The foregoing minimum vesting requirements shall not apply to (1) options and stock appreciation rights granted, in the aggregate, for up to 10% of the authorized number of shares under the Amended Plan and (2) restricted stock Awards, restricted stock unit Awards, and other stock unit Awards granted, in the aggregate, for up to 10% of the authorized number of shares under the Amended Plan.
Repricing . Unless such action is approved by our stockholders or is pursuant to an adjustment to reflect stock splits, stock dividends, recapitalizations, spin-offs and other similar changes in capitalization: (1) no
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outstanding option or stock appreciation right may be amended to provide an exercise or base price per share that is lower than the then-current exercise or base price per share of the option or stock appreciation right, (2) the board of directors may not cancel any outstanding option or stock appreciation right and grant in substitution therefor new Awards under the Amended Plan covering the same or a different number of shares of common stock and having an exercise or base price per share lower than the then-current exercise or base price per share of the cancelled option or stock appreciation right, (3) the board of directors may not cancel in exchange for a cash payment any outstanding option or stock appreciation right with an exercise or base price per share above the then-current fair market value of the common stock, and (4) the board of directors may not take any other action under the Amended Plan that constitutes a repricing under the rules of the NYSE.
Performance Awards . The compensation committee may determine, at the time of grant, that a restricted stock award, restricted stock unit award or other stock unit award granted under the Amended Plan will vest solely upon the achievement of specified performance criteria designed to qualify for deduction under Section 162(m) of the Internal Revenue Code. The performance criteria for each such award will be based on one or more of the following measures, which may be determined in accordance with Generally Accepted Accounting Principles (GAAP) or on a non-GAAP basis: earnings or profitability measures, including but not limited to revenue (gross, operating or net), revenue growth, income (gross, operating, net or adjusted), earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, earnings growth, profit margins or contributions, and expense levels or ratios; return measures, including but not limited to return on investment, assets, equity, capital (total or invested); cash flow measures, including but not limited to operating cash flow, cash flow sufficient to achieve financial ratios or a specified cash balance, free cash flow, cash flow return on capital, net cash provided by operating activities, cash flow per share, and working capital or adjusted working capital; stock price and equity measures, including but not limited to return on stockholders equity, total stockholder return, stock price, stock price appreciation, market capitalization, earnings per share (basic or diluted) (before or after taxes), and price-to-earnings ratio; and strategic metrics, including but not limited to acquisitions or divestitures, collaborations, licensing or joint ventures, product research and development, clinical trials, regulatory filings or approvals, patent application or issuance, manufacturing or process development, sales or net sales, sales growth, market share, market penetration, inventory control, growth in assets, key hires, business expansion, achievement of milestones under a third-party agreement, financing, resolution of significant litigation, legal compliance or risk reduction, improvement of financial ratings, or achievement of balance sheet or income statement objectives.
Such performance measures may be adjusted to exclude any one or more of extraordinary items, gains or losses on the dispositions of discontinued operations, the cumulative effects of changes in accounting principles, the impairment or writedown of any asset or assets, charges for restructuring and rationalization programs, or other extraordinary or non-recurring items, as specified by the compensation committee when establishing the performance measures. Such performance measures may vary by participant and may be different for different Awards, may be particular to a participant or the department, branch, line of business, subsidiary or other unit in which the participant works and may cover such period as may be specified by the compensation committee, and must be set by the compensation committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). Awards that are not intended to qualify as performance-based compensation may be based on these or such other performance measures as the board of directors may determine.
Eligibility to Receive Awards
Our employees, officers, directors, consultants and advisors are eligible to be granted Awards under the Amended Plan. The maximum number of shares of common stock with respect to which awards may be granted to any participant under the Amended Plan is 1,000,000 per fiscal year. Under the Amended Plan, Awards designed to comply with the requirements of Section 162(m) of the Internal Revenue Code can provide for cash payments of up to $750,000 per calendar year per individual. Stockholder approval of this proposal will also constitute an approval of the foregoing 1,000,000 share limitation and a reapproval of the foregoing $750,000
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maximum cash amount for purposes of Section 162(m) of the Internal Revenue Code. The maximum number of shares of common stock with respect to which Awards may be granted to any non-employee director under the Amended Plan is 5% of the maximum number of shares authorized for issuance under the Amended Plan.
Plan Benefits
As of March 24, 2014, approximately 265 persons are eligible to receive Awards under the Amended Plan, including our five executive officers and seven non-employee directors. The granting of Awards under the Amended Plan is discretionary, and we cannot now determine the number or type of Awards to be granted in the future to any particular person or group. On March 24, 2014, the last reported sale price of our common stock on the NYSE was $25.77.
Administration
The Amended Plan is administered by our board of directors. Our board of directors has the authority to adopt, amend and repeal the administrative rules, guidelines and practices relating to the Amended Plan and to interpret the provisions of the Amended Plan. Pursuant to the terms of the Amended Plan, the board of directors may delegate authority under the Amended Plan to one or more committees or subcommittees of the board of directors. The board of directors has authorized our compensation committee to administer certain aspects of the Amended Plan, including the granting of options to executive officers.
The board of directors also may delegate authority under the Amended Plan to our officers, each of whom has the power to make Awards to all of our employees, except to executive officers. The board of directors has authorized our chief executive officer and executive chairman to grant stock options under our Amended Plan. Neither the chief executive officer nor the executive chairman is authorized to grant options to himself, to any other director or executive officer, to any other officer or other person whose compensation is determined by the compensation committee or to any person who the board of directors or the compensation committee may from time to time designate in writing. Our board of directors has fixed the terms of the Awards to be granted by such officers, including the exercise price of such Awards and the maximum number of shares subject to Awards that such officers may make.
Subject to any applicable limitations contained in the Amended Plan, our board of directors, our compensation committee, or any other committee to whom our board of directors delegates authority, as the case may be, selects the recipients of Awards and determines the number of shares of common stock covered by options and the dates upon which such options become exercisable, the exercise price of options (which may not be less than 100% of the fair market value of the common stock), the duration of options (which may not exceed seven years in the case of options granted on or after March 6, 2012) and the number of shares of common stock subject to any stock appreciation right, restricted stock, restricted stock units or other stock unit awards and the terms and conditions of such awards, including conditions for exercise, repurchase, issue price and repurchase price.
If any Award expires or is terminated, surrendered, canceled or forfeited, the unused shares of common stock covered by such Award will again be available for grant under the Amended Plan. Shares of common stock delivered to us by a participant to satisfy tax withholding obligations with respect to restricted stock, restricted stock units, and other stock unit awards (including shares retained from the Award creating the tax obligation) will again be available for grant under the Amended Plan. However, shares of common stock delivered to us by a participant to satisfy tax withholding obligations with respect to an option or stock appreciation right (including shares retained from the Award creating the tax obligation) will not again be available for grant under the Amended Plan. In no event will shares of common stock repurchased by us on the open market using the proceeds from the exercise of an Award increase the number of shares available for future grant of Awards under the Amended Plan.
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Adjustments for Changes in Common Stock and Certain Other Events
Our board of directors is required to make appropriate adjustments in connection with the Amended Plan and any outstanding Awards to reflect stock splits, stock dividends, recapitalizations, spin-offs and other similar changes in capitalization. If a merger or other reorganization event occurs, our board of directors will provide that all of our outstanding options are to be assumed or substituted by the successor corporation. If the merger or reorganization event also constitutes a change in control event, as defined under the Amended Plan, the assumed or substituted options will become immediately exercisable in full if on or prior to the first anniversary of the reorganization event an option holders employment with us or our succeeding corporation is terminated by the option holder for good reason or is terminated by us or the succeeding corporation without cause, each as defined in the Amended Plan. In the event the succeeding corporation does not agree to assume, or substitute for, outstanding options, then our board of directors will provide that all unexercised options will become exercisable in full prior to the completion of the merger or other reorganization event and that these options will terminate immediately prior to the completion of the merger or other reorganization event if not previously exercised. Our board of directors may also provide for a cash out of the value of any outstanding options. In addition, upon the occurrence of a change in control event that does not also constitute a reorganization event under the Amended Plan, each option will continue to vest according to its original vesting schedule, except that an option will become immediately exercisable in full if on or prior to the first anniversary of the change in control event an option holders employment with us or our succeeding corporation is terminated by the option holder for good reason or is terminated by us or our succeeding corporation without cause.
If a merger or other reorganization event occurs, our repurchase and other rights under outstanding restricted stock Awards will apply to the cash, securities or other property which our common stock is converted into or exchanged for pursuant to such merger or other reorganization event in the same manner and to the same extent as such repurchase and other rights applied to our common stock under such Awards. If a merger or other reorganization event occurs that also constitutes a change of control event, unless provided to the contrary in the instrument evidencing a restricted stock Award, a restricted stock Award will become immediately vested in full if, on or prior to the first anniversary of the change in control event, the holders employment with us or our succeeding corporation is terminated for good reason by the holder or is terminated by us or the succeeding corporation without cause, each as defined in the Amended Plan.
Our board of directors may specify the effect of a merger or other reorganization event or change in control event on any stock appreciation right or other stock unit Award at the time of grant.
Amendment or Termination
Our board of directors generally may amend, modify or terminate any outstanding Award, including substituting another Award therefor, provided that we must obtain the holders consent unless our board of directors determines that such action would not materially and adversely affect the holder (other than to reflect stock splits, stock dividends, recapitalizations, spin-offs and other similar changes in capitalization or in connection with certain mergers or other reorganization events) and, without stockholder approval, as more fully described above, we cannot amend any outstanding option or stock appreciation right to provide an exercise or base price per share that is lower than the then-current exercise or base price per share of the option or stock appreciation right (other than to reflect stock splits, stock dividends, recapitalizations, spin-offs and other similar changes in capitalization).
In addition, our board of directors may amend, suspend or terminate the Amended Plan or any portion thereof at any time, except that, to the extent determined by our board of directors, no amendment requiring stockholder approval under any applicable legal, regulatory or listing requirement shall become effective until such stockholder approval is obtained and stockholder approval will be required for any amendment to the Amended Plan that (i) materially increases the number of shares of common stock available for issuance under the Amended Plan (other than an increase to reflect stock splits, stock dividends, recapitalizations, spin-offs and
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other similar changes in capitalization) or (ii) materially expands the class of service providers eligible to participate in the Amended Plan. No Award may be granted under the Amended Plan after December 31, 2021, but Awards previously granted may extend beyond that date.
If stockholders do not approve the Amended Plan, the Amended Plan will not go into effect. In such event, our board of directors will consider whether to adopt alternative arrangements based on its assessment of our needs.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax consequences that generally will arise with respect to Awards granted under the Amended Plan. This summary is based on the federal tax laws in effect as of the date of this proxy statement. In addition, this summary assumes that all Awards are exempt from, or comply with, the rules under Section 409A of the Internal Revenue Code regarding nonstatutory deferred compensation. Changes to these laws could alter the tax consequences described below.
Incentive Stock Options
A participant will not have income upon the grant of an incentive stock option. Also, except as described below, a participant will not have income upon exercise of an incentive stock option if the participant has been employed by us or our corporate parent or 50% or more-owned corporate subsidiary at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under Nonstatutory Stock Options. The exercise of an incentive stock option may subject the participant to the alternative minimum tax.
A participant will have income upon the sale of the stock acquired under an incentive stock option at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the stock. If a participant sells the stock more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the stock prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be compensation income and a portion may be capital gain. This capital gain will be long-term if the participant has held the stock for more than one year and otherwise will be short-term. If a participant sells the stock at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Nonstatutory Stock Options
A participant will not have income upon the grant of a nonstatutory stock option. A participant will have compensation income upon the exercise of a nonstatutory stock option equal to the value of the stock on the day the participant exercised the option less the exercise price. Upon sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the stock for more than one year and otherwise it will be short-term.
Stock Appreciation Rights
A participant will not have income upon the grant of a stock appreciation right. A participant generally will recognize compensation income upon the exercise of stock appreciation rights equal to the amount of the cash and the fair market value of any stock received. Upon the sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the stock appreciation right was exercised. This capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
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Restricted Stock Awards
A participant will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Internal Revenue Code is made within 30 days of the date of grant. If a timely election under Section 83(b) is made, then a participant will have compensation income equal to the value of the stock less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the date of grant. If the participant does not make an 83(b) election, then when the stock vests the participant will have compensation income equal to the value of the stock on the vesting date less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Restricted Stock Units
A participant will not have income upon the grant of a restricted stock unit. A participant is not permitted to make a Section 83(b) election with respect to a restricted stock unit award. When the restricted stock unit vests, the participant will have compensation income on the vesting date in an amount equal to the fair market value of the stock on the vesting date less the purchase price, if any. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise it will be short-term.
Other Stock Unit Awards
The tax consequences associated with any other stock unit Awards granted under the Amended Plan will vary depending on the specific terms of such Award. Among the relevant factors are whether or not the Award has a readily ascertainable fair market value, whether or not the Award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the Award and the participants holding period and tax basis for the Award or underlying common stock.
Tax Consequences to Us
There will be no tax consequences to us except that we will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Internal Revenue Code.
Vote Required and Board Recommendation
Approval of Proposal 3 requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions are considered votes cast and, therefore, will have the effect of a vote against the matter. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote on this proposal for your shares to be counted on this proposal.
The board of directors recommends a vote FOR the approval of the Third Amended and Restated Emergent BioSolutions Inc. 2006 Stock Incentive Plan.
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
Our board of directors has determined to provide our stockholders the opportunity to vote each year to approve, on an advisory basis, the compensation of our named executive officers, as disclosed in the proxy statement.
Our executive compensation programs are designed to attract, motivate, and retain executive officers, who are critical to our success. Under these programs, our named executive officers are rewarded for the achievement of our near-term and longer-term financial and strategic goals and for driving corporate financial performance and stability. The programs contain elements of cash and equity-based compensation and are designed to align the interests of our executives with those of our stockholders.
The Executive Compensation section of this proxy statement beginning on page 33, including Compensation Discussion and Analysis beginning on page 33, describes in detail our executive compensation programs and the decisions made by the compensation committee and the board of directors with respect to 2013. Highlights of our executive compensation program include the following:
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pay should be linked to performance; |
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compensation opportunities should be competitive with similarly-sized, commercial-stage biotechnology companies; |
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the equity compensation program should align executive interests with those of stockholders; and |
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supplemental benefits and perquisites should be limited and used selectively in specific circumstances to attract and retain executives. |
As we describe in the Compensation Discussion and Analysis section of this proxy statement, our executive compensation program embodies a pay-for-performance philosophy that supports our business strategy and aligns the interests of our executives with those of our stockholders. The board of directors believes this link between compensation and the achievement of our near- and long-term business goals has helped drive our performance over time. At the same time, we believe our program does not encourage excessive risk-taking by management.
Pursuant to Section 14A of the Securities Exchange Act, our board of directors is asking stockholders to approve an advisory vote on the following resolution:
RESOLVED , that the compensation paid to Emergent BioSolutions Inc.s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation tables and any related material disclosed in this proxy statement, is hereby approved.
As an advisory vote, this proposal is not binding. Although the vote is non-binding, our compensation committee and board of directors value the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
Vote Required and Board Recommendation
Approval of Proposal 4 requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions are considered votes cast and, therefore, will have the effect of a vote against the matter. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote on this proposal for your shares to be counted on this proposal.
The board of directors recommends a vote FOR the approval of the compensation of our named executive officers.
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IDENTIFICATION OF EXECUTIVE OFFICERS
Set forth below is information regarding the positions, ages and business experience of each of our executive officers as of March 24, 2014.
Name |
Age |
Position |
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Fuad El-Hibri | 56 | Executive Chairman | ||||
Daniel J. Abdun-Nabi | 59 | President and Chief Executive Officer | ||||
Robert G. Kramer | 56 | Executive Vice President, Corporate Services Division, Chief Financial Officer and Treasurer | ||||
Adam Havey | 43 | Executive Vice President and President, Biodefense Division | ||||
Barry Labinger | 50 | Executive Vice President and President, Biosciences Division |
Fuad El-Hibri. For more information about Mr. El-Hibri, please see his biography under the caption Directors and Nominees.
Daniel J. Abdun-Nabi. For more information about Mr. Abdun-Nabi, please see his biography under the caption Directors and Nominees.
Robert G. Kramer. Mr. Kramer has served as our executive vice president, corporate services division since September 2012 and as chief financial officer since December 2012. He is responsible for finance and administration, human resources, IT, investor relations, quality, regulatory affairs and medical affairs. Mr. Kramer first joined Emergent in 1999 as its chief financial officer. From 1999 until his retirement in 2010, he held various executive positions with the last being president of Emergent Biodefense Operations Lansing. Mr. Kramer returned to the company in 2011 as the interim head of the Biosciences division, and then as interim executive vice president, corporate services division before taking his current position. Prior to joining Emergent in 1999, Mr. Kramer held various financial management positions at Pharmacia Corporation, which subsequently merged with the Upjohn Company in 1995 and eventually became part of Pfizer Inc. Mr. Kramer received an M.B.A. from Western Kentucky University and a B.S. in industrial management from Clemson University.
Adam Havey . Mr. Havey has served as our executive vice president and president, biodefense division since March 2011. Mr. Havey previously served as president of Emergent Biodefense Operations Lansing LLC from January 2009 to February 2011; vice president of business operations from November 2007 to December 2008; and senior director of manufacturing development from June 2006 to November 2007. Mr. Havey received a B.S. in chemical engineering from Michigan State University.
Barry Labinger. Mr. Labinger has served as our executive vice president and president, biosciences division since August 2013. Prior to joining the company, Mr. Labinger served as executive vice president and chief commercial officer at Human Genome Sciences, Inc. from 2005 to 2012. He has held a number of executive positions, including global head of 3M Pharmaceuticals from 2002 to 2005, and senior vice president and general manager commercial operations, and vice president, Enbrel marketing, at Immunex Corp. from 2000 to 2002. Mr. Labinger has held a number of leadership positions in pharmaceutical marketing at Bristol-Myers Squibb from 1997 to 2000 and at Abbott Laboratories from 1990 to 1997. Mr. Labinger received his M.B.A. in Marketing, Finance and Management Policy and B.A. in Economics from Northwestern University.
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Executive Compensation Processes
The compensation committee has implemented an annual review program for our executive officers pursuant to which the committee determines annual salary increases, annual cash bonus amounts and annual equity awards granted to our executive officers. Our chief executive officer and senior vice president of human resources prepare compensation recommendations regarding the compensation of each of our executive officers, other than the executive chairman of the board and the chief executive officer, and present these recommendations to the compensation committee for approval. The compensation committee evaluates the overall performance of the chief executive officer and the other executive officers other than the executive chairman based on achievement of corporate goals and objectives, achievement of individual goals, performance of job responsibilities and demonstration of behavioral competencies. The compensation committee then makes individual compensation decisions for the chief executive officer and the executive officers other than the executive chairman based on these evaluations and competitive market data. The compensation committee evaluates the overall performance of the executive chairman based on performance of job responsibilities and makes compensation decisions for the executive chairman based on this evaluation and competitive market data.
The board of directors has delegated to our chief executive officer and our executive chairman the authority to grant stock options and restricted stock units to employees under our Second Amended and Restated 2006 Stock Incentive Plan. Neither our chief executive officer nor our executive chairman has authority to grant options or restricted stock units to himself, to any other director or executive officer, to any other officer or other person whose compensation is determined by the compensation committee, or to any person whom the board of directors or the compensation committee may from time to time designate in writing. In addition, neither the chief executive officer nor the executive chairman has authority to grant, in the aggregate, options and restricted stock units with respect to more than 2,000,000 shares of common stock in any fiscal year or to grant to any person, in any one fiscal year, options and restricted stock units with respect to more than 287,700 shares of common stock, in each case as counted against the maximum aggregate number of shares of common stock available for issuance under our Second Amended and Restated 2006 Stock Incentive Plan.
The compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. During 2013, the compensation committee retained Towers Watson & Co. as an outside compensation consultant to advise the compensation committee on market compensation practices and the implementation of public company compensation programs and policies and to review recommendations from management on compensation matters. The compensation committee met with the compensation consultant three times in 2013 and three times in 2014, at the time salary, annual bonus targets and equity award guidelines were being considered for the chief executive officer and our other executive officers. This compensation consultant performed executive compensation services in support of the compensation committee. This compensation consultant also collected competitive market data for specific positions and researched market practices on compensation plan and design for the company during 2013. The compensation consultants services for the compensation committee and the company during 2013 and 2014 have not raised a conflict of interest.
COMPENSATION DISCUSSION AND ANALYSIS
This section discusses the principles underlying our executive compensation programs, policies and decisions and the most important factors relevant to an analysis of these programs, policies and decisions. It provides qualitative information regarding the manner and context in which compensation is earned by and awarded to our executives and is intended to place in perspective the data presented in the tables and narrative that follow.
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The compensation committee of our board of directors oversees our executive compensation programs. In this role, the compensation committee reviews and approves all compensation decisions relating to our named executive officers. The compensation committee has hired Towers Watson & Co. as its independent compensation consultant to provide competitive compensation data and assist with the implementation of various aspects of our base salary determinations, annual bonus plan, long-term incentive program and other executive compensation decisions from time to time. Towers Watson provides data and advice that the compensation committee considers in making its decisions.
Overview of 2013 Corporate Goals
Bonuses paid to our executive officers are based, in part, on our overall achievement of corporate goals. The compensation committees assessment of the level of achievement of the corporate goals determines the corporate factor component to be applied to bonus calculations. The corporate factor may range from 0 to 1.5, based on our achievement of corporate goals. In January 2014, the compensation committee met to determine the corporate factor to be applied to bonuses paid for 2013 performance and approved a corporate factor of 0.95.
These corporate goals, and the degree to which we achieved those goals, are as follows:
Goal | Performance | Achievement | ||
Achieve revenue of at least $315 million | Achieved revenues of approximately $312 million | Substantially Achieved | ||
Achieve net income of at least $30 million | Achieved net income of $31 million | Achieved | ||
Complete acquisition of product that will generate revenue within 12 months of acquisition | Completed acquisition of RSDL ® (decontamination lotion) and executed agreement to acquire Cangene Corporation | Achieved | ||
Advance product portfolio by completing all activities to enable commencement of a Phase 3 study for otlertuzumab in the first quarter of 2014 | Agreed with the board of directors to defer Phase 3 trial until the program is partnered; as revised by the board of directors, the goal required completion of all activities to enable initiation of three Phase 2 triple drug combination studies in 2014 and the company is on track to initiate such studies | Achieved | ||
Advance progress of Building 55 licensure by initiating pivotal process comparability and non-clinical studies | Positive progress with the FDA on Building 55 comparability | Goal Not Achieved |
Role of Executive Officers in Determining Executive Compensation
The compensation committee approves all compensation decisions relating to our named executive officers, including our executive chairman and our chief executive officer. As part of this process, our chief executive officer, together with our senior vice president human resources, prepares compensation recommendations for each of our named executive officers, other than the executive chairman of the board and the chief executive officer, and presents these recommendations to the compensation committee for approval. The outside compensation consultant retained by the compensation committee, Towers Watson, assists in this effort, periodically meeting with management to gain input on objectives with respect to executive compensation and
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assisting the compensation committee in its deliberations. Compensation recommendations for the executive chairman and chief executive officer are developed and approved by the compensation committee based on data and context provided by the senior vice president of human resources and Towers Watson. No named executive officer is present when the committee makes decisions regarding his compensation.
Executive Compensation Principles
Our executive compensation programs are based on four key principles:
Executive Compensation Principles:
pay should be linked to performance
compensation opportunities should be competitive with similarly-sized, commercial-stage biotechnology companies
the equity compensation program should align executive interests with those of stockholders
supplemental benefits and perquisites should be limited and used selectively in specific circumstances to attract and retain executives |
Pay should be linked to performance.
We believe that a significant portion of each senior executives compensation should be variable. The performance of our senior executives has a significant impact on the overall performance of our company. To that end, a significant portion of the compensation opportunity provided to our senior executives is variable and based on performance. We consider both annual cash bonuses and equity awards to be variable compensation.
Compensation opportunities should be competitive with similarly-sized, commercial-stage biotechnology companies.
The compensation committee reviews data and industry surveys to assist in its compensation decisions.
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2013 Radford Survey data and 2013 Proxy Peer Group . In making compensation decisions for our named executive officers, other than our executive chairman and chief executive officer, for 2013, the compensation committee reviewed data from the Radford Global Life Sciences Survey, or the 2013 Radford Survey data. We used the 2013 Radford Survey data from (1) companies employing 150 to 499 employees and (2) companies employing over 500 employees, to assist in setting salaries, target bonus percentages and long-term incentive award guidelines. The compensation committee considered 2011 blended data from the Radford Survey that was updated for 2013 using an annual adjustment factor of 3%. As a second data point, we reviewed salary, target bonus and long-term incentive award values of comparable executives from the 2012 proxy statements of similarly-sized, commercial-stage biotechnology companies with a disease focus on oncology, infectious disease or autoimmunity that are generally in a phase of business life cycle similar to us. We refer to this group of companies, which are listed in the table below, as our 2013 proxy peer group. |
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2013 Specialized Peer Group . In making compensation decisions for total cash compensation and long-term incentive compensation for our executive chairman and chief executive officer for 2013, the compensation committee reviewed data from a separate group of 16 companies that (1) had separate individuals in those offices, (2) operate in the life sciences field and (3) had revenues between $5 million and $1.8 billion. We refer to this group of companies as our 2013 specialized peer group. The compensation committee considered 2011 peer group data that was updated for 2013 using an annual adjustment factor of 3%. The 2013 specialized peer group was comprised of the following companies, all of which had executive chairs at that time: Bio-Rad Laboratories, Inc., ResMed Inc., Hanger, Inc., |
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Haemonetics Corporation, Regeneron Pharmaceuticals, Inc., Affymetrix, Inc., HMS Holdings Corp., Genomic Health Inc., Meridian Bioscience, Inc., Conceptus Inc., Immunomedics, Inc., Infinity Pharmaceuticals, Inc., Maxygen, Inc., DURECT Corporation, Dyax Corp. and EntreMed, Inc. Our compensation committee believed that the roles and compensation of executive chairmen and chief executive officers in companies that have separate individuals in those offices differed from that of companies without non-executive chairmen. Our compensation committee believed that comparable data from this specialized peer group provided a more valid basis than general industry surveys for making compensation decisions for our executive chairman and chief executive officer in 2013. |
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2014 Radford Survey data and 2014 Proxy Peer Group . For 2014, in making compensation decisions for our named executive officers, other than the executive chairman, the compensation committee reviewed a custom data sample from the Radford Global Life Sciences survey data comprised of similarly-sized, commercial-stage companies in the life sciences industry. We refer to this customized data as the 2014 Radford Survey data. As a second data point, the compensation committee reviewed data from the 2013 proxy statements of select pharmaceutical and/or biotech companies. We refer to this group of companies, which are listed in the table below, as our 2014 proxy peer group. To be considered for this 2014 proxy peer group, the reference company must have had similar business operations and financial performance and a market capitalization of less than $6 billion. With the assistance of Towers Watson, we evaluated this pool of potential companies to ensure that an included company had a similar operational focus and size, evaluating the following screening criteria: |
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at least one marketed product; |
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disease focus on oncology, infectious disease or autoimmunity; |
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R&D expense between 5% and 20% of revenue; |
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employee size of between 750 and 3,000; |
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revenues of between $220 million to $1.4 billion; |
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positive net income; and |
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market capitalization of between $450 million to $2.7 billion. |
In February 2014, the management team met with the compensation committee to review the previous proxy peer group methodology and the proposed new proxy peer group methodology. The discussions resulted in revised gating and screening criteria and recommendations, based on this analysis, as to which companies should be included in the companys 2014 proxy peer group. The management team proposed, and the compensation committee determined to recommend, to amend the proxy peer group that was used in 2013 to include the following new list of companies, all of which satisfied at least 75% of the screening criteria. The committee further decided to retain companies from the 2013 peer group that met at least 60% of the 2014 screening criteria in an effort to minimize peer group fluctuations from year to year.
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2013 Proxy Peer Group |
2014 Proxy Peer Group | |
Acorda Therapeutics, Inc. |
Acorda Therapeutics, Inc. | |
Akorn, Inc. |
Akorn, Inc. | |
Alexion Pharmaceuticals, Inc. |
Alkermes Inc | |
Alkermes Inc. |
Auxilium Pharmaceuticals Inc. | |
Auxilium Pharmaceuticals Inc. |
Cubist Pharmaceuticals Inc. | |
BioMarin Pharmaceutical Inc. |
Dendreon Corp. | |
Dendreon Corp. |
Genomic Health Inc. | |
Hi Tech Pharmacal Co. |
Hi Tech Pharmacal Co. | |
Impax Laboratories Inc. |
Impax Laboratories Inc. | |
Isis Pharmaceuticals, Inc. |
Lannett Company, Inc | |
The Medicines Company |
The Medicines Company | |
Onyx Pharmaceuticals, Inc. |
Myriad Genetics Inc. | |
Salix Pharmaceuticals Ltd. |
Salix Pharmaceuticals Ltd. | |
Spectrum Pharmaceuticals, Inc. |
Spectrum Pharmaceuticals, Inc. | |
United Therapeutics Corporation |
United Therapeutics Corporation | |
ViroPharma Inc. |
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2014 Executive Chairman Reference Group . For 2014, in making its compensation decisions for the executive chairman, the compensation committee reviewed market data of a broad range of similarly-sized companies from various industries with an executive chairman role due to the lack of survey benchmarks for the executive chairman position and the limited amount of publicly available compensation information for the executive chairman position from the 2013 specialized peer group (a majority of which no longer have executive chairman positions). A review of this data demonstrated that companies often use very different approaches to delivering compensation for the executive chairman position based on company-specific circumstances, which leads to divergent compensation practices across the reference group of companies. The compensation committees reference group for the executive chairman position consisted of: Acacia Research Corporation, Atlantic Tele-Network, Inc., CEC Entertainment Inc., comScore, Inc., EV Energy Partners LP, Exam Works Group, Inc., Five Below, Inc., Grand Canyon Education, Inc., Parker Drilling Co., PetroLogistics LP, QLogic Corp. and Vitamin Shoppe, Inc. We refer to this data as the 2014 executive chairman reference group. |
The equity compensation program should align executive interests with those of stockholders.
We believe annual equity awards align the compensation opportunity for our executives with stockholder value creation. We grant a mix of stock options and restricted stock units such that 50% of the value of the total long-term incentive award is intended to be delivered through each form of compensation.
Supplemental benefits and perquisites should be limited and used selectively in specific circumstances to attract and retain executives.
No named executive officer received any supplemental benefits or perquisites in 2013. We use supplemental benefits on a very limited case-by-case basis, only to the extent we consider necessary to attract or retain particular executives.
Elements of Executive Compensation
Compensation for our executives generally consists of the following elements:
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base salary; |
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annual cash bonuses; |
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equity awards; |
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traditional benefits generally available to all employees; and |
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severance and change of control benefits. |
Base Salary. We provided 2013 base salaries to our executive chairman and chief executive officer in amounts based between the 50th and 75th percentile of the 2013 specialized peer group data. We generally provide base salaries to our named executive officers other than our executive chairman and chief executive officer within a competitive range in an amount based in the aggregate around the 50th percentile of the applicable Radford Survey data as described above. However, the percentile for any given executive may vary below or above these targets, sometimes substantially, based on a variety of factors, including the executives seniority, time in the role, scope of responsibilities, individual performance and potential future contributions to our company. In addition, we consider our overall financial performance in making decisions to adjust executive salaries. The compensation committee reviews base salaries at least annually and adjusts such salaries from time to time to realign them with market levels after taking into account individual responsibilities, performance and experience. The factors considered in making a specific adjustment to base salary may relate to a change in the emphasis placed on one or more of the factors that were used to set the initial base salary for a particular named executive officer, or reflect a new factor that arises in the course of our operations.
The compensation committee used the information described above in approving the annual base salaries paid to our named executive officers for 2013, and 2014 base salaries, which are described below. In 2013, the chief executive officer position pay was benchmarked against the 2013 specialized peer group as part of the transition plan from our former CEO, who now serves as our executive chairman, to our incumbent CEO. For purposes of determining CEO pay for 2014, the CEO position was no longer benchmarked against the 2013 specialized peer group but, instead, benchmarked against the 2014 Radford Survey data and the 2014 proxy peer group data consistent with all other named executive officers and reflecting the fact that the CEO transition is now complete. When benchmarked against the 2014 Radford Survey data, the chief executive officer position was lagging the market median and a market adjustment was approved by the compensation committee to position the chief executive officer base pay level between the 25th and 50th percentiles.
Similarly, it was determined that the scope of responsibility of the executive chairman role was unique within the company and that it was appropriate to set the executive chairmans cash compensation between the 50 th and 75 th percentile of the 2014 executive chairman reference group cash compensation. In order to attain this positioning, a market adjustment was also approved for the executive chairman position. A market adjustment was also applied to Mr. Haveys base salary to ensure better alignment with our stated compensation philosophy.
Name |
2013 Base Salary | 2014 Base Salary | Increase from 2013 | |||||||||
Fuad El-Hibri |
$ | 728,021 | $ | 900,016 | 23.6 | % | ||||||
Daniel J. Abdun-Nabi |
$ | 572,021 | $ | 680,014 | 18.9 | % | ||||||
Robert G. Kramer |
$ | 430,186 | $ | 455,998 | 6.0 | % | ||||||
Steven N. Chatfield, Ph.D.(1) |
£ | 219,485 | £ | N/A | N/A | |||||||
Adam Havey(2) |
$ | 332,592 | $ | 385,008 | 15.8 | % | ||||||
Barry Labinger(3) |
$ | 425,006 | $ | 429,977 | 1.2 | % |
(1) | Effective April 1, 2013, Dr. Chatfield became our executive vice president, strategic investments division and, in this new position, Dr. Chatfield was no longer considered an executive officer of the company. |
(2) | Mr. Haveys 2014 base salary reflects a 3% merit increase and a 12.8% market adjustment. |
(3) | Mr. Labingers 2014 base salary reflects a 3% merit increase that was prorated based on his August 12, 2013 hire date. |
Annual Cash Bonuses. The compensation committee has the authority under our Annual Bonus Plan for Executive Officers to award annual cash bonuses to our executives. Each executive other than our executive chairman is eligible for an annual bonus, which is intended to motivate and compensate each executive for
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achieving financial and operational goals and individual performance objectives. The amount of annual bonuses that are payable under this plan are reviewed and approved by the compensation committee. Amounts are determined as follows:
The philosophy of the compensation committee is to set bonus targets at approximately the 50th percentile as measured against the applicable Radford Survey data. No participant may earn a bonus of more than twice their target bonus percentage. The corporate factor may range from 0 to 1.5, based on our achievement of corporate goals determined by the compensation committee, and the individual factor may range from 0 to 1.5, based on an evaluation of each participants performance of day-to-day responsibilities, behavioral competencies, and achievement of individual goals determined by the compensation committee. The compensation committee may also make discretionary bonuses outside of the framework of the bonus plan. No such discretionary bonuses were awarded to our named executive officers in 2013.
Equity Awards. We use stock option and restricted stock unit awards as the forms of long-term incentive compensation for executives and other employees. All stock option and restricted stock unit awards to named executive officers are approved by the compensation committee.
For all equity awards in 2014, excluding the executive chairman, chief executive officer, and chief financial officer, we relied on guidelines that the compensation committee approved based on data provided by Towers Watson to determine annual equity awards to executives. The guidelines set forth a dollar value for the amount of annual equity grants that we may make to executives and other employees and included a minimum, midpoint and maximum target value of equity to be awarded to each participant level. For 2014, the midpoint target value of equity to be awarded was generally at or slightly above the 50th percentile of long-term incentive values as compared to the applicable Radford Survey data as described above for all named executive officers, other than our executive chairman and chief executive officer.
Over the range of equity grant values permitted by the guidelines, the total value to be awarded to each named executive officer is a reflection of each named executive officers individual factor. The following calculations formed the basis for the number of stock options and restricted stock units granted to our named executive officers.
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The number of options is equal to 50% of the total desired long-term incentive value divided by 50% of the trailing one-year average closing price of our common stock on the NYSE, which we believe approximates the Black-Scholes valuation of a stock option. |
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The number of restricted stock units is equal to 50% of the desired long-term incentive value divided by the trailing one-year average closing price of our common stock on the NYSE. |
We generally make an annual equity grant to all executives and eligible employees on the third full trading day following the release of our financial results for the prior fiscal year. We generally make an equity grant on the third full trading day following the release of our financial results for the most recently completed fiscal quarter to executives and eligible employees who have been hired or promoted since the occurrence of the last equity grant. If circumstances warrant, we also may make equity grants at various other points throughout the year. The compensation committee makes all awards to named executive officers, while our chief executive officer and executive chairman have been authorized to make awards to eligible employees other than executive officers.
The exercise price of all stock options we grant is equal to the fair market value of our common stock on the date of grant, which we consider to be the closing sales price of our common stock on the NYSE on the trading
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day immediately preceding the date of grant. Stock options and restricted stock units vest in three equal annual instalments beginning one year from the date of grant and stock options have a seven-year term. The vesting feature of our stock option and restricted stock unit awards is intended to aid in executive retention by providing an incentive to our executives to remain in our employ during the vesting period.
The compensation committee reviews all components of each executives compensation when determining equity awards to ensure that an executives total compensation conforms to our overall philosophy and objectives. The compensation committee may consider the value of previously granted equity awards in making future grants, but a significant amount of value represented by previous awards or a significant level of stock ownership will not necessarily cause the committee to forego making, or reduce the amount of, any future award.
With stock options, executives are rewarded if our stock price increases above the exercise price of the stock option. We believe that stock option awards are an effective method of motivating executives to manage our company in a manner that is consistent with the long-term interests of our stockholders. We believe that restricted stock units are another effective tool for motivating, retaining and incentivizing executives, especially when used in addition to stock option awards. The stock ownership opportunities afforded by restricted stock units align motivation of executives with the goals of stockholders even in situations where declines in our stock price diminish the retentive or incentivizing effects of stock options. In addition, we believe that stock options and restricted stock units are simple for participants to understand because we have engaged in broad training to ensure that these forms of equity-based compensation are familiar to our executives. The compensation committee has reviewed and will continue to monitor market trends with respect to equity incentives and may periodically evaluate the appropriateness of other forms of equity-based compensation.
Benefits. We maintain broad-based benefits that are generally available to all employees, including health insurance, life and disability insurance, dental insurance and a 401(k) plan. Executives are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. We provide a matching contribution for each 401(k) plan participant of 50% of the participants elective deferrals for the year up to 6% of the participants eligible compensation, subject to IRS limitations. The matching contribution is fully and immediately vested. Dr. Chatfield is a U.K. resident and did not participate in our 401(k) plan. As described under Executive Compensation Employment Agreements, under the terms of his employment agreement with us prior to his retirement, if Dr. Chatfield made a monthly contribution equal to 2.5% of his salary to a qualified personal pension plan, we contributed an amount equal to 13% of his salary to such plan.
Executive Severance Arrangements. Compensation for named executive officers includes severance and change of control arrangements, which are reflected in our 2011 Senior Management Severance Plan, or the Senior Management Severance Plan. Our Senior Management Severance Plan provides for payments and benefits as a result of involuntary termination without cause or termination of employment in particular circumstances in connection with a change of control. The compensation committee periodically reviews benchmarking data to evaluate whether the benefits to be received by each executive continue to be competitive compared to our updated proxy peer group. The Senior Management Severance Plan is designed based on our understanding of market practice at comparable companies for similarly situated executives and in a manner that we believe is likely to attract and help retain high quality executive talent. The Senior Management Severance Plan is described in greater detail under Executive Compensation Payments Upon Termination or Change of Control.
In making its decision to adopt the Senior Management Severance Plan, the compensation committee considered the views of Towers Watson that the program was generally consistent with market practice, as well as information on the potential costs associated with the program. The triggers for benefits are based on the compensation committees view of market practice and the compensation committees view that some level of income continuation should be provided in the event a named executive officers employment is terminated without cause or by the executive with good reason as those terms are defined in the Senior Management Severance Plan. In addition, the compensation committee believes that, based on its view of market practice, the
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vesting of outstanding equity awards should accelerate if the executive is terminated without cause or leaves for good reason following a change in control. We do not provide any payments or benefits in the case of termination by an executive without good reason or in the case of termination for cause.
Targeted Mix of Compensation for 2013
The following charts set forth information regarding the targeted mix of compensation for 2013 for our executive chairman, chief executive officer and our other named executive officers.
Executive Chairman |
Chief Executive Officer | Average of Other Named Executive Officers | ||
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(1) | Based on target annual cash bonuses for 2013. |
(2) | The target value delivered by long-term equity-based awards is calculated based on a modified Black-Scholes model as described further in the Equity Awards discussion. |
Elements of 2014 Executive Compensation Decisions
The following sections set forth a detailed discussion of specific compensation committee decisions made in the first quarter of 2014 regarding the award of bonuses to our named executive officers for fiscal year 2013 performance, the award of equity grants in March 2014 and the establishment of base salaries and target bonuses for fiscal 2014.
Fuad El-Hibri. Mr. El-Hibri serves as our executive chairman. In this role, Mr. El-Hibri is not eligible for an annual cash bonus. In March 2013, the compensation committee used the 2013 specialized peer group to determine his 2013 base salary and 2013 equity award. In March 2014, the compensation committee evaluated Mr. El-Hibris 2013 performance and referenced the 2014 executive chairman peer group for the purpose of determining his 2014 base salary and 2014 equity award, taking into account, among other factors, the following:
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board leadership and direction, including the operations of the board and its committees and the recruitment of a new director; |
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maintenance of critical external relationships, including with US and international governments and business leaders; |
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merger and acquisitions transaction guidance, including involvement in negotiations, due diligence planning, valuation analysis, structuring, deal completion and integration; |
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strategic and financial planning guidance, including guidance for the business foundation and strategic objectives and participation in the development of five-year plans; and |
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support for the executive team, including mentoring and coaching the chief executive officer and others on strategic, business development, management, culture and succession planning matters. |
Based on its evaluation of Mr. El-Hibris 2013 performance and reference to the data from the 2014 executive chairman peer group, the compensation committee increased Mr. El-Hibris base salary from $728,021 to $900,016 and approved an equity award of $2.1 million to Mr. El-Hibri, which was granted on March 11, 2014. The following represents Mr. El-Hibris total target compensation for 2014, which has been calibrated to the market median, as compared to the 2014 executive chairman peer group. Specific percentiles have been approximated on a straightline basis between the 25 th and 50 th and 50 th and 75 th percentiles for illustrative purposes only.
Daniel J. Abdun-Nabi. Mr. Abdun-Nabi serves as our president and chief executive officer. In March 2013, the compensation committee used data for chief executive officers of the 2013 specialized peer group in approving a target annual cash bonus percentage for Mr. Abdun-Nabi of 65% of base salary. In March 2014, the compensation committee evaluated Mr. Abdun-Nabis performance in his role as president and chief executive officer taking into account, among other factors, the following:
|
progress towards the achievement of the corporate goals described above; |
|
completion of a $225 million credit facility that led to an offering of $250 million senior convertible notes; |
|
positive results from the FDA biennial inspection; |
|
integration of the RSDL business, including manufacturing, quality, regulatory and sales and marketing; and |
|
recruitment of top executive talent to lead two divisions (Biosciences and Legal & Compliance) and, with the assistance of the executive chairman, a new director. |
Based on its evaluation, the compensation committee determined to award Mr. Abdun-Nabi a cash bonus of $459,190.
42
Based on the performance evaluation and a market adjustment as indicated by the 2014 Radford Survey data, in March 2014, the compensation committee increased Mr. Abdun-Nabis base salary from $572,021 to $680,014, increased his target annual cash bonus percentage from 65% to 80% of base salary and approved an equity award of $2.3 million to Mr. Abdun-Nabi, which was granted on March 11, 2014. These adjustments bring Mr. Abdun-Nabis total direct compensation to the 42 nd percentile of the Radford Survey data. The following represents Mr. Abdun-Nabis total target direct compensation for 2014 as compared to the 2014 Radford Survey data. Specific percentiles have been approximated on a straightline basis between the 25 th and 50 th and 50 th and 75 th percentiles for illustrative purposes only.
Steven N. Chatfield, Ph.D. Dr. Steven Chatfield served as executive vice president, biosciences division from the period of January 1, 2013 to March 31, 2013. In this role, Dr. Chatfield was considered one of the companys executive officers. Effective April 1, 2013, Dr. Chatfield became our executive vice president, strategic investments division and, in this new position, Dr. Chatfield was no longer considered an executive officer of the company. In March 2013, based upon his changing role, the company approved a target annual cash bonus percentage of 45%. In March 2014, the company determined Dr. Chatfields bonus and equity award for 2013 based upon an evaluation of Dr. Chatfields performance in this new role. Based on this evaluation, the company awarded Dr. Chatfield a cash bonus of £112,596 for 2013 performance, which was paid on March 24, 2014. Dr. Chatfield retired from the company effective March 31, 2014.
Adam Havey. Mr. Havey serves as our executive vice president and president, biodefense division. In March 2013, the compensation committee used the 2013 Radford Survey data in approving a target annual cash bonus percentage for Mr. Havey of 45% of base salary. In March 2014, the compensation committee evaluated Mr. Haveys performance, taking into account, among other factors, the following:
|
progress towards the achievement of the corporate goals described above; |
|
agreement with the FDA on Building 55 regarding protein profile for comparability; |
|
positive results from the FDA biennial inspection; |
|
an achievement of 97% of budget upside for BioThrax sales; |
|
integration of the RSDL business and achievement of better-than-targeted RSDL revenues; and |
|
management of senior leadership transitions at the Baltimore site. |
Based on its evaluation, the compensation committee determined to award Mr. Havey a cash bonus of $142,183.
43
Based on the performance evaluation and the market data from the 2014 Radford Survey data, in March 2014, the compensation committee increased Mr. Haveys 2014 base salary from $332,592 to $385,008, which reflects a 3% merit increase, as well as a 12.8% market adjustment as indicated by the 2014 Radford Survey data, increased his target annual cash bonus percentage from 45% to 50% of base salary, which also reflects a market adjustment as indicated by the 2014 Radford survey data, and approved an equity award of $525,000 to Mr. Havey, which was granted on March 11, 2014. The following represents Mr. Haveys total target direct compensation for 2014 as compared to the market data from 2014 Radford Survey data. Specific percentiles have been approximated on a straightline basis between the 25 th and 50 th and 50 th and 75 th percentiles for illustrative purposes only.
Robert G. Kramer. Mr. Kramer serves as our executive vice president, corporate services division and chief financial officer. In March 2013, the compensation committee used the 2013 Radford Survey data in approving a target annual cash bonus percentage for Mr. Kramer of 50% of base salary. In March 2014, the compensation committee evaluated Mr. Kramers performance, taking into account, among other factors, the following:
|
progress towards the achievement of the corporate goals described above; |
|
completion of a $225 million credit facility that led to an offering of $250 million convertible senior notes; |
|
positive results from the FDA biennial inspection; |
|
completion of due diligence for two acquisitions (HR, IT, Quality, Regulatory, Finance) and integration of quality systems for RSDL manufacturing and order-to-cash system for sales; |
|
establishment and implementation of IT strategy and master plan; and |
|
completion of two five-year plans and roll out of 18 month forecast/budget process. |
Based on its evaluation, the compensation committee determined to award Mr. Kramer a cash bonus of $265,640.
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Based on the performance evaluation and the market data from the 2014 Radford Survey data, in March 2014, the compensation committee increased Mr. Kramers 2013 base salary from $430,000 to $455,998, determined to maintain his target annual cash bonus percentage of 50% of base salary and approved an equity award of $972,000 to Mr. Kramer, which was granted on March 11, 2014. The following represents Mr. Kramers total target direct compensation for 2014 as compared to the market data from the 2014 Radford Survey data. Specific percentiles have been approximated on a straightline basis between the 25 th and 50 th and 50 th and 75 th percentiles for illustrative purposes only.
Barry Labinger. Mr. Labinger became our executive vice president and president, biosciences division in August 2013. In July 2013, the compensation committee gave consideration to both the 2013 Radford Survey data and the 2012 Radford Survey data in approving a base salary for Mr. Labinger of $425,000 and a target annual cash bonus percentage of 50% of base salary. The compensation committee also approved an equity award of $490,000 that was granted in November 2013.
In March 2014, the compensation committee evaluated Mr. Labingers performance, taking into account, among other factors, the following:
|
progress towards the achievement of the corporate goals described above; |
|
development of deep understanding of Biosciences division operations, products, technology and talent; |
|
management of all partnering negotiations for otlertuzumab and ADAPTIR product candidates; |
|
oversight of the integration program for the acquisition of Cangene Corporation. |
Based on its evaluation, the compensation committee determined to award Mr. Labinger a prorated cash bonus of $78,539 for 2013 and approved an equity award of $525,000 to Mr. Labinger granted on March 11, 2014, which the compensation committee chose not to prorate. The following represents Mr. Labingers total target direct compensation for 2014 as compared to the market data from the 2014 Radford Survey data. Specific percentiles have been approximated on a straightline basis between the 25 th and 50 th and 50 th and 75 th percentiles for illustrative purposes only.
45
Consideration of Say-on-Pay Vote Results
Our board of directors has determined to provide our stockholders the opportunity to vote each year to approve, on an advisory basis, the compensation of our named executive officers, as disclosed in the proxy statement. At our 2013 annual meeting, we held a non-binding stockholder advisory vote on executive compensation (say-on-pay). Our stockholders approved our 2013 executive compensation, with more than 99% of voting stockholders casting their vote in favor of the say-on-pay resolution. Because most of the significant 2013 compensation decisions had already been made at the time of the vote, the committee primarily considered the results of the 2013 say-on-pay vote relating to 2013 executive compensation along with other factors when making executive compensation decisions for 2014. In making executive compensation decisions for 2014, the committees main considerations included our stockholders support for our executive compensation program and the committees satisfaction with the 2013 pay mix and levels. The committee will continue to consider our stockholders views when making executive compensation decisions in the future.
Other Executive Compensation Practices
Stock Ownership Requirements and Hedging Policies. Because we believe it is important for executives to have an equity stake in our company to help align their interests with those of our stockholders, in January 2012 we adopted a formal stock ownership requirement for our directors and employee executive officers. Directors and employee executive officers must directly or indirectly hold stock or restricted stock units in our company with a value equal to the amounts set forth in the table below:
Position |
Requirement |
|
Non-employee Directors |
One time the base annual retainer | |
Chief Executive Officer |
Three times base salary | |
Employee Executive Officers |
One time base salary |
Our directors, chief executive officer and employee executive officers have five years to satisfy these ownership requirements. Until these ownership requirements are satisfied, our directors, chief executive officer and employee executive officers must retain 50% of after-tax shares after vesting of restricted stock units or exercise of stock options. Our insider trading policy prohibits our directors and executive officers from entering into derivative transactions such as puts, calls, or short sales of our common stock, among many other actions. We provide training and distribute periodic reminders to our directors and executive officers regarding this policy.
Compensation Recovery Policy. In 2011 we adopted a compensation recovery policy pursuant to which certain incentive based compensation can be recouped from a current or former executive if the board of directors determines that:
|
such compensation has been awarded or received by such executive based on financial results that were achieved or operating metrics that were satisfied, as a result of fraudulent or illegal conduct; |
|
certain restatements of our financial results are required due to material noncompliance with financial reporting requirements by such executive; or |
|
such executive engaged in intentional misconduct that contributed in any material respect to improper accounting or incorrect financial data resulting in a restatement of our financial results. |
Tax and Accounting Considerations. Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, generally disallows a tax deduction for compensation in excess of $1.0 million paid to our chief executive officer and to each other officer (other than our chief financial officer) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act by reason of being among the three most highly paid executive officers. Certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if certain requirements are met. We periodically review the potential consequences of Section 162(m) of the Internal Revenue Code and we generally intend to
46
structure the performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, the compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent and are in the best interest of our stockholders.
Sections 280G and 4999 of the Internal Revenue Code impose certain adverse tax consequences on compensation treated as excess parachute payments. An executive is treated as having received excess parachute payments if such executive receives compensatory payments or benefits that are contingent on a change in control, and the aggregate amount of such payments and benefits equal or exceeds three times the executives base amount (which is generally such executives average compensation from us over the five years prior to the change in control). The portion of the payments and benefits in excess of one times base amount are treated as excess parachute payments and are subject to a 20% excise tax, in addition to any applicable federal income and employment taxes. Also, our compensation deduction in respect of the executives excess parachute payments is disallowed. If we were to undergo a change-in-control, certain amounts received by our executives (for example, certain severance payments and amounts attributable to the accelerated vesting of stock options and restricted stock units) could be excess parachute payments under Sections 280G and 4999 of the Internal Revenue Code. As discussed below under Payments Upon Termination or Change in Control we do not provide executive officers with tax gross up payments in the event of a change-in-control.
The information contained in this report shall not be deemed to be soliciting material or filed with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, or the Exchange Act, except to the extent that Emergent BioSolutions Inc. specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on this review and discussion, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
By the Compensation Committee of the
Board of Directors of Emergent BioSolutions Inc.
Louis W. Sullivan, M.D., Chair
General George Joulwan
John E. Niederhuber, M.D.
Marvin L. White
Compensation Committee Interlocks and Insider Participation
During 2013, Dr. Sullivan, General Joulwan, Dr. Niederhuber and Mr. White served as members of the compensation committee. No member of the compensation committee was at any time during 2013, or formerly, an officer or employee of Emergent BioSolutions or any subsidiary of Emergent BioSolutions, and no member of the compensation committee had any relationship with Emergent BioSolutions during 2013 requiring disclosure under Item 404 of Regulation S-K.
During 2013, none of our executive officers served as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more executive officers who served as a member of our board of directors or compensation committee during 2013.
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The following table sets forth information for the fiscal years ended December 31, 2013, 2012 and 2011 regarding the compensation of our executive chairman, chief executive officer, our chief financial officer, our former executive officer and our two other most highly compensated executive officers who were serving as executive officers on December 31, 2013. We refer to these individuals throughout this proxy statement as our named executive officers.
Name and Principal Position |
Year | Salary(1) | Bonus(2) |
Option
Awards(3) |
Stock
Awards(4) |
All Other
Compensation(5) |
Total | |||||||||||||||||||||
Fuad El-Hibri |
2013 | $ | 726,297 | $ | | $ | 258,639 | $ | 306,632 | $ | 3,904 | $ | 1,295,471 | |||||||||||||||
Executive Chairman |
2012 | $ | 726,228 | $ | 159,515 | $ | 204,894 | $ | 253,929 | $ | 63,862 | $ | 1,408,428 | |||||||||||||||
of the Board of Directors |
2011 | $ | 692,609 | $ | 655,170 | $ | 897,068 | $ | 969,019 | $ | 7,350 | $ | 3,221,216 | |||||||||||||||
Daniel J. Abdun-Nabi |
2013 | $ | 589,695 | $ | 459,190 | $ | 505,281 | $ | 599,035 | $ | 7,650 | $ | 2,160,850 | |||||||||||||||
President and Chief |
2012 | $ | 538,743 | $ | 321,591 | $ | 360,619 | $ | 446,913 | $ | 7,500 | $ | 1,675,365 | |||||||||||||||
Executive Officer |
2011 | $ | 479,788 | $ | 288,777 | $ | 469,494 | $ | 507,150 | $ | 7,350 | $ | 1,752,559 | |||||||||||||||
Robert G. Kramer |
2013 | $ | 428,560 | $ | 265,640 | $ | 48,747 | $ | 57,800 | $ | | $ | 800,746 | |||||||||||||||
Executive Vice President, Corporate Services Division, Chief Financial Officer and Treasurer |
2012 | $ | 396,253 | $ | 52,793 | $ | 133,405 | $ | 463,675 | $ | | $ | 1,046,126 | |||||||||||||||
Steven N. Chatfield, Ph.D.(7) |
2013 | $ | 361,887 | $ | 185,647 | $ | 147,738 | $ | 175,145 | $ | 45,675 | $ | 916,092 | |||||||||||||||
Executive Vice President, Strategic Investments Division (formerly Executive Vice President, Biosciences Division) |
2012 | $ | 344,208 | $ | 139,404 | $ | 139,866 | $ | 174,051 | $ | 44,747 | $ | 842,276 | |||||||||||||||
2011 | $ | 275,063 | $ | 122,551 | $ | 135,259 | $ | 146,108 | $ | 27,506 | $ | 706,487 | ||||||||||||||||
Adam Havey |
2013 | $ | 332,648 | $ | 142,183 | $ | 147,738 | $ | 175,145 | $ | 7,650 | $ | 805,364 | |||||||||||||||
Executive Vice President, |
2012 | $ | 322,123 | $ | 130,774 | $ | 93,627 | $ | 116,034 | $ | 7,500 | $ | 670,058 | |||||||||||||||
Biodefense Division |
2011 | $ | 308,959 | $ | 107,470 | $ | 227,816 | $ | 246,089 | $ | 7,365 | $ | 897,698 | |||||||||||||||
Barry Labinger |
2013 | $ | 138,944 | $ | | $ | 269,387 | $ | 317,073 | $ | 50,000 | $ | 775,405 | |||||||||||||||
Executive Vice President, |
||||||||||||||||||||||||||||
Biosciences Division |
(1) | Includes amounts deferred at the direction of the executive officer to our 401(k) plan and amounts paid to the executive officer for accrued and unused paid time off. |
(2) | Represents bonuses paid in March following the year indicated, for performance in the year indicated. |
(3) | The amounts in the Option Awards column reflect grant date fair value of stock option awards granted to the named executive officers in the fiscal years indicated, calculated in accordance with SEC rules. For a discussion of our valuation assumptions, see Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. |
(4) | The amounts in the Stock Awards column reflect grant date fair value of restricted stock unit awards granted to the named executive officers in the fiscal years indicated, calculated in accordance with SEC rules. For a discussion of our valuation assumptions, see Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. |
(5) | Represents 401(k) plan matching contributions. For Dr. Chatfield, the amount represents company contributions to a qualified personal pension plan pursuant to the terms of his employment agreement. For Mr. Labinger, the amount represents a signing bonus. |
(6) | Amounts for Dr. Chatfield reflected above were paid in pounds sterling, which have been converted to U.S. dollars at an exchange rate of 1.6488 U.S. dollars for each pound sterling. This exchange rate represents the spot rate as of December 31, 2013. |
(7) | Effective April 1, 2013, Dr. Chatfield became our executive vice president, strategic investments division and, in this new position, Dr. Chatfield was no longer considered an executive officer of the company. Dr. Chatfield retired from the company effective March 31, 2014. |
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Employment Agreements
Dr. Chatfield had an employment agreement with us as a result of his U.K. residency, but, with his retirement from the company effective March 31, 2014, none of our named executive officers has an employment agreement with us.
Each of our other named executive officers is eligible for severance benefits pursuant to the Senior Management Severance Plan, as summarized under Payments Upon Termination or Change of Control.
On an annual basis, the compensation committee determines salary increases, cash bonus amounts and equity awards for our named executive officers. In addition, the compensation committee determines target annual cash bonuses as a percentage of each named executive officers annual base salary. We do not have any formal or informal policy for the amount of executive salary and bonus in proportion to total compensation.
2013 GRANTS OF PLAN-BASED AWARDS
The following table sets forth information regarding each grant of an award made to each named executive officer during the fiscal year ended December 31, 2013 under any plan, contract, authorization or arrangement pursuant to which cash, securities, similar instruments or other property may be received.
Name |
Grant Date |
Number of Shares of
Stock or Units(1) |
Number of Securities
Underlying Options(2) |
Exercise Price
of Option Awards ($/sh)(3) |
Grant Date Fair
Value of Stock and Option Awards(4) |
|||||||||||||||
Fuad El-Hibri |
3/12/2013 | 20,902 | | $ | | $ | 306,632 | |||||||||||||
3/12/2013 | | 41,804 | $ | 14.67 | $ | 258,639 | ||||||||||||||
Daniel J. Abdun-Nabi |
3/12/2013 | 40,834 | | $ | | $ | 599,035 | |||||||||||||
3/12/2013 | | 81,669 | $ | 14.67 | $ | 505,281 | ||||||||||||||
Robert G. Kramer |
3/12/2013 | 3,940 | | $ | | $ | 57,800 | |||||||||||||
3/12/2013 | | 7,879 | $ | 14.67 | $ | 48,747 | ||||||||||||||
Steven N. Chatfield, Ph.D. |
3/12/2013 | 11,939 | | $ | | $ | 175,145 | |||||||||||||
3/12/2013 | | 23,879 | $ | 14.67 | $ | 147,738 | ||||||||||||||
Adam Havey |
3/12/2013 | 11,939 | | $ | | $ | 175,145 | |||||||||||||
3/12/2013 | | 23,879 | $ | 14.67 | $ | 147,738 | ||||||||||||||
Barry Labinger |
11/12/2013 | 15,142 | | $ | | $ | 317,073 | |||||||||||||
11/12/2013 | | 30,284 | $ | 20.94 | $ | 269,387 |
(1) | Represents shares of common stock underlying a restricted stock unit award. |
(2) | Represents shares of common stock issuable upon the exercise of stock options. |
(3) | Represents the fair market value of our common stock on the date of grant, which we consider to be the closing sales price of our common stock on the NYSE on the trading day immediately preceding the date of grant. |
(4) | The amounts in the Grant Date Fair Value of Stock and Option Awards column reflect the grant date fair value of each equity award calculated in accordance with SEC rules. For a discussion of our valuation assumptions, see Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. |
In 2013, all equity awards were granted under our Second Amended and Restated 2006 Stock Incentive Plan and vest in three equal installments on the first, second and third annual anniversaries of the date of grant. All stock options have an exercise price equal to the closing sale price per share of our common stock on the NYSE on the trading day immediately preceding the date of grant. Under the terms of the agreements governing the restricted stock unit awards granted to our named executive officers in 2013, each named executive officer is entitled to receive, at the time of the issuance of any shares upon vesting of the applicable restricted stock unit award, an amount of cash equal to the aggregate amount of all dividends paid by us between the date of grant and the issuance of such shares, if any.
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2013 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information regarding unexercised stock options outstanding as of December 31, 2013 for each of the named executive officers.
Option Awards | Stock Awards | |||||||||||||||||||||||
Number of Securities Underlying Unexercised Equity Awards |
||||||||||||||||||||||||
Name |
Exercisable | Unexercisable |
Option Award
Exercise Price |
Option Award
Expiration Date |
Unvested Stock
Awards |
Market Value
Unvested Stock Awards |
||||||||||||||||||
Fuad El-Hibri |
33,333 | | $ | 7.00 | 3/10/2015 | | $ | | ||||||||||||||||
107,900 | | $ | 18.90 | 3/9/2016 | | $ | | |||||||||||||||||
84,594 | | $ | 15.91 | 3/8/2017 | | $ | | |||||||||||||||||
53,500 | 26,750 | (1) | $ | 24.15 | 3/14/2018 | | $ | | ||||||||||||||||
10,694 | 21,388 | (2) | $ | 15.83 | 3/12/2019 | | $ | | ||||||||||||||||
| 41,804 | (3) | $ | 14.67 | 3/11/2020 | | $ | | ||||||||||||||||
| | $ | | | 13,375 | (6) | $ | 307,491 | (11) | |||||||||||||||
| | $ | | | 10,694 | (7) | $ | 245,855 | (11) | |||||||||||||||
| | $ | | | 20,902 | (8) | $ | 480,514 | (11) | |||||||||||||||
Daniel J. Abdun-Nabi |
68,500 | | $ | 18.90 | 3/9/2016 | | $ | | ||||||||||||||||
44,291 | | $ | 15.91 | 3/8/2017 | | $ | | |||||||||||||||||
28,000 | 14,000 | (1) | $ | 24.15 | 3/14/2018 | | $ | | ||||||||||||||||
18,822 | 37,643 | (2) | $ | 15.83 | 3/12/2019 | | $ | | ||||||||||||||||
| 81,669 | (3) | $ | 14.67 | 3/11/2020 | | $ | | ||||||||||||||||
| | $ | | | 7,000 | (6) | $ | 160,930 | (11) | |||||||||||||||
| | $ | | | 18,821 | (7) | $ | 432,718 | (11) | |||||||||||||||
| | $ | | | 40,834 | (8) | $ | 938,751 | (11) | |||||||||||||||
Robert G. Kramer |
7,688 | 15,374 | (4) | $ | 14.41 | 11/4/2019 | | $ | | |||||||||||||||
| 7,879 | (3) | $ | 14.67 | 3/11/2020 | | $ | | ||||||||||||||||
| | $ | | | 7,687 | (9) | $ | 176,724 | (11) | |||||||||||||||
| | $ | | | 3,940 | (8) | $ | 90,558 | (11) | |||||||||||||||
Steven N. Chatfield, Ph.D. |
11,466 | | $ | 15.91 | 3/8/2017 | | $ | | ||||||||||||||||
8,067 | 4,033 | (1) | $ | 24.15 | 3/14/2018 | | $ | | ||||||||||||||||
7,300 | 14,600 | (2) | $ | 15.83 | 3/12/2019 | | $ | | ||||||||||||||||
| 23,879 | (3) | $ | 14.67 | 3/11/2020 | | $ | | ||||||||||||||||
| | $ | | | 2,017 | (6) | $ | 46,371 | (11) | |||||||||||||||
| | $ | | | 7,330 | (7) | $ | 168,517 | (11) | |||||||||||||||
| | $ | | | 11,939 | (8) | $ | 274,478 | (11) | |||||||||||||||
Adam Havey |
21,800 | | $ | 18.90 | 3/9/2016 | | $ | | ||||||||||||||||
10,400 | | $ | 15.91 | 3/8/2017 | | $ | | |||||||||||||||||
13,587 | 6,793 | (1) | $ | 24.15 | 3/14/2018 | | $ | | ||||||||||||||||
4,887 | 9,773 | (2) | $ | 15.83 | 3/12/2019 | | $ | | ||||||||||||||||
| 23,879 | (3) | $ | 14.67 | 3/11/2020 | | $ | | ||||||||||||||||
| | $ | | | 3,397 | (6) | $ | 78,097 | (11) | |||||||||||||||
| | $ | | | 4,886 | (7) | $ | 112,329 | (11) | |||||||||||||||
| | $ | | | 11,939 | (8) | $ | 274,478 | (11) | |||||||||||||||
Barry Labinger |
| 30,284 | (5) | $ | 20.94 | 11/11/2020 | | $ | | |||||||||||||||
| | $ | | | 15,142 | (10) | $ | 348,115 | (11) |
(1) | The unexercisable portion of this stock option award vested on March 14, 2014. |
(2) | Approximately one half of this stock option award vested on March 12, 2014 and the remaining unvested portion of this stock option award will vest on March 12, 2015. |
(3) | Approximately one third of this stock option award vested on March 11, 2014 and approximately one third of this stock option award will vest on each of March 11, 2015 and 2016. |
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(4) | Approximately one half of this stock option award vested on November 5, 2014 and the remaining unvested portion of this stock option award will vest on November 5, 2015. |
(5) | Approximately one third of the unexercisable portion of this stock option award will vest on each of November 11, 2014, 2015 and 2016. |
(6) | The unvested portion of this restricted stock unit award vested on March 14, 2014. |
(7) | Approximately one half of this restricted stock unit award vested on March 12, 2014 and the remaining unvested portion of this restricted stock unit award will vest on March 12, 2015. |
(8) | Approximately one third of this restricted stock unit award vested on March 11, 2014 and approximately one third of this restricted stock unit award will vest on each of March 11, 2015 and 2016. |
(9) | Approximately one half of the unvested portion of this restricted stock unit award will vest on November 5, 2014 and the remaining unvested portion of this restricted stock unit award will vest on November 5, 2015. |
(10) | Approximately one third of the unvested portion of this restricted stock unit award will vest on each of November 12, 2014, 2015 and 2016. |
(11) | Represents the closing price of our common stock on December 31, 2013 multiplied by the number of shares underlying the unvested proration of the restricted stock unit award as of December 31, 2013. |
2013 OPTION EXERCISES AND STOCK AWARDS VESTED
The following table sets forth information regarding the exercise of stock options during the fiscal year ended December 31, 2013 for each of the named executive officers on an aggregated basis.
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of Shares
Acquired on Exercise |
Value Realized
on Exercise(1) |
Number of Shares
Acquired on Vest |
Value Realized on
Vest(2) |
||||||||||||
Fuad El-Hibri |
| $ | | 23,881 | $ | 360,281 | ||||||||||
Daniel J. Abdun-Nabi |
4,613 | $ | 38,288 | 16,220 | $ | 242,583 | ||||||||||
Robert G. Kramer |
| $ | | 2,625 | $ | 51,555 | ||||||||||
Steven N. Chatfield, Ph.D. |
| $ | | 4,273 | $ | 127,893 | ||||||||||
Adam Havey |
| $ | | 5,065 | $ | 112,982 | ||||||||||
Barry Labinger |
| $ | | | $ | |
(1) | The amounts in the Value Realized on Exercise column are calculated based on the difference between the closing market price per share of our common stock on the date of exercise and the exercise price per share of the applicable stock option. |
(2) | The amounts in the Value Realized on Vest column are calculated based on the closing market price per share of our common stock on the date of vest. |
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
In December 2011, the compensation committee of our board of directors approved the Senior Management Severance Plan effective December 20, 2011. The Senior Management Severance Plan replaces our senior management termination protection program, and was adopted in part to:
|
remove the ability for any executive to resign within a certain period of time after a change of control for any reason and still receive severance benefits; and |
|
eliminate gross-up payments with respect to applicable excise taxes on any payment to participants. |
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The Senior Management Severance Plan is for the benefit of employees with the title of chief executive officer, president, executive vice president, senior vice president or vice president who have been designated to participate in the Senior Management Severance Plan by our board of directors or, with the authorization of our board of directors, by our chief executive officer. Our chief executive officer is authorized to designate the greater of 7% of the total number of our employees or 35 employees to be participants in the Senior Management Severance Plan at any particular time, on the basis of name, title, function or compensation level. Our chief executive officer will at all times be a participant under the Senior Management Severance Plan and shall have no less favorable rights under the Senior Management Severance Plan than any other participant. Each of the named executive officers is currently a participant in the Senior Management Severance Plan except for Dr. Chatfield, whose severance provisions are governed by his employment agreement and are substantially similar to those of the Senior Management Severance Plan.
The Senior Management Severance Plan continues in effect through December 31, 2015. Commencing on December 31, 2015, and on December 31 of each year thereafter, the Senior Management Severance Plan will be automatically extended for additional one-year periods unless we provide 90 days prior written notice to the participating employees that the term will not be extended.
For-cause terminations. If during the term of the Senior Management Severance Plan, we terminate a participants employment with cause, then the participant will not be entitled to receive any compensation, benefits or rights under the Senior Management Severance Plan, and any stock options or other equity participation benefits vested on or prior to the date of the termination, but not yet exercised, will immediately terminate.
Without-cause terminations. If during the term of the Senior Management Severance Plan we terminate a participants employment without cause, as defined in the Senior Management Severance Plan, then the participant will be entitled to:
|
any unpaid base salary and accrued paid time-off through the date of termination; |
|
a pro rata portion of the participants target annual bonus in respect of the year of termination; |
|
any bonus earned but unpaid as of the date of termination for any previously completed year; |
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reimbursement for any unreimbursed expenses incurred by the participant prior to the date of termination; |
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an amount equal to a specified percentage of the participants annual base salary and target bonus, as indicated in the table below; |
|
employee and fringe benefits and perquisites, if any, to which the participant may be entitled as of the date of termination under our relevant plans, policies and programs; and |
|
continued eligibility for the participant and his or her eligible dependents to receive employee benefits (such as medical, dental, life insurance (not to exceed one year), and pension benefits), for a stated period following the participants date of termination as indicated in the table below, except when the provision of employee benefits would result in a duplication of benefits provided by any subsequent employer. |
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The following table sets forth the percentage of base salary and the stated period for continued employee benefits to which each of our named executive officers is entitled if we terminate the executive officers employment without cause.
Benefits for a Termination Without Cause
Name |
Percentage of Annual Base
Salary and Bonus |
Stated Period for Continued
Employee Benefits |
||||||
Fuad El-Hibri |
200% | none | ||||||
Daniel J. Abdun-Nabi |
150% | 18 months | ||||||
Robert G, Kramer |
125% | 15 months | ||||||
Steven N. Chatfield, Ph.D.(1) |
N/A | N/A | ||||||
Adam Havey |
125% | 15 months | ||||||
Barry Labinger |
125% | 15 months |
(1) | Dr. Chatfield retired from the company effective March 31, 2014. |
The following table sets forth the amount of potential payments and value of benefits that each named executive officer who was serving as an executive officer on December 31, 2013 would have received if we had terminated the executive officers employment without cause on December 31, 2013.
Termination without Cause | ||||||||||||
Name |
Cash Payments(1) | Value of Benefits(2) |
Value of
Equity Awards |
|||||||||
Fuad El-Hibri |
$ | 1,456,042 | $ | | $ | | ||||||
Daniel J. Abdun-Nabi |
$ | 1,415,752 | $ | 36,481 | $ | | ||||||
Robert G. Kramer |
$ | 806,599 | $ | 30,476 | $ | | ||||||
Steven N. Chatfield, Ph.D.(3) |
$ | N/A | $ | N/A | $ | N/A | ||||||
Adam Havey |
$ | 602,823 | $ | 30,476 | $ | | ||||||
Barry Labinger |
$ | 796,886 | $ | 30,476 | $ | |
(1) | The amounts in this column represent the aggregate amount equal to the applicable specified percentage of the named executive officers annual base salary and target bonus in effect on December 31, 2013 plus 100% (the applicable pro rata portion) of the named executive officers target annual bonus for 2013. |
(2) | The amounts in this column reflect the estimated value of future premiums under our health and welfare benefit plans and life insurance program. |
(3) | Dr. Chatfield retired from the company effective March 31, 2014. |
Change-of-control terminations. If during the term of the Senior Management Severance Plan, we terminate a participants employment without cause or a participant resigns for good reason, as defined in the Senior Management Severance Plan, in each case within 18 months following a change of control, as defined in the Senior Management Severance Plan, then the participant will be entitled to:
|
a lump sum amount equal to the sum of: |
|
any unpaid base salary and accrued paid time-off through the date of termination, |
|
a pro rata portion of the participants target annual bonus in respect of the year of termination, |
|
any bonus earned but unpaid as of the date of termination for any previously completed year, |
|
any unreimbursed expenses incurred by the participant prior to the date of termination, and |
|
an amount equal to a specified percentage of the sum of the participants base salary and the participants target bonus, as indicated in the table below; |
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|
employee and fringe benefits and perquisites, if any, to which the participant may be entitled as of the date of termination of employment under our relevant plans, policies and programs; |
|
any unvested stock options held by the participant that are outstanding on the date of termination will become fully vested as of that date and any restricted stock awards held by the participant that are outstanding on the date of termination shall also be deemed fully vested as of that date such that the shares of common stock covered by the award will be held outright by the participant free of the previously-applicable restrictions. In addition, the period during which any stock options held by the participant that are outstanding on that date may be exercised shall be extended to a date that is the later of the 15th day of the third month following the termination date, or December 31 of the calendar year in which the stock option would otherwise have expired if the exercise period had not been extended, but not beyond the final date the stock option could have been exercised if the participants employment had not terminated, in each case based on the term of the option at the original grant date; |
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continued eligibility for the participant and his or her eligible dependents to receive employee benefits (such as medical, dental, life insurance (not to exceed one year), disability and pension benefits), for a stated period following the participants date of termination as indicated in the table below, except when the provision of employee benefits would result in a duplication of benefits provided by any subsequent employer; |
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the retention for the maximum period permitted by applicable law of all rights the participant has to indemnification from us immediately prior to the change of control and the continuation throughout the period of any applicable statute of limitations of any directors and officers liability insurance covering the participant immediately prior to the change of control; and |
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the advancement to the participant of all costs and expenses, including attorneys fees and disbursements, incurred by the participant in connection with any legal proceedings that relate to the termination of employment or the interpretation or enforcement of any provision of the Senior Management Severance Plan, for which the participant will have no obligation to reimburse us if the participant prevails in the proceeding with respect to at least one material issue or the proceeding is settled. |
The following table sets forth the percentage of base salary and bonus and the stated period for continued employee benefits to which each of our named executive officers is entitled under the circumstances described above in connection with a change of control.
Benefits for a Termination In Connection with a Change in Control
Name |
Percentage of
Annual Base Salary and Bonus |
Stated Period
for Continued Employee Benefits |
||||||
Fuad El-Hibri |
200% | none | ||||||
Daniel J. Abdun-Nabi |
250% | 30 months | ||||||
Robert G, Kramer |
200% | 24 months | ||||||
Steven N. Chatfield, Ph.D.(1) |
N/A | N/A | ||||||
Adam Havey |
200% | 24 months | ||||||
Barry Labinger |
200% | 24 months |
(1) | Dr. Chatfield retired from the company effective March 31, 2014. |
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The following table sets forth the amount of potential payments and value of benefits that each named executive officer who was serving as an executive officer on December 31, 2013 would have received if we had terminated the executive officers employment prior to or in connection with a change of control on December 31, 2013.
Termination Prior to or in Connection with a Change of Control | ||||||||||||
Name |
Cash
Payments(1) |
Value of
Benefits(2) |
Value of
Options(3) |
|||||||||
Fuad El-Hibri |
$ | 1,456,042 | $ | | $ | 3,184,631 | ||||||
Daniel J. Abdun-Nabi |
$ | 2,359,587 | $ | 61,176 | $ | 3,209,919 | ||||||
Robert G. Kramer |
$ | 1,290,558 | $ | 48,941 | $ | 570,730 | ||||||
Steven N. Chatfield, Ph.D.(4) |
$ | N/A | $ | N/A | $ | N/A | ||||||
Adam Havey |
$ | 964,517 | $ | 48,941 | $ | 931,337 | ||||||
Barry Labinger |
$ | 1,275,018 | $ | 48,941 | $ | 410,197 |
(1) | The amounts in this column represent the aggregate amount equal to the applicable specified percentage of the named executive officers annual base salary and target bonus in effect on December 31, 2013, plus 100% (the applicable pro rata portion) of the named executive officers target annual bonus for 2013. |
(2) | The amounts in this column reflect the estimated value of future premiums under our health and welfare benefit plans and life insurance program. |
(3) | The amounts in this column reflect the value of accelerated vesting of stock options and restricted stock units. The amounts reflecting the value of accelerated vesting of stock options are calculated by multiplying the number of shares subject to accelerated vesting under outstanding stock options by the difference between $22.99, which was the closing market price per share of our common stock on December 31, 2013, and the per share exercise price of the applicable accelerated stock option. The amounts reflecting the value of accelerated vesting of restricted stock units are calculated by multiplying the number of shares subject to accelerated vesting under restricted stock unit grants by $22.99, which was the closing market price per share of our common stock on December 31, 2013. |
(4) | Dr. Chatfield retired from the company effective March 31, 2014. |
General provisions. All payments under the Senior Management Severance Plan will be reduced by any applicable taxes required by applicable law to be paid or withheld by us. If at the time a participants employment is terminated, the participant is a specified employee within the meaning of Section 409A, then any payments to the participant that constitute non-qualified deferred compensation within the meaning of Section 409A will be delayed by a period of six months. All such payments that would have been made to the participant during the six-month period will be made in a lump sum on the date that is six months and one day following the date of termination, and all remaining payments will commence in the seventh month following the date of termination. Our board of directors or any committee thereof designated by our board of directors is authorized to administer the Senior Management Severance Plan and has authority to adopt, amend and repeal the administrative rules, guidelines and practices relating to the Senior Management Severance Plan as it deems advisable.
As a condition to payment of any amounts under the Senior Management Severance Plan, the participant is required:
|
for the same stated period during which we have agreed to provide continued employee benefits to the terminated employee, not to: |
|
induce, counsel, advise, solicit or encourage our employees to leave our employ or to accept employment with any other person or entity, |
|
induce, counsel, advise, solicit or encourage any person who we employed within six months prior to that time to accept employment with any person or entity besides us or hire or engage that person as an independent contractor, |
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solicit, interfere with or endeavor to cause any of our customers, clients or business partners to cease or reduce its relationship with us or induce any such customer, client or business partner to breach any agreement that such customer, client or business partner may have with us, and |
|
engage in or have a financial interest in any business competing with us within any state, region or locality in which we are then doing business or marketing products; |
|
upon reasonable notice and at our expense, to cooperate fully with any reasonable request that may be made by us in connection with any investigation, litigation or other similar activity to which we are or may be a party or may otherwise be involved and for which the participant may have relevant information; and |
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to sign and deliver a suitable waiver and release under which the participant will release and discharge us from and on account of any and all claims that relate to or arise out of our employment relationship. |
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2013 regarding securities authorized for issuance under our equity compensation plans, consisting of our Second Amended and Restated 2006 Stock Incentive Plan and our employee stock purchase plan, as amended. Both of our equity compensation plans were adopted with the approval of our stockholders.
Plan Category |
Number of
Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights(a) |
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights(b) |
Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(1) |
|||||||||
Equity compensation plans approved by stockholders |
4,488,927 | $ | 13.91 | 3,334,695 | ||||||||
Equity compensation plans not approved by stockholders |
| $ | | | ||||||||
Total |
4,488,927 | 3,334,695 |
(1) | Includes 2,387,463 and 947,232, respectively, of equity available for issuance under our Second Amended and Restated 2006 Stock Incentive Plan and our employee stock purchase plan. In addition to being available for future issuance upon exercise of stock options and vesting of restricted stock unit awards that have been or may be granted after December 31, 2013, our Second Amended and Restated 2006 Stock Incentive Plan provides for the issuance of restricted stock awards and other stock-based awards. |
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TRANSACTIONS WITH RELATED PERSONS
Agreements with Intergen N.V.
On November 5, 2008, we entered into an amended and restated marketing agreement with Intergen N.V. that amended and restated a prior amended and restated marketing agreement between the parties. Yasmine Gibellini, the chairperson and a major shareholder of Intergen, is the sister of Fuad El-Hibri, the executive chairman of our board of directors. Under the marketing agreement, we appointed Intergen as our marketing representative for the sale and promotion of BioThrax ® (Anthrax Vaccine Adsorbed), PreviThrax (Recombinant Protective Antigen Anthrax Vaccine, Purified), Anthrivig (Fully Human Anthrax Immunoglobulin), recombinant botulinum vaccine and botulinum immune globulin in Saudi Arabia, Qatar and United Arab Emirates, unless the export of such products to any of these countries is prohibited by the U.S. government. The appointment is non-exclusive. We agreed to pay Intergen a fee equal to 17.5% of net sales of the marketed products pursuant to customer contracts in Saudi Arabia, and 15% in Qatar and United Arab Emirates. Under the marketing agreement, we agreed to reimburse Intergen for out-of-pocket expenses attributable to a particular purchase contract up to a specified percentage of net sales under that contract. The marketing agreement provides for automatic one-year successive renewals of the agreement, unless terminated by either party. Either party may terminate the marketing agreement on 90 days notice. We have not paid Intergen any fees to date under this agreement.
Registration Rights
In September 2006, we granted registration rights with respect to shares of our common stock to certain of our principal stockholders. The following table sets forth the number of shares of our common stock subject to these registration rights that are held by our 5% stockholders and their affiliates as of March 24, 2014.
Name |
Number of Shares of
Common Stock |
|||
Intervac, L.L.C. |
4,344,250 | |||
BioVac, L.L.C. |
1,524,155 |
Demand registration rights. Subject to specified limitations, holders of these registration rights may require that we register all or part of our common stock subject to the registration rights for sale under the Securities Act of 1933. These holders may demand registration of our common stock so long as the aggregate offering price to the public of the shares requested to be registered is at least $25,000,000. We are required to effect only one demand registration, subject to specified exceptions.
Incidental registration rights. If we propose to register any of our common stock under the Securities Act of 1933, subject to specified exceptions, either for our own account or for the account of other security holders, holders of registration rights are entitled to notice of the registration and to include shares of common stock that are subject to the registration rights in the registered offering. In connection with our Registration Statement on Form S-3 declared effective in 2012, we registered an aggregate of 3,000,000 shares for sale from time to time by these stockholders.
Limitations and expenses. With specified exceptions, the right to include shares in a registration is subject to the right of underwriters for the offering to limit the number of shares included in the offering. We are required to pay one-half of all fees, costs and expenses of any demand registration, other than underwriting discounts and commissions.
Indemnification Agreements
We have entered into an indemnification agreement with each of our directors and executive officers. This form of indemnification agreement, and our certificate of incorporation and by-laws, require us to indemnify and advance expenses to these persons to the full extent permitted by Delaware law. We also intend to enter into an indemnification agreement with each of our future directors and executive officers.
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Policies and Procedures for Related Person Transactions
In March 2007, our board of directors adopted written policies and procedures for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a related person, has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a related person transaction, the related person must report the proposed related person transaction to our general counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the audit committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chair of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between audit committee meetings, subject to ratification by the audit committee at its next meeting. Any related person transactions that are ongoing in nature are reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related persons interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:
|
the related persons interest in the related person transaction; |
|
the approximate dollar value of the amount involved in the related person transaction; |
|
the approximate dollar value of the amount of the related persons interest in the transaction without regard to the amount of any profit or loss; |
|
whether the transaction was undertaken in the ordinary course of our business; |
|
whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; |
|
the purpose of, and the potential benefits to us of, the transaction; and |
|
any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
The audit committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is consistent with our best interests. The audit committee may impose any conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SECs related person transaction disclosure rule, the board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
|
interests arising solely from the related persons position as an executive officer of another entity (whether or not the person is also a director of such entity) that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million dollars or 2% of the annual gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of our annual gross revenues; and |
|
a transaction that is specifically contemplated by provisions of our charter or bylaws. |
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The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee in the manner specified in its charter. There were no related person transactions in 2013 with respect to which these policies and procedures were not followed.
Other Matters
Our board of directors has no knowledge of any other matters which may come before the meeting. However, if any other matters are properly presented to the meeting, it is the intention of the persons named in the accompanying proxy to vote, or otherwise act, in accordance with their judgment on those matters.
Requests for Copies of Annual Report
We will provide without charge a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, including financial statements and schedules, to each of our stockholders of record on March 24, 2014, and to each beneficial owner of common stock on that date, upon receipt of a written request for the Form 10-K mailed to our offices, Emergent BioSolutions Inc., 2273 Research Boulevard, Suite 400, Rockville, MD 20850, Attention: Investor Relations, telephone: (301) 795-1800. In the event that exhibits to the Form 10-K are requested, a fee will be charged for reproduction of the exhibits. Requests from beneficial owners of common stock must set forth a good faith representation as to such ownership. Our filings with the SEC are available without charge on our website at www.emergentbiosolutions.com as soon as reasonably practicable after they are filed.
Stockholder Proposals for the 2015 Annual Meeting
Any stockholder who intends to present a proposal at the companys annual meeting to be held in 2015, and who wishes to have the proposal included in the companys proxy statement for that meeting, must deliver the proposal to the companys Corporate Secretary no later than December 8, 2014. Any proposal received after this date will be considered untimely and may be excluded from the proxy statement. A proposal must satisfy the rules and regulations of the Securities and Exchange Commission to be eligible for inclusion in the proxy statement for that meeting.
A stockholder may present a proposal that is a proper subject for consideration at an annual meeting, even if the proposal is not submitted by the deadline for inclusion in the proxy statement. To do so, the stockholder must comply with the procedures set forth in the companys by-laws. The by-laws require that a stockholder who intends to present a proposal at an annual meeting of stockholders submit the proposal to the Corporate Secretary not fewer than 90 and not more than 120 days before the anniversary of the date of the previous years annual meeting. To be eligible for consideration at the 2015 annual meeting, such a proposal and any nominations for director must be received by the Corporate Secretary between January 22, 2015 and February 21, 2015. This advance notice period is intended to allow stockholders an opportunity to consider all business and nominees expected to be considered at the meeting. Any such proposal received after this date may be considered untimely and may be excluded.
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All submissions to, or requests from, the Corporate Secretary should be made to Emergent BioSolutions Inc., Attention: Corporate Secretary, 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850.
By Order of the Board of Directors,
A.B. Cruz III
Executive Vice President, General Counsel and Corporate Secretary
Rockville, Maryland
April 7, 2014
OUR BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE
ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED
TO VOTE YOUR PROXY AS SOON AS POSSIBLE. IF YOU ATTEND THE MEETING, YOU
MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
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APPENDIX A
THIRD AMENDED AND RESTATED
EMERGENT BIOSOLUTIONS INC. 2006 STOCK INCENTIVE PLAN
1. | Purpose |
The purpose of this Third Amended and Restated 2006 Stock Incentive Plan (the Plan) of Emergent BioSolutions Inc., a Delaware corporation (the Company), is to advance the interests of the Companys stockholders by enhancing the Companys ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of the Companys stockholders. The Plan amends and restates the 2006 Stock Incentive Plan (the Original Plan) that was originally adopted by the board of directors of the Company (the Board) on October 25, 2006 and approved by the stockholders on October 27, 2006, was amended by the Board on March 31, 2009 and approved by the stockholders on May 21, 2009, was amended by the Board on March 6, 2012 and approved by the stockholders on May 17, 2012 and was amended by the Board on March 20, 2014 and approved by the stockholders on [May 22, 2014]. Except where the context otherwise requires, the term Company shall include any of the Companys present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the Code) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board.
2. | Eligibility |
All of the Companys employees, officers, directors, consultants and advisors are eligible to receive options, stock appreciation rights, restricted stock, restricted stock units and other stock-unit awards (each, an Award) under the Plan. Each person who receives an Award under the Plan is deemed a Participant.
3. | Administration and Delegation |
(a) Administration by Board of Directors . The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Boards sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.
(b) Appointment of Committees . To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a Committee). All references in the Plan to the Board shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Boards powers or authority under the Plan have been delegated to such Committee or officers.
(c) Delegation to Officers . To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power to grant Awards to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of the Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and
A-1
the maximum number of shares subject to Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant Awards to any executive officer of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the Exchange Act)) or to any officer of the Company (as defined by Rule 16a-1 under the Exchange Act).
(d) Awards to Non-Employee Directors . Awards made to non-employee directors will be granted and administered by a Committee, all of the members of which are independent directors as defined by Section 303A.02 of the New York Stock Exchange Listed Company Manual.
4. | Stock Available for Awards . |
(a) Maximum Number of Shares . An aggregate of 4,000,000 shares of common stock, $0.001 par value per share, of the Company (the Common Stock) shall be added to the 11,178,826 shares issuable or transferable under the Plan as of March 19, 2014 for a total of 15,178,826 shares.
If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right), is settled in cash, or results in any shares of Common Stock not being issued, the unused shares of Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Shares of Common Stock delivered (either by actual delivery, attestation or net exercise) to the Company by a Participant to (i) purchase shares of Common Stock upon the exercise of an Award or (ii) satisfy tax withholding obligations with respect to Options and Stock Appreciation Rights (including shares retained from the Option or Stock Appreciation Right creating the tax obligation) shall not be added back to the number of shares available for future grant of Awards (for the avoidance of doubt, shares of Common Stock delivered to the Company by a Participant to satisfy tax withholding obligations with respect to Restricted Stock, Restricted Stock Units and Other Stock Unit Awards (including shares retained from the Restricted Stock, Restricted Stock Unit or Other Stock Unit Award creating the tax obligation) shall be added back to the number of shares available for future grant of Awards). However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares of Common Stock issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. Notwithstanding anything to the contrary herein, with respect to Stock Appreciation Rights settled in shares of Common Stock upon exercise, the aggregate number of shares of Common Stock with respect to which the Stock Appreciation Right is exercised, rather than the number of shares of Common Stock actually issued upon exercise, shall be counted against the number of shares of Common Stock available for Awards under the Plan. In no event shall shares of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award increase the number of shares available for future grant of Awards.
(b) Computing the Total Number of Shares of Common Stock Available Under the Plan . For purposes of computing the maximum aggregate number of shares of Common Stock available for issuance under the Plan, the following rules shall apply:
(i) Any shares of Common Stock made subject to Awards of Options or Stock Appreciation Rights shall be counted against the maximum aggregate number of shares of Common Stock available for issuance under the Plan as one (1) share of Common Stock for every one (1) share of Common Stock granted.
(ii) Any shares of Common Stock made subject to Awards of Options or Stock Appreciation Rights which shares are returned to the Plan pursuant to Section 4(a) shall be retuned as one (1) share of Common Stock for every one (1) share of Common Stock granted.
(iii) Any shares of Common Stock made subject to a Full-Value Award (as defined below): (A) granted prior to May 21, 2009, shall be counted against the maximum aggregate number of shares of Common Stock available for issuance under the Plan as one (1) share of Common Stock for every one (1) share of Common Stock granted; (B) granted on or after May 21, 2009 but prior to May 17, 2012, shall be counted against the
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maximum aggregate number of shares of Common Stock available for issuance under the Plan as 1.5 shares of Common Stock for every one (1) share of Common Stock granted; (C) granted on or after May 17, 2012 but prior to May 22, 2014, shall be counted against the maximum aggregate number of shares of Common Stock available for issuance under the Plan as 1.86 shares of Common Stock for every one (1) share of Common Stock granted; and (D) granted on or after May 22, 2014, shall be counted against the maximum aggregate number of shares of Common Stock available for issuance under the Plan as 2.3 shares of Common Stock for every one (1) share of Common Stock granted. A Full-Value Award is an Award of Restricted Stock, a Restricted Stock Unit Award, an Other Stock Unit Award or a Performance Award.
(iv) Any shares of Common Stock made subject to a Full-Value Award which shares are returned to the Plan pursuant to Section 4(a): (A) shall be returned as one (1) share of Common Stock for every one (1) share of Common Stock granted prior to May 21, 2009; (B) shall be returned as 1.5 shares of Common Stock for every one (1) share of Common Stock granted on or subsequent to May 21, 2009 and prior to May 17, 2012; (C) shall be returned as 1.86 shares of Common Stock for every one (1) share of Common Stock granted on or subsequent to May 17, 2012 and prior to May 22, 2014. Beginning on May 22, 2014, any shares of Common Stock subject to a Full-Value Award that are returned to the Plan will be returned as 2.3 shares of Common Stock for every one (1) share of Common Stock subject to such Award, regardless of when the Award was granted.
(c) Sublimits .
(i) Section 162(m) Per Participant Limit . The maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 1,000,000 per fiscal year. For purposes of the foregoing limit, the combination of an Option in tandem with a SAR (as each is hereafter defined) shall be treated as a single Award. The per Participant limit described in this Section 4(c) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder (Section 162(m)). For the avoidance of doubt, all shares of Common Stock underlying Awards granted under the Plan shall be counted on a one-for-one basis for purposes of the sublimit set forth in this section.
(ii) Limit on Awards to Non-Employee Directors . The maximum number of shares with respect to which Awards may be granted to directors who are not employees as of the time of grant shall be 5% of the maximum number of authorized shares set forth in Section 4(a).
(d) Substitute Awards . In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock unit awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code.
5. | Stock Options |
(a) General . The Board may grant options to purchase Common Stock (each, an Option) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a Nonstatutory Stock Option.
(b) Incentive Stock Options . An Option that the Board intends to be an incentive stock option as defined in Section 422 of the Code (an Incentive Stock Option) shall only be granted to employees of Emergent BioSolutions Inc., any of Emergent BioSolutions Inc.s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with
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the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board, including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.
(c) Exercise Price . The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option agreement; provided, however, that the exercise price shall not be less than 100% of the Fair Market Value (as defined below) on the date the Option is granted.
(d) Duration and Vesting of Options . Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement subject to the limitations of the Plan; provided, however, that no Option granted before March 6, 2012 will be granted for a term in excess of 10 years and no Option granted on or after March 6, 2012 will be granted for a term in excess of 7 years. Options granted to Participants other than non-employee directors that vest solely based on the passage of time shall not vest (i) prior to the first anniversary of the date of grant; (ii) as to more than one-third of the Award prior to the second anniversary of the date of grant; and (iii) as to more than two-thirds of the Award prior to the third anniversary of the date of grant. Options to non-employee directors that vest solely based on the passage of time shall not vest: (i) prior to the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant; (ii) as to more than one-third of the Award prior to the earlier of the second anniversary of the date of grant and the date of the second annual meeting held after the date of grant; and (iii) as to more than two-thirds of the Award prior to the earlier of the third anniversary of the date of grant and the date of the third annual meeting held after the date of grant. Notwithstanding the foregoing, the Board or the Committee, either at the time the Option is granted or at any time thereafter, may allow an Option to accelerate and become vested, in whole or in part, prior to the vesting date specified above, in the event of the death or disability of the Participant, the termination of the Participants employment by or service to the Company under specified circumstances, with respect to Options granted in connection with an acquisition by the Company or as a result of a merger, consolidation, sale, reorganization, recapitalization, or change in control of the Company. Options that do not vest solely based on the passage of time shall not vest prior to the first anniversary of the date of grant (or, in the case of Awards to non-employee directors, the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant). The four foregoing sentences shall only apply to Options granted on or after March 6, 2012. The foregoing minimum vesting requirements shall not apply to Options and Stock Appreciation Rights granted, in the aggregate, for up to 10% of the authorized number of shares specified in Section 4(a).
(e) Exercise of Option . Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised. Subject to Section 10(e), shares of Common Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a deferred basis (with the Companys obligation to be evidenced by an instrument providing for future delivery of the deferred shares at the time or times specified by the Board).
(f) Payment Upon Exercise . Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:
(i) in cash or by check, payable to the order of the Company;
(ii) except as otherwise provided in the applicable option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;
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(iii) to the extent provided for in the applicable option agreement or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board (Fair Market Value), provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;
(iv) to the extent permitted by applicable law and provided for in the applicable option agreement or approved by the Board, in its sole discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or
(v) by any combination of the above permitted forms of payment.
(g) Limitation on Repricing . Unless such action is approved by the Companys stockholders or is pursuant to Section 9 of the Plan: (i) outstanding Options granted under the Plan may not be amended to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option, (ii) the Board may also not cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled option, (iii) the Board may not cancel in exchange for a cash payment any outstanding Option with an exercise price per share above the then-current Fair Market Value or (iv) the Board may not take any other action under the Plan that constitutes a repricing under the rules of the New York Stock Exchange (NYSE).
6. | Stock Appreciation Rights |
(a) General . A Stock Appreciation Right, or SAR, is an Award entitling the holder, upon exercise, to receive an amount of Common Stock determined by reference to appreciation, from and after the date of grant, in the fair market value of a share of Common Stock. The date as of which such appreciation or other measure is determined shall be the exercise date.
(b) Grants . Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan.
(i) Tandem Awards . When Stock Appreciation Rights are expressly granted in tandem with Options, (i) the Stock Appreciation Right will be exercisable only at such time or times, and to the extent, that the related Option is exercisable (except to the extent designated by the Board in connection with a Reorganization Event or a Change in Control Event) and will be exercisable in accordance with the procedure required for exercise of the related Option; (ii) the Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Option, except to the extent designated by the Board in connection with a Reorganization Event or a Change in Control Event and except that a Stock Appreciation Right granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the Stock Appreciation Right; (iii) the Option will terminate and no longer be exercisable upon the exercise of the related Stock Appreciation Right; and (iv) the Stock Appreciation Right will be transferable only with the related Option. No tandem SAR may have a base amount that is less than 100% of the fair market value of a share of Common Stock on the date of grant. No tandem SAR granted prior to March 6, 2012 may have a term of more than ten (10) years from the date of grant and no tandem SAR granted on or after March 6, 2012 may have a term of more than seven (7) years from the date of grant.
(ii) Independent SARs . A Stock Appreciation Right not expressly granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Board may specify in the SAR Award; provided, however, that the base amount specified on the date of grant to calculate appreciation shall be no less
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than 100% of the fair market value of a share of Common Stock on the date of grant and the maximum term of any Stock Appreciation Right shall (i) with respect to Stock Appreciation Rights granted prior to March 6, 2012, be no more than ten (10) years from the date of grant and (ii) with respect to Stock Appreciation Rights granted on or after March 6, 2012 be no more than seven (7) years from the date of grant.
(c) Exercise . Stock Appreciation Rights may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with any other documents required by the Board.
(d) Vesting . Stock Appreciation Rights granted to Participants other than non-employee directors that vest solely based on the passage of time shall not vest (i) prior to the first anniversary of the date of grant; (ii) as to more than one-third of the Award prior to the second anniversary of the date of grant; and (iii) as to more than two-thirds of the Award prior to the third anniversary of the date of grant. Stock Appreciation Rights granted to non-employee directors that vest solely based on the passage of time shall not vest: (i) prior to the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant; (ii) as to more than one-third of the Award prior to the earlier of the second anniversary of the date of grant and the date of the second annual meeting held after the date of grant; and (iii) as to more than two-thirds of the Award prior to the earlier of the third anniversary of the date of grant and the date of the third annual meeting held after the date of grant. Notwithstanding the foregoing, the Board or the Committee, either at the time the Stock Appreciation Right is granted or at any time thereafter, may allow an Stock Appreciation Right to accelerate and become vested, in whole or in part, prior to the vesting date specified above, in the event of the death or disability of the Participant, the termination of the Participants employment by or service to the Company under specified circumstances, with respect to Stock Appreciation Rights granted in connection with an acquisition by the Company or as a result of a merger, consolidation, sale, reorganization, recapitalization, or change in control of the Company. Stock Appreciation Rights that do not vest solely based on the passage of time shall not vest prior to the first anniversary of the date of grant (or, in the case of Awards to non-employee directors, the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant). The four foregoing sentences shall only apply to Stock Appreciation Rights granted on or after March 6, 2012. The foregoing minimum vesting requirements shall not apply to Options and Stock Appreciation Rights granted, in the aggregate, for up to 10% of the authorized number of shares specified in Section 4(a).
(e) Limitation on Repricing . Unless such action is approved by the Companys stockholders or is pursuant to Section 9 of the Plan: (i) outstanding Stock Appreciation Rights granted under the Plan may not be amended to provide a base price per share that is lower than the then-current base price per share of such outstanding Stock Appreciation Right, (ii) the Board may also not cancel any outstanding stock appreciation right (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan covering the same or a different number of shares of Common Stock and having a base price per share lower than the then-current base price per share of the cancelled stock appreciation right, (iii) the Board may not cancel in exchange for a cash payment any outstanding Stock Appreciation Right with a base price per share above the then-current Fair Market Value or (iv) the Board may not take any other action under the Plan that constitutes a repricing under the rules of the NYSE.
7. | Restricted Stock; Restricted Stock Units |
(a) General . The Board may grant Awards entitling recipients to acquire shares of Common Stock (Restricted Stock), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common Stock to be delivered at the time such shares of Common Stock vest (Restricted Stock Units) (Restricted Stock and Restricted Stock Units are each referred to herein as a Restricted Stock Award).
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(b) Terms and Conditions for all Restricted Stock Awards . The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, provided that for Restricted Stock Awards granted on or after March 6, 2012, the following minimum vesting provisions shall apply. Restricted Stock Awards granted to Participants other than non-employee directors that vest solely based on the passage of time shall not vest: (i) prior to the first anniversary of the date of grant; (ii) as to more than one-third of the Award prior to the second anniversary of the date of grant; and (iii) as to more than two-thirds of the Award prior to the third anniversary of the date of grant. Restricted Stock Awards granted to non-employee directors that vest solely based on the passage of time shall not vest: (i) prior to the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant; (ii) as to more than one-third of the Award prior to the earlier of the second anniversary of the date of grant and the date of the second annual meeting held after the date of grant; and (iii) as to more than two-thirds of the Award prior to the earlier of the third anniversary of the date of grant and the date of the third annual meeting held after the date of grant. Restricted Stock Awards that do not vest solely based on the passage of time (excluding Performance Awards granted pursuant to Section 10(i)) shall not vest prior to the first anniversary of the date of grant (or, in the case of Awards to non-employee directors, the earlier of the first anniversary of the date of grant and date of the first annual meeting held after the date of grant).
The foregoing minimum vesting requirements shall not apply to Restricted Stock Awards and Other Stock-Unit Awards granted, in the aggregate, for up to 10% of the authorized number of shares specified in Section 4(a). Notwithstanding any other provision of the Plan (other than Section 9(i), if applicable), the Board or Committee may, either at the time a Restricted Stock Award is made or at any time thereafter, waive any right to repurchase shares of Common Stock (or waive the forfeiture thereof) or remove or modify the restrictions applicable to the Restricted Stock Award, in whole or in part, in the event of the death or disability of the Participant, the termination of the Participants employment by or service to the Company under specified circumstances, with respect to Restricted Stock Awards or Other Stock Unit Awards granted in connection with an acquisition by the Company or as a result of a merger, consolidation, sale, reorganization, recapitalization, or change in control of the Company.
(c) Additional Provisions Relating to Restricted Stock
(i) Dividends . Unless otherwise provided in the applicable Award agreement, any dividends (whether paid in cash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock (Unvested Dividends) shall be paid to the Participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares. Each payment of Unvested Dividends will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the lapsing of the restrictions on transferability and the forfeitability provisions applicable to the shares of Restricted Stock.
(ii) Stock Certificates . The Company may require that any stock certificates issued in respect of shares of Restricted Stock shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participants death (the Designated Beneficiary). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participants estate.
(d) Additional Provisions Relating to Restricted Stock Units
(i) Settlement . Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or an amount of cash equal to the Fair Market Value of one share of Common Stock, as provided in the applicable Award agreement. The Board may, in its discretion, provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant.
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(ii) Voting Rights . A Participant shall have no voting rights with respect to any Restricted Stock Units.
(iii) Dividend Equivalents . To the extent provided by the Board, in its sole discretion, a grant of Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (Dividend Equivalents). Dividend Equivalents may be paid currently or credited to an account for the Participants, may be settled in cash and/or shares of Common Stock and shall be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, as determined by the Board in its sole discretion, subject in each case to such terms and conditions as the Board shall establish, in each case to be set forth in the applicable Award agreement.
8. | Other Stock-Unit Awards |
Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (Other Stock Unit Awards), including without limitation Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock Unit Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock Unit Awards may be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock Unit Award, including any purchase price applicable thereto , provided that for Other Stock Unit Awards granted on or after March 6, 2012 the following minimum vesting provisions shall apply.
Other Stock Unit Awards granted to Participants other than non-employee directors that vest solely based on the passage of time shall not vest: (i) prior to the first anniversary of the date of grant; (ii) as to more than one-third of the Award prior to the second anniversary of the date of grant; and (iii) as to more than two-thirds of the Award prior to the third anniversary of the date of grant. Other Stock Unit Awards granted to non-employee directors that vest solely based on the passage of time shall not vest: (i) prior to the earlier of the first anniversary of the date of grant and the date of the first annual meeting held after the date of grant; (ii) as to more than one-third of the Award prior to the earlier of the second anniversary of the date of grant and the date of the second annual meeting held after the date of grant; and (iii) as to more than two-thirds of the Award prior to the earlier of the third anniversary of the date of grant and the date of the third annual meeting held after the date of grant. Other Stock Unit Awards that do not vest solely based on the passage of time (excluding Performance Awards granted pursuant to Section 10(i)) shall not vest prior to the first anniversary of the date of grant (or, in the case of Awards to non-employee directors, the earlier of the first anniversary of the date of grant and date of the first annual meeting held after the date of grant).
The foregoing minimum vesting requirements shall not apply to Restricted Stock Awards and Other Stock-Unit Awards granted, in the aggregate, for up to 10% of the authorized number of shares specified in Section 4(a)(1). Notwithstanding any other provision of the Plan (other than Section 9(i), if applicable), the Board or Committee may, either at the time a Stock Unit Award is made or at any time thereafter, waive any right to repurchase shares of Common Stock (or waive the forfeiture thereof) or remove or modify the restrictions applicable to the Stock Unit Award, in whole or in part, in the event of the death or disability of the Participant, the termination of the Participants employment by or service to the Company under specified circumstances, with respect to Restricted Stock Awards or Other Stock Unit Awards granted in connection with an acquisition by the Company or as a result of a merger, consolidation, sale, reorganization, recapitalization, or change in control of the Company.
9. | Adjustments for Changes in Common Stock and Certain Other Events |
(a) Changes in Capitalization . In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in
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capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(c), (iii) the share- and per-share provisions and the exercise price of each SAR, (iv) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award, and (v) the share- and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock Unit Award, shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to any outstanding Options are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then optionees who exercise such Options between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
(b) Reorganization and Change in Control Events
(i) Definitions
(A) A Reorganization Event shall mean:
(1) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled;
(2) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction; or
(3) any liquidation or dissolution of the Company.
(B) A Change in Control Event shall mean:
(1) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a Person) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d 3 promulgated under the Exchange Act) 50% or more of either (x) the aggregate number of shares of Common Stock then-outstanding (the Outstanding Company Common Stock) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of subsection (3) of this definition; or
(2) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term Continuing Director means at any date a member of the Board (x) who was a member of the Board on the date of the initial adoption of this Plan by the Board or (y) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was
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recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or (3) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a Business Combination), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Companys assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the Acquiring Corporation) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 50% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or
(3) the liquidation or dissolution of the Company.
(C) Good Reason shall mean any significant diminution in the Participants title, authority, or responsibilities from and after such Reorganization Event or Change in Control Event, as the case may be, or any reduction in the annual cash compensation payable to the Participant from and after such Reorganization Event or Change in Control Event, as the case may be, or the relocation of the place of business at which the Participant is principally located to a location that is greater than 50 miles from its location immediately prior to such Reorganization Event or Change in Control Event.
(D) Cause shall mean any (i) willful failure by the Participant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company, (ii) willful misconduct by the Participant which affects the business reputation of the Company, (iii) material breach by the Participant of any employment, consulting, confidentiality, non-competition or non-solicitation agreement with the Company, (iv) conviction or plea of nolo contendere (no contest) by the Participant to a felony, or (v) commission by the Participant of any act involving fraud, theft or dishonesty with respect to the Companys business or affairs. The Participant shall be considered to have been discharged for Cause if the Company determines, within 30 days after the Participants resignation, that discharge for Cause was warranted.
(ii) Effect on Options
(A) Reorganization Event. Upon the occurrence of a Reorganization Event (regardless of whether such event also constitutes a Change in Control Event), or the execution by the Company of any agreement with respect to a Reorganization Event (regardless of whether such event will result in a Change in Control Event), the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); provided that if such Reorganization Event also constitutes a Change in Control Event, except
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to the extent specifically provided to the contrary in the instrument evidencing any Option or any other agreement between a Participant and the Company such assumed or substituted options shall become immediately exercisable in full if, on or prior to the first anniversary of the date of the consummation of the Reorganization Event, the Participants employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation or the Participants service on the Board is terminated. For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.
Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, some or all of such Options, or in the event of a liquidation or dissolution of the Company, the Board shall, upon written notice to the Participants, provide with respect to any Options that are not to be acquired by an acquiring or succeeding corporation that all then unexercised Options will become exercisable in full as of a specified time prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by the Participants before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the Acquisition Price), then the Board may instead provide that all such outstanding Options shall terminate upon consummation of such Reorganization Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options and any applicable tax withholdings.
(B) Change in Control Event that is not a Reorganization Event. Upon the occurrence of a Change in Control Event that does not also constitute a Reorganization Event, except to the extent specifically provided to the contrary in the instrument evidencing any Option or any other agreement between a Participant and the Company, then outstanding Option shall continue to become vested in accordance with the original vesting schedule set forth in such Option, provided, however, that each such Option shall be immediately exercisable in full if, on or prior to the first anniversary of the date of the consummation of the Change in Control Event, the Participants employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation.
(iii) Effect on Restricted Stock Awards
(A) Reorganization Event that is not a Change in Control Event. Upon the occurrence of a Reorganization Event that is not a Change in Control Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Companys successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.
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(B) Change in Control Event. Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes a Reorganization Event), except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company, each then outstanding Restricted Stock Award shall continue to become free from conditions or restrictions in accordance with the original schedule set forth in such Restricted Stock Award, provided, however, that each such Restricted Stock Award shall immediately become free from all conditions or restrictions if, on or prior to the first anniversary of the date of the consummation of the Change in Control Event, the Participants employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation.
(iv) Effect on Stock Appreciation Rights and Other Stock Unit Awards
The Board may specify in an Award at the time of the grant the effect of a Reorganization Event and Change in Control Event on any SAR and Other Stock Unit Award.
10. | General Provisions Applicable to Awards |
(a) Transferability of Awards . Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant, except as may be otherwise provided in an Award agreement; provided, however, that the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, domestic partner, family trust or other entity established for the benefit of the Participant and/or an immediate family member thereof if, with respect to such proposed transferee, the Company would be eligible to use a Registration Statement on Form S-8 for the registration of the sale of the Common Stock subject to such Award under the Securities Act of 1933, as amended; provided, further, that the Company shall not be required to recognize any such transfer until such time as the Participant and such authorized transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award; and, provided, further, that no option intended to be an incentive stock option shall be transferable unless the Board shall otherwise permit. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.
(b) Documentation . Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion . Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
(d) Termination of Status . The Board shall determine the effect on an Award of the disability, death, termination of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participants legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.
(e) Withholding . The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding
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or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company so requires, at the same time as is payment of the exercise price unless the Company determines otherwise. If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Companys minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(f) Amendment of Award . Except as otherwise provided in Sections 5(g) and 6(e) with respect to repricings, Sections 5(d), 6(d), 7(b) and 8 with respect to minimum vesting of Awards, Section 9(i) with respect to Performance Awards or Section 11(d) with respect to actions requiring stockholder approval, the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided either (i) that the Participants consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant or (ii) that the change is permitted under Section 9 hereof; provided further, notwithstanding anything to the contrary herein, the Board shall have no authority to amend, modify or terminate any outstanding Award that has the same effect of actions expressly prohibited by Section 5(g) and requires approval by the Companys stockholders.
(g) Conditions on Delivery of Stock . The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Companys counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
(h) Acceleration . Except as provided in Sections 5(d), 6(d), 7(b), 8 and 9(i), the Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
(i) Performance Awards
(i) Grants . Restricted Stock Awards and Other Stock Unit Awards under the Plan may be made subject to the achievement of performance goals pursuant to this Section 10(i) (Performance Awards), subject to the limit in Section 4(c) on shares covered by such grants. Restricted Stock Awards and Other Stock Unit Awards granted pursuant to this Section 10(i) shall be counted against the shares available for issuance under the Plan in the accordance with the computation rules of Section 4(b). Performance Awards can also provide for cash payments of up to $750,000 per calendar year per individual. Performance Awards shall not vest prior to the first anniversary of the date of grant. If Dividends or Dividend Equivalents are granted in connection with a Performance Award, such Dividend or Dividend Equivalent shall be paid only if the performance goal or goals associated with such Performance Award are satisfied.
(ii) Committee . Grants of Performance Awards to any Covered Employee intended to qualify as performance-based compensation under Section 162(m) (Performance-Based Compensation) shall be made only by a Committee (or subcommittee of a Committee) comprised solely of two or more directors eligible to serve on a committee making Awards qualifying as performance-based compensation under Section 162(m). In
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the case of such Awards granted to Covered Employees, references to the Board or to a Committee shall be deemed to be references to such Committee or subcommittee. Covered Employee shall mean any person who is a covered employee under Section 162(m)(3) of the Code.
(iii) Performance Measures . For any Award that is intended to qualify as Performance-Based Compensation, the Committee shall specify that the degree of granting, vesting and/or payout shall be subject to the achievement of one or more objective performance measures established by the Committee, which shall be based on the relative or absolute attainment of specified levels of one or any combination of the following, which may be determined in accordance with Generally Accepted Accounting Principles (GAAP) or on a non-GAAP basis:
(A) Earnings or Profitability Measures , including but not limited to: (i) revenue (gross, operating or net); (ii) revenue growth; (iii) income (gross, operating, net or adjusted); (iv) earnings before interest and taxes (EBIT); (v) earnings before interest, taxes, depreciation and amortization (EBITDA); (vi) earnings growth, (vii) profit margins or contributions; and (viii) expense levels or ratios;
(B) Return Measures , including, but not limited to: return on (i) investment; (ii) assets; (iii) equity; or (iv) capital (total or invested);
(C) Cash Flow Measures, including but not limited to: (i) operating cash flow; (ii) cash flow sufficient to achieve financial ratios or a specified cash balance; (iii) free cash flow; (iv) cash flow return on capital; (v) net cash provided by operating activities; (vi) cash flow per share; and (vii) working capital or adjusted working capital;
(D) Stock Price and Equity Measures , including, but not limited to: (i) return on stockholders equity; (ii) total stockholder return; (iii) stock price; (iv) stock price appreciation; (v) market capitalization; (vi) earnings per share (basic or diluted) (before or after taxes); and (vii) price-to-earnings ratio;
(E) Strategic Metrics , including, but not limited to: (i) acquisitions or divestitures; (ii) collaborations, licensing or joint ventures; (iii) product research and development; (iv) clinical trials; (v) regulatory filings or approvals; (vi) patent application or issuance; (vii) manufacturing or process development; (viii) sales or net sales; (ix) sales growth, (x) market share; (xi) market penetration; (xii) inventory control; (xiii) growth in assets; (xiv) key hires; (xv) business expansion; (xvi) achievement of milestones under a third-party agreement; (xvii) financing; (xviii) resolution of significant litigation; (xix) legal compliance or risk reduction; (xx) improvement of financial ratings; or (xxi) achievement of balance sheet or income statement objectives,
(F) In each case such performance measures may be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the impairment or writedown of any asset or assets, (v) charges for restructuring and rationalization programs or (vi) other extraordinary or non-recurring items, as specified by the Committee when establishing the performance measures. Such performance measures: (i) may vary by Participant and may be different for different Awards; (ii) may be particular to a Participant or the department, branch, line of business, subsidiary or other unit in which the Participant works and may cover such period as may be specified by the Committee; and (iii) shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). Awards that are not intended to qualify as Performance-Based Compensation may be based on these or such other performance measures as the Board may determine.
(iv) Adjustments . Notwithstanding any provision of the Plan, with respect to any Performance Award that is intended to qualify as Performance-Based Compensation, the Committee may adjust downwards, but not upwards, the cash or number of Shares payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance measures except in the case of the death or disability of the Participant.
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(v) Other . The Committee shall have the power to impose such other restrictions on Performance Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for Performance-Based Compensation.
11. | Miscellaneous |
(a) No Right To Employment or Other Status . No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Stockholder . Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan . The Plan shall become effective immediately prior to the closing of the Companys initial public offering. No Awards shall be granted prior to (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Companys stockholders. The Plan shall expire on December 31, 2021.
(d) Amendment of Plan . The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided, however, that, to the extent determined by the Board, no amendment requiring stockholder approval under any applicable legal, regulatory or listing requirement shall become effective until such stockholder approval is obtained; provided further, that stockholder approval shall be required for any amendment to the Plan that (i) materially increases the number of shares of Common Stock available for issuance under the Plan (other than an increase to reflect an adjustment described in Section 9) or (ii) materially expands the class of service providers eligible to participate in the Plan.
(e) Authorization of Sub-Plans . The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to this Plan containing (i) such limitations on the Boards discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.
(f) Provisions for Foreign Participants . The Board may modify Awards or Options granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
(g) Compliance with Code Section 409A . Except as provided in individual Award agreements initially or by amendment, if and to the extent (i) any portion of any payment, compensation or other benefit provided to a Participant pursuant to the Plan in connection with his or her employment termination constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code and (ii) the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, in each case as determined by the Company in accordance with its procedures, by which determinations the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of separation from service (as determined under Section 409A of the Code) (the New Payment Date), except as Section 409A of the Code may then permit. The
aggregate of any payments that otherwise would have been paid to the Participant during the period between the
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date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule.
The Company makes no representations or warranty and shall have no liability to the Participant or any other person if any provisions of or payments, compensation or other benefits under the Plan are determined to constitute nonqualified deferred compensation subject to Section 409A of the Code but do not to satisfy the conditions of that section.
(h) Governing Law . The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state.
Approved by the Board of Directors of Emergent
BioSolutions Inc. on March 20, 2014, subject to
stockholder approval.
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ANNUAL MEETING OF STOCKHOLDERS OF
EMERGENT BIOSOLUTIONS INC.
May 22, 2014
Dear Stockholder:
Please take note of the important information accompanying this proxy card. There are matters related to the operation of Emergent BioSolutions that require your prompt attention. Your vote counts, and you are strongly encouraged to exercise your right to vote your shares.
Please vote your shares using one of the methods described on the reverse side of this proxy card. Thank you in advance for your prompt consideration of these matters.
Sincerely,
Board of Directors of Emergent BioSolutions Inc.
0 | ¢ |
EMERGENT BIOSOLUTIONS INC.
2273 RESEARCH BOULEVARD, SUITE 400
ROCKVILLE, MARYLAND 20850
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2014 ANNUAL MEETING OF STOCKHOLDERS
The undersigned, revoking all prior proxies, hereby appoints Daniel J. Abdun-Nabi, Robert G. Kramer and A.B. Cruz III as proxies, each with full power of substitution, and hereby authorizes each of them to represent and vote, as designated on the reverse side, all shares of common stock of Emergent BioSolutions Inc. (the Company) held of record by the undersigned as of March 24, 2014 at the Annual Meeting of Stockholders to be held on May 22, 2014 at 9:00 a.m., Eastern time, at the Sheraton Rockville Hotel, 920 King Farm Boulevard, Rockville, MD 20850 and at any adjournment or postponement thereof, and, in their discretion, on any other matters properly presented for a vote at the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL CLASS II DIRECTOR NOMINEES AND FOR PROPOSALS 2, 3 AND 4.
(Continued and to be signed on the reverse side)
¢ | 14475 | ¢ |
ANNUAL MEETING OF STOCKHOLDERS OF
EMERGENT BIOSOLUTIONS INC.
May 22, 2014
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL :
The notice of meeting, proxy statement and proxy card
are available at http://materials.proxyvote.com/29089Q
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
i | Please detach along perforated line and mail in the envelope provided. | i |
n | 20430303000000000000 6 | 052214 | ||||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL CLASS II DIRECTOR NOMINEES
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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1. To elect four Class II directors to hold office for a term expiring at our 2017 annual meeting of stockholders and until their respective successors are duly elected and qualified |
FOR |
AGAINST |
ABSTAIN | |||||||||||||||
¨ FOR ALL NOMINEES
¨ WITHHOLD AUTHORITY FOR ALL NOMINEES
¨ FOR ALL EXCEPT (See instructions below) |
NOMINEES: ¡ Zsolt Harsanyi, Ph.D. ¡ General George Joulwan ¡ Louis W. Sullivan, M.D. ¡ Marvin L. White |
2. To ratify the appointment by the audit committee of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2014. |
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3. To approve the amendment of our stock incentive plan. |
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4. To approve, on an advisory basis, the compensation of our named executive officers. |
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5. To act upon any other matter that may properly come before the meeting or any adjournment or postponement of the meeting. |
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INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: l |
The board of directors recommends that you vote FOR the election of each of the Class II director nominees, and FOR Proposals 2, 3 and 4. |
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | ¨ |
Signature of Stockholder | Date: | Signature of Shareholder | Date: |
Note: n |
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | n |
ANNUAL MEETING OF STOCKHOLDERS OF
EMERGENT BIOSOLUTIONS INC.
May 22, 2014
PROXY VOTING INSTRUCTIONS
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL : The notice of meeting, proxy statement and proxy card are available at http://materials.proxyvote.com/29089Q |
i Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. i
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Signature of Stockholder | Date: | Signature of Shareholder | Date: |
Note: n |
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | n |