PROPOSAL NO. 5

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020 and the Board further directed that management submit the selection of independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited our financial statements since our inception in 1991. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our bylaws nor our other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. However, we are submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of us and our stockholders.

Approval of this Proposal No. 5 requires a “For” vote from the holders of a majority of the votes cast in person or by proxy at the Annual Meeting. Votes cast online during the virtual Annual Meeting will constitute votes cast in person at the Annual Meeting for purposes of the votes. Abstentions are not counted for the purpose of determining the number of votes cast and will therefore not have any effect on the outcome of the vote on this Proposal No. 5. Since this Proposal No. 5 is considered to be “routine” under NYSE rules, we do not expect any broker non-votes on this Proposal No. 5.

ON BEHALF OF THE AUDIT COMMITTEE, THE BOARD OF DIRECTORS RECOMMENDS

A VOTE IN FAVOR OF PROPOSAL NO. 5

PRINCIPAL ACCOUNTANT FEES AND SERVICES

In connection with the audit of the 2019 financial statements, we entered into an engagement agreement with Ernst & Young LLP that sets forth the terms by which Ernst & Young LLP will perform audit and interim review services for us. That agreement is subject to alternative dispute resolution procedures.

The following table represents aggregate fees billed to us for the fiscal years ended December 31, 2019 and December 31, 2018, by Ernst & Young LLP, our independent registered public accounting firm.

 

		Fiscal Year Ended
		2019				2018
		(in thousands)
Audit Fees		$	1,375			$	1,356
Audit-Related Fees			—				—
Tax Fees			6				6
All Other Fees			2				5
Total Fees		$	1,383			$	1,367

Audit Fees. Audit fees consist of fees for services rendered in connection with the annual audit of our financial statements and review of the interim financial statements in quarterly reports. This category also includes fees for audits provided in connection with statutory and regulatory filings and engagements or services that generally only the independent registered public accounting firm reasonably can provide to a client.

 

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Audit-Related Fees. Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” There were no fees incurred under this category in 2019 and 2018.

Tax Fees. Tax fees include fees for tax compliance, tax planning and tax advice. Specifically, the amounts reflect fees paid to Ernst & Young LLP tax compliance work in Europe.

All Other Fees. Consists of fees for products and services other than the services described above. Specifically, the amounts reflect fees paid to Ernst & Young LLP in connection with the use of Ernst & Young LLP’s online accounting research tool.

PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee is responsible for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. The Audit Committee has established a policy regarding pre-approval of all audit and non-audit services provided by the independent registered public accounting firm. On an on-going basis, management communicates specific projects and categories of service for which the advance approval of the Audit Committee is requested. The Audit Committee reviews these requests and advises management if the Audit Committee approves the engagement of the independent registered public accounting firm. On a periodic basis, management reports to the Audit Committee regarding the actual spending for such projects and services compared to the approved amounts. The Audit Committee also may delegate the ability to pre-approve audit and permitted non-audit services to one or more of its members, provided that any such pre-approvals are reported at the next scheduled Audit Committee meeting. All fees described in the Principal Accountant Fees and Services table above were pre-approved by the Audit Committee.

 

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SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our common stock as of April 2, 2020 (except as noted) by: (i) each director and nominee for director; (ii) each of the executive officers named in the Summary Compensation Table below; (iii) all our executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock.

 

		Beneficial Ownership(1)
Name and Address of Beneficial Owner(2)		Number of Shares				Percent of Total
Baker Bros. Advisors LP 860 Washington Street, 3rd Fl. New York, NY 10014 (3)			11,849,937				7.22	%
BlackRock, Inc. 55 East 52nd Street New York, NY 10055(4)			11,575,205				7.06
PRIMECAP Management Company 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105 (5)			11,300,000				6.89
ARK Investment Management LLC 3 East 28th Street, 7th Floor New York, NY 10016(6)			10,616,460				6.47
Nikko Asset Management Americas, Inc. 605 Third Avenue, 38th Floor New York, NY 10158(7)			9,765,054				5.95
William M. Greenman(8)			4,052,724				2.42
Laurence M. Corash(9)			2,532,445				1.51
Kevin D. Green(10)			895,668				*
Richard Benjamin(11)			486,034				*
Vivek Jayaraman(12)			467,349				*
Timothy B. Anderson(13)			301,283				*
Gail Schulze(14)			252,999				*
Daniel N. Swisher, Jr.(15)			297,810				*
Frank Witney, Ph.D.(16)			243,295				*
Eric Bjerkholt(17)			36,955				*
Timothy L. Moore(18)			21,424				*
Jami Dover Nachtsheim(19)			18,892				*
All executive officers and directors as a group (14 persons)(20)			11,150,407				6.49

 

*	Less than one percent.

(1)

This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of April 2, 2020 and shares of our common stock issuable upon the vesting of outstanding RSUs within 60 days of April 2, 2020 are deemed to be outstanding for the purpose of computing the number of shares held and the percent of total ownership of the person holding those options, but are not treated as outstanding for the purpose of computing the percent of total ownership of any other person. Applicable percentages are based on 164,065,878 shares outstanding on April 2, 2020, adjusted as required by rules promulgated by the SEC.

 

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(2)	Unless otherwise provided, the address for each of the beneficial owners listed is c/o Cerus Corporation, 1220 Concord Avenue, Suite 600, Concord, CA 94520.

(3)

Consists of (i) 10,749,937 shares reported as beneficially owned in Schedule 13G/A jointly filed with the SEC on February 13, 2019 by Baker Bros. Advisors LP (the “Advisor”), Baker Bros. Advisors (GP) LLC (the “Advisor GP”), Felix J. Baker and Julian C. Baker reporting beneficial ownership as of December 31, 2018, and (ii) 1,100,000 shares purchased in our January 2020 underwritten public offering of common stock as reported to us by the underwriter of the public offering. According to the Schedule 13G/A, pursuant to the management agreements, as amended, among the Advisor, Baker Brothers Life Sciences, L.P. (“Life Sciences”) and 667, L.P. (“667” and together with Life Sciences, the “Funds”) and their respective general partners, the Funds’ respective general partners relinquished to the Advisor all discretion and authority with respect to the investment and voting power of the securities held by the Funds, and thus the Advisor has complete and unlimited discretion and authority with respect to the Funds’ investments and voting power over investments, which include the 9,733,405 shares reported as beneficially owned by Life Sciences and 1,016,532 shares reported as beneficially owned by 667 in the Schedule 13G/A. The Advisor GP, Felix J. Baker and Julian C. Baker as managing members of the Advisor GP, and the Advisor may be deemed to be the beneficial owners of securities directly held by the Funds, and may be deemed to have the power to vote or direct the vote of and the power to dispose or direct the disposition of such securities. The Advisor, the Advisor GP, Felix J. Baker and Julian C. Baker each disclaim beneficial ownership of the securities held by each of the Funds. Because the information in the table above does not reflect any transactions between December 31, 2018 and April 2, 2020, other than the January 2020 underwritten public offer, the Advisor’s actual beneficial ownership of our common stock on April 2, 2020 may be different than reported in the table above.

(4)

Based solely on information contained in Schedule 13G/A as filed with the SEC on February 5, 2020 by BlackRock, Inc. (“BlackRock”). According to the Schedule 13G/A, BlackRock has sole voting power with respect to 11,319,527 shares and sole dispositive power with respect to 11,575,205 shares. The Schedule 13G/A filed by BlackRock provides information only as of December 31, 2019. Because the information in the table above does not reflect any transactions between December 31, 2019 and April 2, 2020, BlackRock’s actual beneficial ownership of our common stock on April 2, 2020 may be different than reported in the table above.

(5)

Based solely on information contained in Schedule 13G/A as filed with the SEC on February 12, 2020 by PRIMECAP Management Company (“PRIMECAP”). According to the Schedule 13G/A, PRIMECAP has sole voting and dispositive power over the 11,300,000 shares. The Schedule 13G/A filed by PRIMECAP provides information only as of December 31, 2019. Because the information in the table above does not reflect any transactions between December 31, 2019 and April 2, 2020, PRIMECAP’s actual beneficial ownership of our common stock on April 2, 2020 may be different than reported in the table above.

(6)

Consists of (i) 9,416,460 shares reported as beneficially owned by ARK Investment Management LLC (“ARK”) as reported in ARK’s Schedule 13G filed with the SEC on February 14, 2020 and (ii) 1,200,000 shares purchased by ARK in our January 2020 underwritten public offering of common stock as reported to us by the underwriter of the public offering. According to the Schedule 13G, ARK has sole voting power with respect to 7,558,293 shares, shared voting power with respect to 165,930 shares and sole dispositive power with respect to 9,416,460 shares. The Schedule 13G filed by ARK provides information only as of December 31, 2019. Because the information in the table above does not reflect any transactions between December 31, 2019 and April 2, 2020, other than the information provided to us with respect to our January 2020 underwritten public offering, ARK’s actual beneficial ownership of our common stock on April 2, 2020 may be different than reported in the table above.

(7)

Based solely on information contained in (i) the Schedule 13G filed with the SEC on February 12, 2020 by Nikko Asset Management Americas, Inc. (“Nikko”) reporting beneficial ownership as of December 31, 2019 (the “Nikko 13G”) and (ii) the Schedule 13G jointly filed with the SEC on February 12, 2020 by Sumitomo Mitsui Trust Holdings, Inc. (“SMTH”) and Nikko Asset Management Co., Ltd (“NAM”) reporting beneficial ownership as of December 31, 2019 (the “Joint 13G”). According to the Nikko 13G and the Joint 13G, Nikko is a subsidiary to SMTH and NAM and therefore the securities reported on the Nikko 13G and the Joint 13G are owned, or may be deemed to be beneficially owned, by each of Nikko, SMTH

 

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and NAM. According to the Joint 13G, SMTH and NMA have shared voting power with respect to 9,765,054 shares and shared dispositive power with respect to 9,765,054 shares. According to the Nikko 13G, Nikko has shared voting power with respect to 7,280,617 shares and shared dispositive power with respect to 9,765,054 shares. The Nikko 13G filed by Nikko and the Joint 13G jointly filed by SMTH and NAM provide information only as of December 31, 2019. Because the information in the table above does not reflect any transactions between December 31, 2019 and April 2, 2020, the actual beneficial ownership by Nikko, SMTH and NAM of our common stock on April 2, 2020 may be different than reported in the table above.

(8)	Includes 3,226,875 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(9)	Includes 729,687 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(10)	Includes 774,687 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(11)	Includes 444,271 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(12)	Includes 328,437 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(13)	Includes 113,785 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(14)	Includes 216,790 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(15)	Includes 251,900 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(16)	Includes 182,990 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(17)	Includes 12,673 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(18)	Includes 13,513 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(19)	Includes 11,354 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

(20)	Includes 7,656,406 shares underlying stock options which are exercisable within 60 days of April 2, 2020.

 

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DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the 1934 Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of Cerus. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of such reports filed electronically with the SEC during or with respect to the fiscal year ended December 31, 2019 and written representations that no reports on Form 5 were required, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with during the fiscal year ended December 31, 2019, except as follows: One report on Form 4 was filed late by each of Mr. Greenman, Mr. Green, Dr. Benjamin, Ms. Menard and Ms. Moore covering two transactions each with respect to the vesting of RSUs. Two reports on Forms 4 were filed late by Dr. Corash, one Form 4 was filed late covering two transactions with respect to the vesting of RSUs and one Form 4 was filed late covering two transactions with respect to an option exercise. A late Form 4 was also filed by two of our directors: by Mr. Anderson covering three transactions with respect to an exercise of options and a related sale-to-cover transaction, and by Mr. Moore covering two transactions with respect to the vesting of RSUs.

 

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EXECUTIVE OFFICERS

Our executive officers and their ages as of April 4, 2020 are as follows:

 

Name		Age				Position
William M. Greenman(1)			53			President, Chief Executive Officer and Director
Kevin D. Green			48			Vice President, Finance and Chief Financial Officer
Richard Benjamin			60			Chief Medical Officer
Laurence M. Corash			76			Chief Scientific Officer
Vivek Jayaraman			45			Chief Operating Officer
Chrystal N. Menard			49			Chief Legal Officer and General Counsel
Carol M. Moore			70			Senior Vice President, Regulatory Affairs and Quality

 

(1)	For biographical information, see “Proposal No. 1—Election of Directors.”

Kevin D. Green was appointed our Vice President, Finance and Chief Financial Officer in February 2013. Prior to that, Mr. Green served as our Vice President, Finance and Chief Accounting Officer, a role to which he was appointed in March 2009. From January 2006 to March 2009, Mr. Green was our Senior Director of Finance and Controller. From 2000 until 2006, Mr. Green held various financial management positions with Macromedia, Inc., a software company acquired by Adobe Systems in 2005, including Director of Finance and Assistant Controller. Prior to joining Macromedia, Mr. Green was a member of PricewaterhouseCoopers LLP in the Assurance and Business Advisory Services division. Mr. Green is a certified public accountant. Mr. Green received his BS in Accounting from California State University, Fresno.

Dr. Richard Benjamin was appointed our Chief Medical Officer in July 2015. From January 2006 to June 2015, he served as Chief Medical Officer for the American Red Cross, where he oversaw donor and patient safety issues for approximately 40% of the US blood supply. Dr. Benjamin is a Board Member and Regional Director for North America for the International Society of Blood Transfusion, as well as an active member of the American Association of Blood Banks. He has also served on the DHHS Secretary’s Advisory Committee on Blood Safety and Availability in the U.S. from since December 2016 and previously served on the committee from 2006 to 2007. Dr. Benjamin is an Adjunct Full Professor of Pathology at Georgetown University and author of over 100 peer-reviewed publications. He received his Ph.D. at Cambridge University, England in Immunology and completed post-doctoral research at Stanford University.

Dr. Laurence M. Corash, one of our co-founders, has been our Chief Scientific Officer since July 2015. Previously, he had been our Senior Vice President and Chief Medical and Chief Scientific Officer since July 2009. Prior to that, he had been our Senior Vice President and Chief Medical Officer since March 2008, Vice President, Medical Affairs since July 1996 and Director of Medical Affairs from July 1994. Prior to that, Dr. Corash was a consultant to us. Dr. Corash also served on our Board of Directors from December 2002 to June 2019. Dr. Corash has been a Professor of Laboratory Medicine at the University of California, San Francisco since July 1985. He was the Chief of the Hematology Laboratory for the Medical Center at the University of California, San Francisco from 1982 to 1997. From February 1990 to July 1994, Dr. Corash was a member of the FDA Advisory Panel for Hematology Devices. From 2008 until 2011, Dr. Corash served as the industry representative on the Department of Health and Human Services’ Advisory Committee on Blood Safety and Availability.

Vivek K. Jayaraman was appointed our Chief Operating Officer in March 2020. He previously served as our Chief Commercial Officer since August 2016. From October 2009 to February 2016, Mr. Jayaraman served as Vice President, Sales and Marketing of TriVascular Technologies, Inc., or TriVascular, where he oversaw TriVascular’s commercial expansion as the company grew from a preclinical, venture-backed startup into a publicly traded, global medical device company. Mr. Jayaraman received his MBA from the Wharton School at the University of Pennsylvania and holds dual bachelor’s degrees from the University of Michigan.

 

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Chrystal N. Menard was appointed our Chief Legal Officer and General Counsel in December 2012. From August 2011 until October 2012, Ms. Menard was Senior Corporate Counsel at Zynga Inc. Prior to August 2011, Ms. Menard was a partner of the law firm presently named Cooley LLP, practicing corporate and securities law. Ms. Menard received her BS from the University of Colorado and her JD from the University of Chicago.

Carol M. Moore was promoted to Senior Vice President, Regulatory Affairs, Quality and Clinical in February 2013. From April 2008 to February 2013, Ms. Moore was our Vice President, Regulatory Affairs, Quality and Clinical. Prior to joining Cerus, Ms. Moore served in various roles at Bayer Corporation, most recently as Vice President, Worldwide Regulatory Affairs, for over 30 years focusing on the registration and regulatory compliance of Bayer’s biological and biotech products, health policy, and strategic planning. Ms. Moore received her BS in Biological Science from California State University, Hayward.

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

OVERVIEW

The following Compensation Discussion and Analysis addresses the following topics:

 

•

executive summary of our compensation practices;

 

•

our compensation philosophy and objectives;

 

•

our process for setting executive compensation; and

 

•

our executive compensation components and decisions for the 2019 fiscal year.

The Named Executive Officers (NEOs) for the 2019 fiscal year were as follows:

 

Named Executive Officer		Title
William M. Greenman		President and Chief Executive Officer
Kevin D. Green		Vice President, Finance and Chief Financial Officer
Richard Benjamin		Chief Medical Officer
Laurence M. Corash		Chief Scientific Officer
Vivek Jayaraman(1)		Chief Operating Officer

 

(1)	Mr. Jayaraman was appointed Chief Operating Officer effective March 1, 2020. He previously held the role of Chief Commercial Officer.

EXECUTIVE SUMMARY

Business Overview

We are a biomedical products company focused on developing and commercializing the INTERCEPT Blood System to enhance blood safety by inactivating a broad range of pathogens such as viruses, bacteria, and parasites that may be present in donated blood. The INTERCEPT Blood System, which is based on our proprietary technology for controlling biological replication, is designed to reduce blood-borne pathogens in donated blood components intended for transfusion. Our INTERCEPT Blood System is for use with three blood components: plasma, platelets, and red blood cells. The INTERCEPT Blood System for platelets, or platelet system, and the INTERCEPT Blood System for plasma, or plasma system, have received a broad range of regulatory approvals and are being marketed and sold in the United States, Europe, the Commonwealth of Independent States, the Middle East, Latin America, and selected countries in other regions around the world. The INTERCEPT Blood System for red blood cells, or the red blood cell system, is currently in late stage development.

2019 and Early 2020 Performance Highlights

We attained a number of notable performance and other achievements in during fiscal year 2019 and the first quarter of fiscal year 2020, including the following:

 

•

Reported record full year 2019 product revenue of $74.6 million, an increase of 22% compared to 2018 product revenue.

 

•

Pathogen reduction technology was included as one of the strategy options in the 2019 FDA guidance document titled “Bacterial Risk Control Strategies for Blood Collection Establishments and Transfusion Services to Enhance the Safety and Availability of Platelets for Transfusion, Guidance for Industry.”

 

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•

Entered a new debt facility with MidCap Financial in March 2019 which is expandable to $90 million. The debt facility consists of a staged $70 million term loan and a $5 million revolving line of credit expandable up to $20 million. The non-dilutive financing provides Cerus with additional capital and the flexibility to fund our growth initiatives.

 

•

Completed an underwritten public offering of common stock in January 2020, raising gross proceeds of $63.3 million, before deducting offering expenses. The proceeds from the offering strengthened our balance sheet and allows us to focus on executing on our growth initiatives.

 

•

Announced organizational change in March 2020, with Vivek Jayaraman promoted to Chief Operating Officer, Dr. Nina Mufti prompted to Vice President, Development and Red Blood Cell Program Leader, and Dr. Yasmin Singh promoted to VP Development and Platelet/Plasma/Therapeutics Program Leader. The promotions create an organizational structure focused on ownership of key deliverables and are expected to provide Cerus with continued growth opportunities.

 

•

Published in December 2019, the 16th Annual National French Hemovigilance Report highlighted the safety and effectiveness of INTERCEPT platelets during the first full year of 100% production and routine use during 2018.

 

•

In March 2020, we formed a collaborative research group with the goal of optimizing coronavirus convalescent plasma, or CCP, for COVID-19 patients. The group seeks to define key characteristics that could influence the potential efficacy of CCP, including the level of antibodies, optimal collection timing, dosing, and how these factors may influence response to the investigational treatment.

 

•

Entered a new five-year agreement in December 2019 to supply Swiss Transfusion SRC, a company of the Swiss Red Cross, with the INTERCEPT Blood System.

 

•

Announced a new corporate brand in June 2019 that reflects our increasingly important role in helping blood centers globally to proactively protect the blood supply against the threat of known and emerging infectious diseases.

 

•

Announced the relocation of our new corporate headquarters to a new facility in Concord, California in June 2019. The new facility consolidates all non-field based, U.S. employees from three separate buildings into one, which was designed to facilitate greater teamwork and communication, and to allow for future expansion as the business grows.

 

•

The use of licensed pathogen reduction technology was included as an alternative to year-round testing in the 2019 FDA guidance document titled “Recommendations for Reducing the Risk of Transfusion-Transmitted Babesiosis.”

 

•

Appointed Jami Nachtsheim to our Board in March 2019. Ms. Nachtsheim brings nearly four decades of commercial and marketing leadership experience to our Board.

Executive Compensation Governance Highlights

Our Compensation Committee believes that our executive compensation program is appropriately designed and reasonable in that it both encourages our NEOs to work for our long-term prosperity and reflects a pay-for-performance philosophy, without encouraging our employees to assume excessive risks, and also reflects a reasonable and responsible cost structure.

Below are key elements of our compensation program, as well as problematic pay practices that we avoid:

 

What We Do		What We Don’t Do
✓  Design executive compensation to align pay with performance   ✓  Structure our executive compensation program to minimize inappropriate risk-taking		x  No excessive change in control or severance payments   x  No employment contracts or severance agreements with NEOs providing for “single trigger” acceleration upon a change in control

 

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What We Do		What We Don’t Do
✓  Select peer companies with which we compete with for executive talent, and that have a similar business and are of similar size as us, and review their pay practices   ✓  Solicit advice from our Compensation Committee’s independent compensation consultant that reports directly to the Compensation Committee   ✓  Rely on long-standing, consistently-applied practices on the timing of equity grants   ✓  Enforce “no-hedging” and “no-pledging” policies   ✓  Maintain stock ownership guidelines for our Chief Executive Officer   ✓  Have 100% independent directors serve on our Compensation Committee		x  No NEO perquisites that are not available to all Cerus employees   x  No tax gross-ups on severance or change in control benefits   x  No repricing of stock options without stockholder approval   x  No NEO post-termination retirement or pension benefits that are not available to employees generally

Response to 2019 Say-on-Pay Votes

We value the input of our stockholders on our compensation programs. We hold an advisory vote on executive compensation on an annual basis. At our 2019 Annual Meeting, the stockholders approved, on an advisory basis, the compensation of the NEOs, as disclosed in the proxy statement for that meeting pursuant to the compensation disclosure rules of the SEC. The Compensation Committee reviewed the final vote results for the proposal, and, given the significant level of stockholder support (approximately 96.92% of the votes cast with respect to the advisory proposal), concluded that our compensation program continues to provide a competitive pay-for-performance package that effectively encourages our NEOs to work for our long-term prosperity and reflects a reasonable and responsible cost structure. Accordingly, the Compensation Committee determined not to make any significant changes to our executive compensation policies or decisions as a result of the vote, although the Compensation Committee continues to look critically at our short-term performance-based incentive targets and long-term incentive awards. The Compensation Committee will continue to consider the outcome of our advisory votes on executive compensation and our stockholders’ views when making future executive compensation decisions for our executives.

EXECUTIVE COMPENSATION PHILOSOPHY AND OBJECTIVES

We believe that the performance of our executive officers has the potential to significantly impact our ability to achieve our corporate performance and strategic goals. We therefore give considerable thought to the design and administration of our executive officer compensation program. The Compensation Committee believes that the most effective compensation program is one that provides competitive base salary, rewards the achievement of established corporate performance goals and objectives and provides an incentive for retention. At the same time, our Compensation Committee believes that an effective compensation program must maintain a reasonable and responsible cost structure.

Our executive compensation program is designed around the following objectives:

 

•

develop compensation policies and practices that are consistent with our strategic business objectives and executive compensation philosophy;

 

•

attract and retain qualified individuals and motivate those individuals to perform at the highest of professional levels that will contribute to our growth and success;

 

•

provide competitive compensation opportunities consistent with industry practices where we compete for talent;

 

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•

design programs to retain key employees, reward past performance and incentivize future contributions, balancing both short and long-term financial and business objectives to build a sustainable and prosperous company; and

 

•

provide long-term incentive opportunities that continue to correlate employee contributions and rewards with stockholder value creation.

COMPENSATION SETTING PROCESS

Overview

When creating an executive’s overall compensation package, the Compensation Committee considers the different components of our compensation packages in light of the role the executive will play in achieving our near-term and longer-term goals, in addition to the objectives described above. The Compensation Committee also considers the compensation packages provided to similarly situated executives at the companies we consider to be our peers. Performance-based cash compensation awards under our Bonus Plan for Senior Management of Cerus Corporation, or our Bonus Plan, are made based on the achievement of corporate performance goals designed to create incentives that we believe drive executive performance that increase stockholder value, and each executive officer’s contribution toward achieving our corporate performance goals. The corporate performance goals vary year-to-year, but generally include value-adding achievements such as meeting revenue targets and timely completion of clinical, development, regulatory, commercial, manufacturing, or other operational or strategic undertakings.

Components of Pay/Target Pay Positions/Mix of Pay

The components used to support our compensation objectives stated above are base salary, cash incentive awards under our Bonus Plan, equity awards and certain other benefits (discussed in greater detail below under “Executive Compensation Components and Decisions”). We use a combination of these pay elements to provide a competitive total compensation package to our executives. We do not specify a target percentage of the overall compensation to be represented by the various compensation elements. However, the Compensation Committee’s intention is that a significant percentage of each NEO’s total compensation package should be “at risk” in the form of performance-based cash incentive compensation and long-term equity compensation. Our Compensation Committee believes that having a significant portion of our executives’ compensation package be “at risk” has contributed to cultivating a culture in which our NEOs aggressively pursue our corporate performance goals as they know that their take home pay, to a large extent, depends upon our corporate performance and, to some extent, their contribution to that performance. At the same time, a significant portion of the “at risk” compensation is in the form of long-term equity incentives, which is designed to mitigate any risk that our executives will pursue short-term outcomes at the expense of long-term stockholder value. Employees in more senior roles have an increasing proportion of their potential compensation “at risk” and tied to performance because they are in a position to have greater influence on achieving our performance results. For example, 39.6% of our Chief Executive Officer’s total potential 2019 cash compensation was “at risk,” and 80.0 % of his total potential 2019 compensation was “at risk.” For purposes of calculating the potential cash and total 2019 compensation “at risk,” we included the target Bonus Plan compensation as reported in the Grants of Plan-Based Awards Table and, with respect to total compensation, the grant date fair value of each stock option and RSU award, calculated in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table.

Role of the Chief Executive Officer in Executive Officer Compensation Decisions

The Chief Executive Officer does not participate in setting his own compensation and is specifically excluded from any discussions or deliberations related to his compensation package. However, the Chief Executive Officer recommends to the Compensation Committee for its consideration and ultimate approval, proposed corporate performance goals and their relative weighting for the upcoming fiscal year, as well as provides input on the level of attainment of the prior year’s corporate performance goals, for purposes of

 

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determining the level of achievement of the corporate performance goals. The Chief Executive Officer also regularly provides input to the Compensation Committee during the course of the year regarding the performance of our other NEOs. The Chief Executive Officer is also delegated authority by the Compensation Committee to approve annual cash incentive bonuses to our non-executive officers in his discretion out of an aggregate annual cash bonus pool within limits previously approved by the Compensation Committee.

Compensation Committee Decision-Making Process

Typically, the Compensation Committee meets at least twice per year to make compensation decisions for our NEOs, with greater frequency if necessary. The Compensation Committee also meets and confers regularly in executive session without the presence of our executive team. The Compensation Committee met three times during 2019.

From time to time, various members of our management and other employees, as well as outside advisors or consultants, may be invited by the Compensation Committee to make presentations, provide financial or other background information or advice, or otherwise participate in Compensation Committee meetings. The charter of the Compensation Committee grants the Compensation Committee full access to all of our books, records, facilities and personnel, as well as the authority, in its sole discretion, to retain (or obtain the advice of) any compensation consultant, legal counsel or other adviser to assist it in the performance of its duties, all at our expense. As part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, and tax and accounting information.

Prior to each meeting where compensation decisions are to be made with respect to our executives, our Vice President, Administration provides the Compensation Committee with tally sheets that set forth our executives’ historical base salary and bonus information covering the past ten years, or period of actual employment if shorter, as well as each executive’s: (1) equity grant history; (2) vested and unvested potential gain on equity awards using projected stock prices at various points in time in the future; and (3) stock option exercise history, in each case during such ten year period, or any shorter period of actual employment. In 2019, the tally sheets were reviewed for the purposes of a subjective evaluation as to whether 2019 compensation levels were appropriate in light of the compensation levels in effect for prior years and whether each executive’s compensation was generally reflective of his or her level of experience and responsibilities.

In determining 2019 compensation for our executive officers, the Compensation Committee considered the recommendations of our Chief Executive Officer with respect to the compensation of our other NEOs as stated above under the heading “Role of the Chief Executive Officer,” as well as each executive’s individual performance during the preceding year and the reports and benchmarking analysis described below under the heading “Use of Peer Group and Survey Data.”

The Compensation Committee approves the compensation packages for all executives, including the allocation of base salary, short-term performance-based cash incentive compensation and long-term equity incentive compensation, and the applicable target award levels as a percentage of base salary related to the short-term performance-based cash incentive compensation. Historically, the Compensation Committee has made its most significant adjustments to annual base compensation, determined cash and equity awards and established new performance objectives at one or more meetings held during the first and fourth quarters of the year. Generally, adjustments to the base salary of our executives are determined by the Compensation Committee in February of each year, with the adjustments becoming effective March 1^st. As discussed more fully below, annual short-term performance-based cash awards are generally made in the first quarter of the year following the year in which performance is achieved.

The Compensation Committee generally awards annual option grants and RSU awards in the first quarter of each year concurrent with the determination of cash compensation. The timing of our annual equity awards was selected so the Compensation Committee could review concurrently all components of executive compensation

 

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(base salary, Bonus Plan targets and corporate performance goal attainment levels, and long-term equity incentive awards) and make compensation determinations based upon the totality of the annual compensation package for each executive. Our general policy is to grant stock options and other equity awards on fixed dates determined in advance, although there are occasions when grants are made on other dates. For example, we were unable to grant awards for our executives in the first quarter of 2019 due to insufficient shares being available for grant under our 2008 Plan. As a result, the 2019 long-term incentive award values were determined in the first quarter of 2019, but the awards were made in June 2019, subsequent to stockholder approval of the proposal to increase the aggregate number of shares available for grant under the 2008 Plan that was put to our stockholders for approval at the 2019 annual meeting. We do not purposely accelerate or delay the public release of material information in consideration of any pending equity award grant to allow the award recipient to benefit from a more favorable stockholder return. Other than equity award grants to new hires, and except as previously described, equity award grants to executive officers are generally approved once a year (typically in the first quarter of the year) unless an executive officer is promoted, in which case a grant will normally be made at the time of such promotion, or, in rare circumstances, for recognition of outstanding performance or for retention purposes. All required approvals are obtained in advance of or on the actual grant date.

Generally, the Compensation Committee’s process for determining Bonus Plan award opportunities involves two related elements: the determination of target award levels and the establishment of corporate performance goals for the current year. Per the terms of his employment agreement, Mr. Greenman’s target level for his short-term performance-based cash incentive compensation is set at 60% of his base salary. For the remaining NEOs, the applicable target level of base salary for the short-term incentive cash compensation award is recommended by the Chief Executive Officer, taking into consideration feedback from Radford Consulting. The Chief Executive Officer’s recommendations are reviewed by the Compensation Committee, and the Compensation Committee either approves the bonus target levels as recommended or may modify the target levels of Bonus Plan awards after considering the peer group data provided by Radford Consulting. Bonus Plan compensation, combined with annual equity compensation, has historically resulted in more than 50% of our NEOs’ total potential compensation being “at risk.”

At or prior to the beginning of each year, corporate performance goals are reviewed and approved by the Compensation Committee and the full Board. Each of our NEO’s short-term incentive cash compensation package is tied to our corporate performance in that corporate performance determines the amount by which the bonus pool is funded, with the Compensation Committee considering each executive’s individual contribution towards the achievement of our corporate performance goals for the performance year before approving actual individual bonus payouts.

Shortly after the end of each year, the Compensation Committee meets with our Chief Executive Officer to discuss and evaluate each of the corporate performance goals for the preceding year, whether such goals were attained and, if so, at what level. The Compensation Committee also reviews with our Chief Executive Officer the individual performance of each of our NEOs, other than our Chief Executive Officer, and each individual’s contribution towards the achievement of our corporate performance goals. The Compensation Committee then meets in executive session without the presence of our Chief Executive Officer to review and evaluate our Chief Executive Officer’s performance for the preceding year.

Although compensation packages are reviewed on an annual basis, generally in the first quarter, the Chief Executive Officer and Compensation Committee regularly discuss the performance of our executive officers throughout the year. The Compensation Committee considers this ongoing feedback along with its annual review of all the NEOs’ individual performance when determining the appropriate levels of base salary and long-term equity incentive compensation awards for the following year. Throughout the year, the Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of our compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation.

 

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Role of Compensation Consultant

The Compensation Committee has engaged Radford Consulting as its compensation consultant since August 2011. Radford Consulting is an independent consulting firm that specializes in executive compensation consulting. The Compensation Committee initially selected Radford Consulting after considering a number of other national compensation consulting firms. The Compensation Committee continues to use Radford Consulting due to their expertise with life sciences companies. Radford Consulting generally provides analysis and recommendations to the Compensation Committee regarding:

 

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trends and emerging topics with respect to executive compensation;

 

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peer group selection;

 

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compensation practices of our peer group;

 

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compensation programs for executives and broad-based employees; and

 

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stock utilization and other metrics.

In October 2018, the Compensation Committee engaged Radford Consulting specifically to update its analysis in connection with the 2019 executive compensation determinations.

In addition to engaging their consulting services, we subscribe to both Radford Consulting’s annual Global Life Science and Global Sales compensation survey data on an ongoing basis. As previously discussed, the Compensation Committee regularly meets in executive session to discuss executive compensation issues. Radford Consulting may be asked to participate in, and has in the past attended, meetings of the Compensation Committee. Radford Consulting reports directly to the Compensation Committee rather than to management, although it has in the past met with management for purposes of gathering information for its analyses and recommendations and may continue to do so in the future.

Use of Peer Group and Survey Data

The Compensation Committee regularly considers the appropriate pay scales for our NEOs and, as part of that process, considers compensation levels provided by comparable, or peer, companies to persons performing duties of similar scope and complexity as a reference point when making compensation-related decisions in order to ensure that total compensation is competitive with compensation paid within the industry and is appropriate given the executive’s level of responsibilities. The Compensation Committee uses this assessment to assist it in making decisions regarding appropriate compensation levels for our executive positions, but the Compensation Committee recognizes that consideration of such comparative data alone is an imperfect tool for establishing competitive compensation packages as the job responsibilities of persons with similar titles may vary significantly from company to company, and a person’s title is not necessarily descriptive of a person’s duties.

As part of the October 2018 engagement, the Compensation Committee requested that Radford Consulting assist with updating the peer group we used for purposes of assisting the Compensation Committee in setting executive compensation levels for 2019. As a result, the Compensation Committee, working closely with Radford Consulting, ultimately selected a peer group consisting of 21 companies based on the following selection criteria:

 

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late development stage biopharmaceutical companies (Phase III or pre-NDA to marketed products);

 

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companies with less than $200 million in annual revenue;

 

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companies with 100 to 500 employees, as compared to our 250 employees as of the time of this peer group update; and

 

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companies with market capitalizations of between $100 million and $2.5 billion, as compared to our approximate market capitalization of $785 million as of the time of this peer group update.

 

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In applying these revised peer group selection criteria, the Compensation Committee approved removing Sucampo Pharmaceuticals, Inc. as they were acquired in 2018. The Compensation Committee also approved removing Achaogen, Inc. as its market cap fell below the criteria range.

To replace these two companies, the Compensation Committee decided to add the following two companies to the revised peer group: CareDx, Inc. and Intersect ENT, Inc. Thus, the following 21 peer group companies were selected by the Compensation Committee for use in setting executive compensation levels for 2019:

 

Adamas Pharmaceuticals, Inc.		Intersect ENT, Inc.
Anika Therapeutics, Inc.		MannKind Corporation
Antares Pharmaceuticals, Inc.		Momenta Pharmaceuticals, Inc.
BioDelivery Sciences International, Inc.		OraSure Technologies, Inc.
CareDX, Inc.		Retrophin, Inc.
ChemoCentryx, Inc.		Rigel Pharmaceuticals, Inc.
Collegium Pharmaceutical, Inc.		Sangamo Therapeutics, Inc.
Cytokinetics, Inc.		STAAR Surgical Company
Dynavax Technologies Corporation		Vanda Pharmaceuticals, Inc.
Five Prime Therapeutics, Inc.		Zogenix, Inc.
Heron Therapeutics, Inc.

Radford Consulting analyzed the most recent compensation practices of the revised peer group in order to assist the Compensation Committee in determining appropriate 2019 NEO compensation levels. Radford Consulting prepared an extensive analysis of the compensation practices of the 21 peer companies as reported in their proxy statements for the prior fiscal year, and offered additional analysis based on the compensation practices of a broader group of life science companies, a subset of what is included in the Radford Life Science Survey for biotechnology and life science companies with 50 to 500 employees. The Compensation Committee used this survey data to determine market trends, to verify that the peer group data for NEO compensation is consistent with overall compensation trends, and to set compensation levels for our non-executive employees. Radford Consulting delivered its report to the Compensation Committee in February 2019, and also included anticipated 2019 compensation trends in its analysis.

The Compensation Committee referenced the cash and equity compensation components analyzed in Radford Consulting’s report, combined with its review of each executive officer’s past individual performance, level of responsibility and anticipated future contributions to Cerus, in setting executive base salary and long-term equity compensation awards for 2019.

In making its decisions with respect to 2019 compensation, the Compensation Committee, after considering the results of Radford Consulting’s report, generally referenced approximately the 50^th percentile of the peer group for base salary and the annual incentive bonus target, and the 60^th percentile of the peer group for equity compensation. The Compensation Committee also focused on pay equity considerations, which, consistent with prior years, resulted in equivalent grants to our NEOs other than our CEO.

 

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2019 EXECUTIVE COMPENSATION COMPONENTS AND DECISIONS

2019 Executive Compensation Summary

The following table summarizes our approved 2019 base salaries, targeted annual incentive bonuses and annual equity awards for our NEOs:

 

Name		Annual Base Salary(1)				Incentive Bonus Target				Number of RSU Shares Awarded
William M. Greenman		$	650,000				65	%			455,000
Kevin D. Green		$	409,336				45	%			135,000
Richard Benjamin		$	429,698				45	%			135,000
Laurence M. Corash		$	441,537				45	%			135,000
Vivek Jayaraman		$	434,805				50	%			135,000

 

(1)	Effective March 1, 2019.

2019 Base Salary

The purpose of base salary is to provide a level of fixed compensation to our NEOs in order to attract and retain executives with the qualifications desired for the particular position. For 2019, the Compensation Committee’s aim, in line with our general philosophy to set target compensation levels that are competitive while maintaining a reasonable cost structure, was to initially review base salaries by referencing the 50^th percentile of the compensation paid to similarly situated executives employed by the peer group companies for target level performance, and then making non-formulaic, subjective adjustments from the 50^th percentile to reflect the executive’s level of experience, actual responsibilities and importance to the strategic goals of the Company. Each year, we generally tend to make modest increases in base salary for executive officers, except where an individual’s base salary is found to be significantly below market when compared to the selected peer group, in which case a larger increase may be warranted, or significantly above market when compared to the selected peer group, in which case a smaller increase may be warranted. The Compensation Committee reviews base salary annually and considers adjusting base salaries to reflect market trends provided by Radford Consulting. These guidelines are used throughout our company in determining appropriate base salary increases for all of our employees. In February 2019, our Compensation Committee approved 2019 base salaries at the same time it approved 2019 bonus targets and equity awards for our executive officers. Salary increases were effective as of March 1, 2019, and took into account trends in base salary increases provided by Radford Consulting (which for 2019 was approximately 3.5%).

 

Named Executive Officer		2018 Base Salary ($)				Percentage Increase for 2019				2019 Base Salary ($)				Pay Relative to Peer Group After Increase (approx.)
William M. Greenman		$	620,000				4.84	%		$	650,000				>75th percentile
Kevin D. Green		$	389,844				5.00	%		$	409,336				50th—75th percentile
Richard Benjamin		$	415,167				3.50	%		$	429,698				50th—75th percentile
Laurence M. Corash		$	426,606				3.50	%		$	441,537				>75th percentile
Vivek Jayaraman		$	414,100				5.00	%		$	434,805				>75th percentile

 

For 2019, the Compensation Committee approved an increase to Dr. Benjamin’s and Mr. Green’s base salaries as part of an incremental plan to bring their respective base compensation generally in line with, although slightly above, the 50^th percentile of comparable positions at our peer companies based upon the data provided by Radford Consulting. Although the increases in base salaries for Dr. Corash and Messrs. Greenman and

 

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Jayaraman put their base compensation above the 75^th percentile, the Compensation Committee approved the stated increases with the goal of retaining those executives given the scope of their responsibilities and their importance to the strategic goals of the Company.

Bonus Plan for 2019

We provide short-term performance-based incentive compensation to our NEOs under the Bonus Plan. Each NEO’s cash incentive compensation is contingent upon our performance and his or her individual contribution towards our corporate performance.

The Bonus Plan is funded based upon the achievement of corporate performance objectives that are specified at the beginning of the performance period. However, when determining payouts under the Bonus Plan, the Compensation Committee may take into account significant corporate events and other significant accomplishments that were not contemplated at the beginning of the performance period in determining the extent to which the goals were satisfied. Likewise, the Compensation Committee may modify or otherwise change the corporate performance objectives during the applicable calendar year to take into account circumstances then existing; however, no modifications were made for our Bonus Plan for 2019. In determining the actual individual Bonus Plan payouts, the Compensation Committee may also exercise its discretion to increase or reduce the bonuses actually paid under the Bonus Plan above or below the level of attainment of our corporate performance objectives used to determine the funding of the Bonus Plan. However, in no event can aggregate payments under the Bonus Plan exceed the amount by which the Bonus Plan is funded. Per the Bonus Plan, the bonus pool is funded based upon the product of (a) the participants’ bonus target percentage multiplied by their bonus year base pay and (b) the final payout rate calculated based upon achievement of the pre-specified goals.

At the beginning of 2019, the Compensation Committee, with input from the Chief Executive Officer (except with respect to his own target bonus percentage), determined to change the target bonus percentages that were in effect for the prior year. The target bonus percentage for Mr. Greenman was increased from 60% of base salary to 65% of base salary and for the rest of the NEOs, with the exception of Mr. Jayaraman, the target bonus percentage was increased from 40% of base salary to 45% of base salary. Mr. Jayaraman’s target bonus percentage was increased from 40% of base salary to 50% of base salary. These increases reflected both an effort to differentiate the bonus target percentages of our executive officers from the bonus target percentages of our next level of employees, as well as pay equity considerations. The bonus target percentage for Mr. Jayaraman reflects the significant impact that the commercial function reporting into him has on the overall achievement of the corporate goals. The factors the Compensation Committee evaluated in determining the level of achievement of the corporate performance goals and the payouts under the Bonus Plan are described below. The Compensation Committee believed these factors were the best indicators of the achievement of the execution of our operating plan and were the factors that were the most critical to increasing the value of our common stock. These factors, therefore, were believed to best align the financial interests of our NEOs with those of our stockholders.

 

Named Executive Officer		2018 Target Bonus (%)				2019 Target Bonus (%)				2019 Target Bonus ($)				Bonus Relative to Peer Group After Increase (approx.)
William M. Greenman			60	%			65	%		$	422,500				50th-75th percentile
Kevin D. Green			40	%			45	%		$	184,201				50th percentile
Richard Benjamin			40	%			45	%		$	193,364				75th percentile
Laurence M. Corash			40	%			45	%		$	198,692				>75th percentile
Vivek Jayaraman			40	%			50	%		$	217,403				>75th percentile

The performance goals were split between quantitative, qualitative and strategic goals and accounted for 55%, 35% and 10%, respectively, of total performance goals under the Bonus Plan for 2019. The Compensation

 

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Committee assigned a final achievement rate of 109.5% with respect to these performance goals for 2019 based on the level of achievement of the following objectives which were established in the first quarter of 2019.

2019 Quantitative Goals

Goal		Goal Weighting				Threshold (50%)				Target (100%)				Stretch (150%)				Achievement
2019 product revenue(1)			45	%		$	70M			$	73M			$	76M			$	78.4M				67.5	%
2019 average quarterly cash used in operations(2)			10	%		$	14M			$	13M			$	12M			$	12.0M				9.0	%
Total																							76.5	%

 

(1)	For purposes of determining the revenue achievement for 2019, all non-U.S. product revenue invoiced and transacted in Euro was converted to U.S. dollars using the 1.2 foreign exchange rate contemplated at the time the corporate goals were approved.

(2)

Average quarterly cash used in operations is adjusted from GAAP cash used in operations by adding back our pre-existing contractual payment obligation to a manufacturing partner, increases in inventory from the prior year and changes in inventory related items reported as current assets elsewhere on the balance sheet.

2019 Qualitative Goals

The qualitative corporate performance goals for 2019 were eligible to result in a 0.5x payout for minimum performance, up to 1.5x payout in the event of exceptional achievement, in each case as determined by the Compensation Committee. For 2019, the Compensation Committee approved the following qualitative corporate performance goals and determined their relative levels of achievement as noted next to each goal below:

 

Goal		Goal Weighting				Achievement
Regulatory efforts with respect to a plasma alternate plastics submission and a cryoprecipitate submission			5	%			4.0	%
Progress on the extended shelf life platelet study and triple storage set validation study			5	%			1.0	%
Execute on U.S. red blood cell clinical study program			10	%			5.0	%
CE mark dossier review and regulatory response for the red blood cell system in Europe			5	%			2.5	%
Supply chain capacity expansion and quality improvements			5	%			7.5	%
Market launch initiatives for red blood cell system in Europe and cryoprecipitate in U.S.			5	%			3.0	%
Total							23.0	%

With respect to regulatory submissions related to alternate plastics for plasma and the cryoprecipitate submission, the Compensation Committee took into account the completion of the validation studies for the alternate plasma and FDA submission, as well as the expanded studies initiated and largely completed with respect to our cryoprecipitate program. The Compensation Committee acknowledged the initiation of the triple storage set validation studies and the negotiations with FDA and ultimate initiation of the extended shelf life platelet study. With respect to executing on our red blood cell clinical study program, our Compensation Committee took into account the twelve red cell clinical sites enrolling patients in our ReCePi study, as well as the over 400 patients enrolled in our RedeS study. With respect to our CE mark dossier, the Compensation Committee acknowledged our progress with respect to answering questions and moving the submission forward with the European regulatory bodies, but also the negative impact associated with the our need to identify an alternate supplier for one of the reagents used in the red cell product. In assessing achievement of our supply chain goals, our Compensation Committee looked at our extraordinary efforts with respect to capacity expansion

 

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and quality improvements, as well as with respect to optimizing our safety stock levels. In addition, the Compensation Committee looked at the extensive progress that we have made with regards to our LED illuminator development. Finally, with respect to our launch initiatives for red cells in Europe and cryoprecipitate in the U.S., the Compensation Committee acknowledged our progress on the Company’s NTAP strategy, progress with the FDA on labeling for the cryoprecipitate product and progress with manufacturing partners.

2019 Strategic Goals

Other corporate strategic goals accounted for 10% of our potential Bonus Plan payout for 2019. The Compensation Committee set out strategic initiatives at the beginning of 2019 that they felt would advance the Company’s opportunities and growth. These areas related to organization, team and process evolution, and product and geographic expansion. Thus, when looking at the achievement level of our strategic goals, the Compensation Committee looked at our progress with respect to hiring talent, including the launch of an organizational review and restructure, portfolio expansion initiatives with respect to our platelet, plasma, red cell, whole blood and cryoprecipitate programs, advancing the extended shelf life label claim in Germany, progress with respect to whole blood initiatives, and geographic expansion initiatives. The Compensation Committee determined that we met 100% of our other 2019 corporate strategic goals and we received credit for the full 10%.

Calculation of 2019 Bonus Plan Payouts

Based on the above results, the Compensation Committee fully allocated the bonus pool after considering each individual’s strong contributions toward achievement of our corporate performance score. Each of Messrs. Greenman, Green and Jayaraman received a bonus payout equal to the bonus achievement rate of 109.5% multiplied by his target bonus. Each of Drs. Benjamin and Corash received a bonus payout equal to 98.55% of his target bonus based upon the progress of our clinical studies, including those with respect to our red cell program.

 

Named Executive Officer		2019 Target Bonus ($)				Bonus Achievement				2019 Actual Bonus ($)
William M. Greenman		$	422,500				109.5	%		$	462,637
Kevin D. Green		$	184,201				109.5	%		$	201,700
Richard Benjamin		$	193,364				98.55	%		$	190,560
Laurence M. Corash		$	198,692				98.55	%		$	195,811
Vivek Jayaraman		$	217,403				109.5	%		$	238,056

2019 Long-Term Incentive Compensation

In addition to salary and short-term incentive compensation, we provide our executive officers with long-term performance incentives, which historically has typically been in the form of stock options. Stock options are intended to foster the long-term perspective we believe is necessary for our continued success by creating a strong, direct link between our NEOs’ compensation and our stock price appreciation. Because the executive must pay a cash exercise price equal to the value of the stock on the date the option is granted, the executive will only receive value from the award if the value of our stock increases following the option grant date. The Compensation Committee also awards stock options because it believes that if our officers own shares of our common stock with value that is significant to them, but which value cannot be immediately realized, they will have an incentive to act to maximize longer-term stockholder value instead of short-term gain. Our stock option awards are granted subject to vesting restrictions, so they are earned over a period of years during the executive’s continued service with us following the option grant date. The Compensation Committee also believes that equity compensation is an integral component of our efforts to attract and retain exceptional executives, senior management and other employees. In 2016, the Compensation Committee determined to add RSU awards to our annual grants for executives, in part because the Compensation Committee believes that long-term equity awards composed of a mix of stock options and RSU awards may better align our executive officers’ interests with those

 

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of our stockholders by minimizing the incentive for inappropriate short-term risk taking at the expense of realizing long-term value. RSU awards generally cover fewer shares than the stock options that we would otherwise grant to deliver a similar value to an executive officer, but have a larger impact on reducing the number of shares available for issuance under the 2008 Plan as the share reserve is currently reduced by 1.55 shares for each share of common stock issued pursuant to an RSU award (or 1.07 shares on or after June 3, 2020 under the Restated 2008 Plan if Proposal No. 2 is approved by our stockholders). As a result, although RSU awards enable the Company to minimize dilution to stockholders, they accelerate the depletion of shares available for issuance under the 2008 Plan. Both stock options and RSU awards vest over time, thereby increasing retention value.

In April 2019, the Compensation Committee approved annual equity award grants to our NEOs. Because we did not have enough shares remaining available under the 2008 Plan at the time these grants were approved, they were approved for grant on the date of the Annual Meeting subject to stockholder approval of a proposal to increase the number of shares available for grant under the 2008 Plan. In line with its historical philosophy, the Compensation Committee determined to target the 60^th percentile of the peer group for these equity awards to provide sufficient motivation and retention and to continue to ensure a significant portion of our NEOs’ compensation is “at risk” and aligned with the interests of our stockholders. However, pay equity considerations result in equivalent awards made being made to our NEOs, other than our CEO. The Compensation Committee determined that the 2019 equity awards would be entirely in the form of RSU awards, primarily to minimize dilution to stockholders because RSU awards cover fewer shares than the stock options that we would otherwise grant to deliver a similar value. Although the Compensation Committee made the determination to grant only RSU awards in 2019, the Compensation Committee does not intend to rely solely on RSU awards in the future and reverted to granting a mix of RSU and option awards in 2020.

The RSU awards granted to our NEOs in 2019 were as follows:

 

Named Executive Officer		RSU Shares
William M. Greenman			455,000
Kevin D. Green			135,000
Richard Benjamin			135,000
Laurence M. Corash			135,000
Vivek Jayaraman			135,000

Change of Control and Severance Benefits

Mr. Green, Dr. Corash, Dr. Benjamin and Mr. Jayaraman are each participants in our change of control severance plan, referred to elsewhere as the Severance Plan, and we have an employment agreement with Mr. Greenman, in each case providing for certain change of control related severance benefits. For more information regarding our change of control related severance benefits, please see the section below entitled “Employment, Severance and Change of Control Agreements.” The Compensation Committee believes that these change of control related severance benefits are an important element of our executive compensation and retention program, which has particular importance in the context of a change of control. Change of control benefits under Mr. Greenman’s employment agreement and the Severance Plan, including stock award vesting acceleration, are structured on a “double-trigger” basis, meaning that the executive officer must experience a constructive termination or a termination without cause in connection with the change of control in order for the change of control benefits to become due. The Compensation Committee believes that the events triggering payment, comprising both a change of control and an involuntary termination, and then only when there is no misconduct by the officer, are appropriate hurdles for the ensuing rewards. It is the Compensation Committee’s belief that providing change of control benefits should eliminate, or at least reduce, the reluctance of our executive officers to diligently consider and pursue potential change of control transactions that may be in the best interests of our stockholders.

 

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The severance benefits for Messrs. Greenman and Green contained in their employment agreements also provides for certain severance benefits in the event of an involuntary termination without cause not dependent on a change of control, including continued payment of salary and healthcare benefits and full equity award acceleration, in exchange for a general release of claims. Our Board and Compensation Committee believe that the non-change of control related severance benefits provided to our NEOs are an important element of their retention and motivation and are consistent with compensation arrangements provided in a competitive market for executive talent. It is further believed that the benefits of such severance arrangements, including generally requiring a release of claims against us as a condition to receiving the severance benefits, are in the best interests of the company.

Other Benefits

We provide our executive officers with other benefits that we believe are reasonable and consistent with, or less than, what our peer group offers its executive officers and that help us to attract and retain high quality executives. The Compensation Committee periodically reviews the levels of benefits provided to our executive officers to ensure they remain reasonable and consistent with our compensation philosophy.

Our NEOs are eligible to participate in all of our employee benefit plans, such as the 401(k) Plan, medical, dental, vision coverage, short-term disability, long-term disability, group life insurance, cafeteria plan, and the Amended and Restated 1996 Employee Stock Purchase Plan, in each case on the same basis as our other employees. We do not currently offer pension or other retirement benefits for our NEOs other than the 401(k) Plan.

CEO Stock Ownership Guidelines

The Board believes that our Chief Executive Officer and each director should develop a meaningful ownership interest in Cerus. Therefore, in March 2018, the Board adopted stock ownership guidelines for our Chief Executive Officer and our non-employee directors. Pursuant to these guidelines, our Chief Executive Officer is expected to own shares of our common stock having a value equal to at least three times his annual base salary. For purposes of these stock ownership guidelines, shares deemed to be owned include shares owned directly by our Chief Executive Officer or by members of our Chief Executive Officer’s immediate family residing in the same household, shares held in trust for the benefit of our Chief Executive Officer or a member of our Chief Executive Officer’s immediate family residing in the same household, up to fifty percent of the vested, “in-the-money” stock options held by our Chief Executive Officer and vested shares subject to any other outstanding equity awards or issued under any deferred compensation plan. Subject to certain extensions, our Chief Executive Officer is required to be in compliance with the stock ownership requirement by December 31^st of the fifth year following the year during which he first became subject to these ownership guidelines. Our Chief Executive Officer first became subject to these guidelines during 2018, and he will be required to be in compliance by December 31, 2023. The Board has discretion to waive the guidelines or to develop an alternative individual guideline for our Chief Executive Officer if compliance would place a severe hardship on our Chief Executive Officer.

Risk Analysis

The Compensation Committee has reviewed our compensation policies as generally applicable to our employees and believes that our policies do not encourage excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on the company. The design of our compensation policies and programs encourage our employees to remain focused on both the short- and long-term goals of the company. For example, while our Bonus Plan measures performance on an annual basis, our equity awards typically vest over a number of years, which we believe encourages our employees to consider sustained stock price appreciation, thus limiting the potential value of excessive risk-taking.

 

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Compensation Recovery Policy

We do not have a policy to attempt to recover cash bonus payments paid to our executive officers if the performance objectives that led to the determination of such payments were to be restated, or found not to have been met to the extent the Compensation Committee originally believed. However, as a public company subject to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002, if we are required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive. In addition, we will comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will adopt a compensation recovery policy once the SEC adopts final regulations on the subject. Notwithstanding the fact that we do not have a policy to recover cash bonuses, our Compensation Committee carefully monitors the Company’s financial results and retains the discretion to reduce the cash bonuses that would otherwise have been paid under the Bonus Plan based on our level of attainment of our corporate and strategic goals to reflect subsequent developments.

Accounting and Tax Considerations

We account for stock-based awards exchanged for employee services in accordance with the Compensation—Stock Compensation topic of the Financial Accounting Standards Board Accounting Standards Codification. In accordance with the topic, we are required to estimate and record an expense for each award of equity compensation over the vesting period of the award. Accounting rules also require us to record cash compensation as an expense over the period during which it is earned.

Under Section 162(m), compensation paid to any publicly held corporation’s “covered employees” that exceeds $1 million per taxable year for any covered employee is generally non-deductible.

Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Company’s NEOs in a manner consistent with the goals of the Company’s executive compensation program and the best interests of the Company and its stockholders, which may include providing for compensation that is not deductible by the Company due to the deduction limit under Section 162(m). The Compensation Committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with the Company’s business needs.

Forward-Looking Statements

Except for the historical statements contained in this Compensation Discussion and Analysis and elsewhere in the proxy statement, this Compensation Discussion and Analysis and other portions of this proxy statement contain forward-looking statements concerning our products and prospects, including statements concerning our growth initiatives and opportunities; the financial capacity available under our debt facility with MidCap Financial; the expected benefits to us of our revised organizational structure and relocation of our corporate headquarters; the potential efficacy of CCP; the total potential value of our agreement with BARDA and intended uses of the proceeds thereof; the potential benefits to us of the FDA’s final guidance document titled “Bacterial Risk Control Strategies for Blood Collection Establishments and Transfusion Services to Enhance the Safety and Availability of Platelets for Transfusion, Guidance for Industry”; and other statements that are not historical facts. Actual results could differ materially from these forward-looking statements as a result of certain factors, including, without limitation: risks associated with the commercialization and market acceptance of, and customer demand for, the INTERCEPT Blood System, including the risks that we may not (a) grow sales globally, including in our U.S. and European markets, and/or realize expected revenue contribution resulting from its U.S. and European market agreements, (b) realize meaningful and/or increasing revenue contributions from U.S. customers in the near term or at all, particularly since we cannot guarantee the volume or timing of commercial purchases, if any, that our U.S. customers may make under our commercial agreements with these

 

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customers, and/or (c) realize any revenue contribution from our pipeline product candidates, whether due to our inability to obtain regulatory approval of our pipeline product candidates, or otherwise; risks associated with our lack of commercialization experience in the United States and our ability to develop and maintain an effective and qualified U.S.-based commercial organization, as well as the resulting uncertainty of our ability to achieve market acceptance of and otherwise successfully commercialize the INTERCEPT Blood System for platelets and plasma in the United States, including as a result of licensure requirements that must be satisfied by U.S. customers prior to their engaging in interstate transport of blood components processed using the INTERCEPT Blood System; risks related to Fresenius Kabi’s efforts to assure an uninterrupted supply of platelet additive solution (PAS); risks related to how any future PAS supply disruption could affect INTERCEPT’s acceptance in the marketplace; risks related to how any future PAS supply disruption might affect current commercial contracts; risks related to our ability to demonstrate to the transfusion medicine community and other health care constituencies that pathogen reduction and the INTERCEPT Blood System is safe, effective and economical; the uncertain and time-consuming development and regulatory process, including the risks (a) that we may be unable to comply with the FDA’s post-approval requirements for the INTERCEPT platelet and plasma systems, including by successfully completing required post-approval studies, which could result in a loss of United States marketing approval for the INTERCEPT platelet and/or plasma systems, (b) that we may be unable to obtain CE Mark approval, or any other regulatory approvals, of the red blood cell system in a timely manner or at all, (c) related to our ability to expand the label claims and product configurations for the INTERCEPT platelet and plasma systems in the United States, including for INTERCEPT-treated extended storage cryoprecipitate from plasma, which will require additional regulatory approvals, and (d) that applicable regulatory authorities may disagree with our interpretations of the data from our clinical studies and/or may otherwise determine not to approve our regulatory submissions, including our CE Mark submission, in a timely manner or at all; the uncertain and time-consuming development process, including the risks that the INTERCEPT Blood System may not inactivate the SARS-CoV-2 coronavirus; risks associated with the uncertain nature of BARDA’s funding over which we have no control as well as actions of Congress and governmental agencies which may adversely affect the availability of funding under our BARDA agreement and/or BARDA’s exercise of any potential subsequent option periods, such that the anticipated activities that we expect to conduct with the funds available from BARDA may be delayed or halted and that we may not otherwise realize the total potential value under our agreement with BARDA; risks related to product safety, including the risk that the septic platelet transfusions may not be avoidable with the INTERCEPT Blood System; risks related to the ongoing COVID-19 pandemic, including potential negative future impacts on our commercialization efforts, manufacturing supply chain, regulatory and clinical development activities and other business operations; adverse market and economic conditions, including continued or more severe adverse fluctuations in foreign exchange rates and/or weakening economic conditions in the markets where we currently sell and are anticipated to sell our products, whether due to the ongoing COVID-19 pandemic or otherwise; our reliance on third parties to market, sell, distribute and maintain our products; risks related to our ability to maintain an effective manufacturing supply chain, including the ability of our manufacturers to comply with extensive FDA and foreign regulatory agency requirements, and our ability to maintain our primary kit manufacturing agreement and our other supply agreements with our third party suppliers; our ability to identify and obtain additional partners to manufacture pathogen-reduced cryoprecipitate; our ability to meet our debt service obligations and our need for additional funding; the risk that the anticipated financial capacity under our debt facility with MidCap Financial may not be available when expected, or at all, including as a result of our inability to satisfy the conditions to the funding of the remaining available advances under the facility; the impact of legislative or regulatory healthcare reforms that may make it more difficult and costly for us to produce, market and distribute our products; risks related to future opportunities and plans, including the uncertainty of our future capital requirements and our future revenues and other financial performance and results, as well as other risks detailed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 21, 2020. To the extent the ongoing COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks and uncertainties described above. We disclaim any obligation or undertaking to update or revise any forward-looking statements contained in this proxy statement.

 

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SUMMARY COMPENSATION TABLE

The following table sets forth certain summary information for the year indicated with respect to the compensation earned by our principal executive officer, our principal financial officer and our three other most highly compensated executive officers at December 31, 2019. These individuals represent the Company’s NEOs.

SUMMARY COMPENSATION TABLE—FISCAL 2019, 2018 AND 2017

 

Name and Principal Position		Year				Salary ($)				Stock Awards ($)(1)				Option Awards ($)(2)				Non-Equity Incentive Plan Compensation ($)(3)				All Other Compensation ($)				Total ($)
William M. Greenman			2019				645,000				2,161,250				—				462,637				1,292	(4)			3,270,179
President and			2018				616,667				928,800				990,333				446,400				1,242				2,983,442
Chief Executive Officer			2017				596,667				365,344				899,320				261,000				1,242				2,123,573
Kevin D. Green			2019				406,088				641,250				—				201,700				894	(5)			1,249,932
Vice President, Finance			2018				386,750				205,200				218,795				210,719				810				1,022,274
and Chief Financial Officer			2017				368,333				97,425				224,830				123,822				810				815,220
Richard Benjamin			2019				427,277				641,250				—				190,560				2,372	(6)			1,261,459
Chief Medical Officer			2018				412,828				205,200				218,795				174,067				2,322				1,013,212
			2017				398,557				97,425				224,830				116,327				2,322				839,461
Laurence M. Corash			2019				439,049				641,250				—				195,811				11,624	(7)			1,287,734
Chief Scientific Officer			2018				425,902				205,200				218,795				178,642				11,724				1,040,263
			2017				421,002				97,425				224,830				116,366				11,724				871,347
Vivek Jayaraman			2019				431,354				641,250				—				238,056				1,610	(8)			1,312,270
Chief Operating			2018				412,417				205,200				218,795				256,460				990				1,093,862
Officer(9)			2017				403,333				48,713				112,415				105,444				990				670,895

 

(1)

Represent the aggregate grant date fair value of RSU awards for the applicable fiscal year calculated in accordance with FASB ASC Topic 718. The grant date fair value of each RSU award is measured based on the closing price of our common stock on the date of grant. These amounts do not reflect whether the NEO has actually realized or will realize a financial benefit from the awards upon the vesting of the granted RSUs, or the sale of the shares underlying such RSUs.

(2)

Represent the aggregate grant date fair value of stock option awards for the applicable fiscal year calculated in accordance with FASB ASC Topic 718, and does not take into account any estimated forfeitures. Assumptions used in the calculation of the grant-date fair value of stock option awards are set forth Note 12 “Stock-Based Compensation” in our 2019 Annual Report on Form 10-K. These amounts do not reflect whether the NEO has actually realized or will realize a financial benefit from the awards upon the vesting of the stock options, the exercise of stock options, or the sale of the shares underlying such stock options.

(3)	The dollar amounts in this column represent the cash bonus awarded under our Bonus Plan for the indicated fiscal year.

(4)	Represents group-term life insurance premiums in the amount of $1,242 and a cell phone accessory stipend of $50.

(5)	Represents group-term life insurance premiums in the amount of $844 and a cell phone accessory stipend of $50.

(6)	Represents group-term life insurance premiums in the amount of $2,322 and a cell phone accessory stipend of $50.

(7)	Represents group-term life insurance premiums in the amount of $11,124, reimbursed gym membership fees in the amount of $450 a cell phone accessory stipend of $50.

(8)	Represents group-term life insurance premiums in the amount of $810, reimbursed gym membership fees in the amount of $450, and a cell phone stipend of $350.

(9)	Mr. Jayaraman was appointed Chief Operating Officer effective March 1, 2020. He previously held the role of Chief Commercial Officer.

 

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GRANTS OF PLAN-BASED AWARDS

The following table summarizes grants of plan-based awards made to our NEOs in 2019.

GRANTS OF PLAN-BASED AWARDS IN  FISCAL 2019

 

Name		Grant Date				Approval Date				Estimated Possible Payouts Under Non- Equity Incentive Plan Awards Target ($)(1)				All Other Stock Awards: Number of Shares of Stock or Units (#)(2)				Grant Date Fair Value of Stock and Option Awards ($)(3)
William M. Greenman											422,500
			6/6/2019				4/12/2019				—				455,000				2,161,250
Kevin D. Green											184,201
			6/6/2019				4/12/2019				—				135,000				641,250
Richard Benjamin											193,364
			6/6/2019				4/12/2019				—				135,000				641,250
Laurence M. Corash											198,692
			6/6/2019				4/12/2019				—				135,000				641,250
Vivek Jayaraman											217,403
			6/6/2019				4/12/2019				—				135,000				641,250

 

(1)

The amounts shown reflect the target bonus awards for the fiscal year ended December 31, 2019 under the Bonus Plan based on our performance. The actual cash bonus award payments made pursuant to our Bonus Plan are reflected in the “Summary Compensation Table” above; accordingly, the amounts set forth in this column do not represent additional compensation earned by the NEOs for the year ended December 31, 2019. “Target” represents 45% of the base salary in effect at the time payment is made for Kevin Green, Laurence Corash and Richard Benjamin and 50% of the base salary in effect at the time payment is made for Vivek Jayaraman. “Target” for our Chief Executive Officer represents 65% of his base salary in effect at the time payment is made. For a description of our Bonus Plan, please see “Compensation Discussion and Analysis—Executive Compensation Components and Decisions—Bonus Plan for 2019.”

(2)	RSUs were granted under the 2008 Plan. For a description of the terms of the RSUs granted in 2019, please see “Employment Agreements and Arrangements—RSU and Option Awards” below.

(3)	Represents the grant date fair value of each RSU award, calculated in accordance with FASB ASC Topic 718. The grant date fair value of each RSU award is measured based on the closing price of our ordinary shares on the date of grant.

 

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EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

Employment Agreements. We do not have employment agreements currently in effect with any of our NEOs. However, from time to time, we have provided an offer letter in connection with an executive officer’s commencement of employment, which describes such executive officer’s initial terms of employment, and we have in other situations provided similar letter agreements to our executive officers based on changed circumstances, including promotions. For a description of these letter agreements, please see the section under the heading “Employment, Severance and Change of Control Agreements” below. As described in that section, the letter agreements for Messrs. Greenman and Green also provide for change of control and/or severance benefits.

Annual Bonus Plan. Our Bonus Plan provides for annual bonus award opportunities to reward executive officers for performance in the prior fiscal year. For a description of our Bonus Plan, please see “Compensation Discussion and Analysis—Executive Compensation Components and Decisions—Bonus Plan for 2019.”

RSU and Option Awards. In addition to salary and short-term incentive compensation under our Bonus Plan, we provide our executive officers with long-term incentives, in the form of RSUs and stock options. RSUs granted in 2019 were granted under the 2008 Plan. These RSUs vest, subject to continued service with us, in three equal installments on each anniversary of the vesting commencement date. We did not grant option awards in 2019.

Change of Control Severance Benefit Plan. Effective September 2005, and amended and restated as of December 11, 2008, we adopted a change of control severance benefit plan, or the Severance Plan, that provides for severance benefits as a result of termination of employment in particular circumstances in connection with a change of control and is described in more detail under the heading “Employment, Severance and Change of Control Agreements” below. Each of Drs. Corash and Benjamin, Mr. Green and Mr. Jayaraman are participants in the Severance Plan.

401(k) Plan. Our 401(k) Profit Sharing Plan, or the 401(k) Plan, enables eligible employees to save for retirement. As well as retirement benefits, the 401(k) Plan provides certain benefits in the event of death, disability, or other termination of employment. The 401(k) Plan is for the exclusive benefit of eligible employees and their beneficiaries. The 401(k) Plan allows employees to shelter a percentage of their income from taxes and choose from a number of investment funds while saving for retirement. All employees who are not residents of Puerto Rico, covered by a collective bargaining agreement for which retirement benefits have been the subject of good faith negotiations, a leased employee or a nonresident alien with no income from a U.S. source are eligible to participate in the 401(k) Plan on the first day of the month following their date of hire. Enrollments are effective and contributions can begin on the first day of the month after hire. The 401(k) Plan has a rollover feature and also allows for borrowing against the balance in the account. Employees can make pre-tax dollar contributions of up to 60% of their eligible pay up to a maximum cap established by the IRS unless their participation level is limited by IRS non-discrimination testing requirements. Beginning in 2019, we began matching contributions made to the plan by our eligible employees, including executive officers. We match 50% of employee contributions up to 6%, with a maximum matching employer contribution of $5,000 per calendar year per person. All matching employer contributions are fully vested when made.

A variety of investment funds are available and money can be allocated among them as employees wish, in any percentage increments. Deferral amount elections may be made and/or changed on a monthly basis. With some limitations, employees may change their investment choices daily.

Other Compensatory Arrangements. For a description of the other elements of our executive compensation program, see “Compensation Discussion and Analysis—Executive Compensation Components and Decisions—Other Benefits” above.

 

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Pension Benefits. Other than with respect to the 401(k) Plan, the NEOs do not participate in any plan that provides for retirement payments and benefits, or payments and benefits that will be provided primarily following retirement.

Nonqualified Deferred Compensation. During the year ended December 31, 2019 the NEOs did not contribute to, or earn any amounts with respect to, any defined contribution or other plan sponsored by us that provides for the deferral of compensation on a basis that is not tax-qualified.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table shows for the fiscal year ended December 31, 2019, certain information regarding outstanding equity awards at fiscal year-end for the NEOs.

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019

 

		Option Awards																Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)(1)
William M. Greenman			100,000				—				3.00				8/31/2020				28,125	(2)			118,688
			550,000				—				2.70				4/18/2021				143,333	(3)			604,865
			100,000				—				2.08				8/31/2021				455,000	(4)			1,920,100
			380,000				—				3.75				2/28/2022
			390,000				—				3.66				2/28/2023
			325,000				—				6.28				3/2/2024
			500,000				—				4.46				3/1/2025
			295,312				19,688	(6)			5.06				2/28/2026
			275,000				125,000	(7)			4.33				2/28/2027
			188,125				241,875	(8)			4.32				2/28/2028
Kevin D. Green			80,000				—				2.08				8/31/2021				7,500	(2)			31,650
			95,000				—				3.75				2/28/2022				31,666	(3)			133,631
			100,000				—				3.66				2/28/2023				135,000	(4)			569,700
			125,000				—				6.28				3/2/2024
			150,000				—				4.46				3/1/2025
			84,375				5,625	(6)			5.06				2/28/2026
			68,750				31,250	(7)			4.33				2/28/2027
			41,562				53,438	(8)			4.32				2/28/2028
Laurence M. Corash			45,000				—				3.75				2/28/2022				7,500	(2)			31,650
			120,000				—				3.66				2/28/2023				31,666	(3)			133,631
			135,000				—				6.28				3/2/2024				135,000	(4)			569,700
			155,000				—				4.46				3/1/2025
			50,000				—				5.13				5/31/2025
			84,375				5,625	(6)			5.06				2/28/2026
			68,750				31,250	(7)			4.33				2/28/2027
			41,562				53,438	(8)			4.32				2/28/2028
Richard Benjamin			300,000				—				4.72				8/31/2025				7,500	(2)			31,650
			42,187				2,813	(6)			5.06				2/28/2026				31,666	(3)			133,631
			33,334				31,250	(7)			4.33				2/28/2027				135,000	(4)			569,700
			41,562				53,438	(8)			4.32				2/28/2028
Vivek Jayaraman			208,333				41,667	(9)			6.36				8/31/2026				18,750	(5)			79,125
			34,375				15,625	(7)			4.33				2/28/2027				3,750	(2)			15,825
			41,562				53,438	(8)			4.32				2/28/2028				31,666	(3)			133,631
																			135,000	(4)			569,700

 

(1)	The market values of the RSU awards that have not vested are calculated by multiplying the number of shares underlying the RSU awards shown in the table by $4.22, the closing price of our common stock on December 31, 2019.

 

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(2)	The shares subject to this RSU award vest in three equal annual installments commencing on March 12, 2018.

(3)	The shares subject to this RSU award vest in three equal annual installments commencing on March 12, 2019.

(4)	The shares subject to this RSU award vest in three equal annual installments commencing on March 12, 2020.

(5)	The shares subject to this RSU award vest in four equal annual installments commencing on August 29, 2017.

(6)	The shares subject to this stock option award vested as to 12.5% of the shares on September 1, 2016, and vest as to the remainder of the shares in 42 equal monthly installments thereafter.

(7)	The shares subject to this stock option award vested as to 12.5% of the shares on September 1, 2017, and vest as to the remainder of the shares in 42 equal monthly installments thereafter.

(8)	The shares subject to this stock option award vested as to 12.5% of the shares on September 1, 2018, and vest as to the remainder of the shares in 42 equal monthly installments thereafter.

(9)	The shares subject to this stock option award vested as to 12.5% of the shares on February 28, 2017, and vest as to the remainder of the shares in 42 equal monthly installments thereafter.

 

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OPTION EXERCISES AND STOCK VESTED

The following table shows for the fiscal year ended December 31, 2019, certain information regarding the vesting of RSUs and option exercises during the last fiscal year with respect to our NEOs.

OPTION EXERCISES AND STOCK VESTED  IN FISCAL 2019

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized on Exercise ($)(1)				Number of Shares Acquired on Vesting (#)				Value Realized on Vesting ($)(2)
William M. Greenman			40,100				113,284				122,292				785,467
Kevin D. Green			11,135				44,458				29,334				188,451
Laurence M. Corash			85,000				72,170				29,334				188,451
Richard Benjamin			—				—				26,334				169,011
Vivek Jayaraman			—				—				38,334				225,471

 

(1)

The value realized on exercise is calculated based on the difference between the exercise price of each option exercised and the closing price of our common stock on the date of exercise multiplied by the number of shares underlying each option exercised, and does not represent actual amounts received by the NEOs as a result of the option exercises.

(2)	The value realized on vesting is calculated based on the number of shares acquired on vesting multiplied by the closing price of our common stock on the date of vesting, and does not represent actual amounts received by the NEOs as a result of the RSU vesting.

 

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EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS

We do not have employment agreements currently in effect with any of our NEOs. However, from time to time, we have provided an offer letter in connection with an executive officer’s commencement of employment, which describes such executive officer’s initial terms of employment, and we have in other situations provided similar letter agreements to our executive officers based on changed circumstances, including promotions. As described below, the letter agreements for Messrs. Greenman and Green also provide for change of control and/or severance benefits.

William M. Greenman, our President and Chief Executive Officer, is a party to a letter agreement with us, dated as of May 12, 2011, which provides for an initial annual base salary of $415,000 and participation in our Bonus Plan, with a target bonus of 60% of Mr. Greenman’s base salary. In connection with his appointment as our President and Chief Executive Officer, Mr. Greenman was granted an option, pursuant to the 2008 Plan, to purchase 550,000 shares of our common stock with an exercise price equal to the fair market value of our common stock on the date of grant. The stock option vested over a four-year period, with 12.5% of the shares subject to the option vesting six months after the vesting commencement date and the remainder vesting in equal monthly installments thereafter. The agreement also provides that, in the event Mr. Greenman’s employment is terminated by us without cause, subject to his execution of a release of claims, and in each case other than within 12 months following a change of control, he will be entitled to receive severance pay equal to 12 months of his base salary in effect as of the termination date (less required deductions and withholdings) to be paid in the form of salary continuation on our standard payroll dates following such termination, and if he timely elects continued group health insurance coverage through COBRA, we will be obligated to pay his COBRA premiums necessary to continue his group health insurance coverage at the same level as in effect as of the termination date for 12 months after his termination or until he becomes eligible for group health insurance coverage through a new employer, whichever occurs first. In addition, in connection with such termination of employment, the vesting of Mr. Greenman’s equity awards will accelerate in full as of the date of termination.

In the event Mr. Greenman’s employment is terminated by us without cause or by him as a good reason resignation within 12 months following a change in control, subject to his execution of a release of claims, he will be entitled to receive severance pay equal to 18 months of his base salary in effect as of the termination date (less required deductions and withholdings) to be paid in the form of a lump sum on the first regular payroll date following the effective date of the release, and if he timely elects continued group health insurance coverage through COBRA, we will be obligated to pay his COBRA premiums necessary to continue his group health insurance coverage at the same level as in effect as of the termination date for 18 months after his termination or until he becomes eligible for group health insurance coverage through a new employer, whichever occurs first. In addition, in connection with such termination of employment, the vesting of Mr. Greenman’s equity awards will accelerate in full as of the date of termination.

Kevin D. Green, our Vice President, Finance and Chief Financial Officer, is a party to a letter agreement with us, dated as of May 1, 2009, which provides for an initial annual base salary of $220,000, participation in our Bonus Plan and the grant of an option, pursuant to the 2008 Plan, to purchase 50,000 shares of our common stock. The option has an exercise price equal to the fair market value of our common stock on the date of grant and vested over a four year period, with 12.5% of the shares subject to the option vesting six months after the vesting commencement date and the remainder vesting in equal monthly installments thereafter. The agreement also provides that, in the event Mr. Green’s employment is terminated by us without cause, subject to his execution of a release of claims, and in each case other than within 12 months following a change of control, he will be entitled to receive severance pay equal to six months of his base salary in effect as of the termination date (less required deductions and withholdings) to be paid in the form of salary continuation on our standard payroll dates following such termination, and if he timely elects continued group health insurance coverage through COBRA, we will be obligated to pay his COBRA premiums necessary to continue his group health insurance coverage at the same level as in effect as of the termination date for six months after his termination or until he becomes eligible for group health insurance coverage through a new employer, whichever occurs first. In addition, in connection with such termination of employment, the vesting of Mr. Green’s equity awards will accelerate in full as of the date of termination. Mr. Green is also a participant in the Severance Plan, which provides for compensation payable to him in the event his employment is terminated following a change of control.

 

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Laurence M. Corash, our Chief Scientific Officer, is a party to a letter agreement with us, dated as of March 2, 2010, which provides for an initial annual base salary of $375,000 and participation in our Bonus Plan. Dr. Corash is also a participant in our Severance Plan, which provides for compensation payable to him in the event his employment is terminated following a change of control.

Vivek Jayaraman, our Chief Operating Officer, is a party to an agreement with us, dated as of May 31, 2016, which provides for an initial annual base salary of $400,000, participation in our Bonus Plan (with a target bonus of 40% of Mr. Jayaraman’s base salary) and the grant of an option to purchase 250,000 shares of our common stock with an exercise price equal to the fair market value of our common stock on the date of grant and vested over a four year period, with 12.5% of the shares subject to the option vesting six months after the vesting commencement date and the remainder vesting in equal monthly installments thereafter. The agreement also provided for the grant of 75,000 RSUs, vesting annually over four years from the vesting commencement date. The agreement also provided that we will reimburse Mr. Jayaraman up to $100,000 for certain relocation expenses if he relocates his residence to within a 30-mile commute from our corporate offices, within a three-year period following his commencement of employment in August 2016. No such relocation expense reimbursement payments were made to Mr. Jayaraman. Mr. Jayaraman is also a participant in our Severance Plan, which provides for compensation payable to him in the event his employment is terminated following a change of control.

Richard J. Benjamin, our Chief Medical Officer, is a party to a letter agreement with us, dated as of May 12, 2015, which provides for an initial annual base salary of $380,000, participation in our Bonus Plan (with a target bonus of 40% of Dr. Benjamin’s base salary) and the grant of an option to purchase 350,000 shares of our common stock with an exercise price equal to the fair market value of our common stock on the date of grant and vested over a four year period, with 12.5% of the shares subject to the option vesting six months after the vesting commencement date and the remainder vesting in equal monthly installments thereafter. The agreement also provided that we will reimburse Dr. Benjamin up to $150,000 for certain moving expenses within a one-year period following his commencement of employment in July 2015. We reimbursed Dr. Benjamin $123,917 for relocation expenses in 2015. All or a portion of the relocation benefits were subject to repayment by Dr. Benjamin in the event his employment had terminated due to a resignation or a termination for cause within the one-year period following his commencement of employment in July 2015. Dr. Benjamin is also a participant in our Severance Plan, which provides for compensation payable to him in the event his employment is terminated following a change of control.

Severance Plan. Effective September 2005 and amended and restated as of December 11, 2008, we adopted the Severance Plan, that provides for severance benefits as a result of termination of employment in particular circumstances in connection with a change of control. At the time the Severance Plan was put in place, each of our executive officers with an individually negotiated agreement providing for severance benefits was given the option of participating in the Severance Plan or continuing to receive the severance benefits provided for in his agreement. Mr. Greenman and Dr. Corash each opted to participate in the Severance Plan. In connection with Mr. Greenman’s appointment as our President and Chief Executive Officer, however, he entered into the employment letter described above and is no longer a participant in the Severance Plan. Dr. Benjamin, Mr. Green and Mr. Jayaraman are also participants in the Severance Plan. The Severance Plan provides for the payment of certain benefits to certain eligible employees in exchange for an effective release of claims in the event the employee is terminated by us without cause or by him or her as a good reason resignation on or within 12 months following a change of control (as such terms are defined in the Severance Plan). The severance compensation consists of a lump sum cash severance payment equal to 12 months of the participant’s annual base salary (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation) as in effect during the last regularly scheduled payroll period immediately preceding the termination event. Additionally, the Severance Plan provides for paid COBRA premiums for continuation coverage (including coverage for his eligible dependents) for 12 months and full accelerated vesting and exercisability of all of the participant’s then-outstanding equity awards.

 

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The following table provides information on severance benefits that would become payable under the existing employment, severance and change in control agreements, as currently in effect, if the employment of our NEOs had terminated on December 31, 2019. In addition, the table sets forth the amounts to which the NEOs would be entitled under the 2008 Plan if, upon a change in control, the surviving or acquiring corporation refuses to assume or continue the outstanding stock options held by the NEOs, or to substitute for similar options.

 

Name and Principal Position		Voluntary Termination for Good Reason or Involuntary Termination On or Within 12 Months After a Change of Control												Involuntary Termination Without Cause Absent a Change of Control												Payments upon a Change of Control
		Health Care Benefits ($)				Salary ($)				Equity Acceleration ($)				Health Care Benefits ($)				Salary ($)				Equity Acceleration ($)				Equity Acceleration ($)(9)
William M. Greenman			60,196	(1)			975,000	(2)			2,643,653	(3)			40,131	(4)			650,000	(5)			2,643,653	(3)			2,643,653
President and Chief Executive Officer
Kevin D. Green			27,615	(4)			409,336	(8)			734,981	(3)			13,808	(7)			204,668	(6)			734,981	(3)			734,981
Vice President, Finance and Chief Financial Officer
Richard Benjamin			23,800	(4)			429,698	(8)			734,981	(3)			—				—				—				734,981
Chief Medical Officer
Laurence M. Corash			29,677	(4)			441,537	(8)			734,981	(3)			—				—				—				734,981
Chief Scientific Officer
Vivek Jayaraman			24,880	(4)			434,805	(8)			798,281	(3)			—				—				—				798,281
Chief Commercial Officer

 

(1)	Represents the aggregate amount of our share of the cost of 18 months of COBRA premiums.

(2)	Represents 18 months of the executive’s base salary as of December 31, 2019 payable in a lump sum amount following an involuntary termination of employment or voluntary termination for good reason within 12 months following a change of control.

(3)

Represents the value of stock option and RSU vesting acceleration, which is based on the closing price of $4.22 of our common stock on December 31, 2019, the last trading day of fiscal 2019, minus, in the case of stock options, the exercise price of the unvested stock option shares subject to acceleration.

(4)	Represents the aggregate amount of our share of the cost of 12 months of COBRA premiums.

(5)	Represents the aggregate amount of the executive’s base salary as of December 31, 2019, payable over the 12-month period following an involuntary termination of the executive’s employment by us other than for cause.

(6)	Represents the aggregate amount of the executive’s base salary as of December 31, 2019, payable over the 6-month period following an involuntary termination of the executive’s employment by us other than for cause.

(7)	Represents the aggregate amount of our share of the cost of 6 months of COBRA premiums.

(8)	Represents 12 months of the executive’s base salary as of December 31, 2019, payable in a lump sum amount following an involuntary termination of employment or voluntary termination for good reason on or within 12 months following a change of control.

(9)

These benefits would be payable pursuant to the terms of the applicable equity agreement for equity granted pursuant to the 2008 Plan, which were outstanding as of December 31, 2019, if, upon a change in control, the surviving or acquiring corporation refuses to assume or continue the outstanding equity awards held by the NEOs, or to substitute for similar equity awards. The value of stock option and RSU vesting acceleration

 

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