Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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(e) On January 5, 2018, the compensation committee of our board of directors (the
Compensation Committee
), approved certain
compensatory arrangements with respect to our executive officers as described below. As discussed in our proxy statement for our May 3, 2017 annual general meeting of shareholders, after considering investor feedback and market compensation
practices, our Compensation Committee determined that we would not grant equity awards to our executive officers that were intended to cover a multiple year period and to instead adopt a regular annual long-term incentive program, commencing with
the 2018 Long-Term Incentive Program awards described below.
2018 Long-Term Incentive Program
Members of the company leadership team, including our named executive officers, did not receive refresher equity grants in 2016 or 2017, and the 2014/2015
performance program, which included performance share units and a cash long-term incentive plan, will most likely not be earned and paid out at any amount. The following 2018 Long-Term Incentive Program was designed in conjunction with Radford, the
compensation consultant to the Compensation Committee. Radford provided the Compensation Committee with detailed analysis of the equity compensation for each executive position relative to those at our peer companies including the value of each
executives unvested equity relative to peers, which were among the factors considered by the Compensation Committee in approving the following program.
Restricted Stock Unit Awards
The Compensation Committee
approved restricted stock unit grants for the members of our executive leadership team, including our named executive officers, as set forth below (
RSU
Awards
). The vesting of the RSU Awards is subject to
shareholder approval of amendments to the 2014 EIP which will be set forth in the proxy statement for our 2018 annual general meeting of shareholders. Timothy P. Walbert, chairman, president and chief executive officer, received 458,899 RSUs Awards;
each of Robert F. Carey, executive vice president, chief business officer, and Paul W. Hoelscher, executive vice president and chief financial officer, received 197,087 RSU Awards; Barry J. Moze, executive vice president and chief administrative
officer, received 51,779 RSU Awards; and David A. Happel, executive vice president, commercial development, received 20,388 RSU Awards.
The RSU Awards
will vest 1/3
rd
annually on each anniversary of January 5, 2018, subject to the individuals continued services through the applicable vesting dates. The RSU Awards are also subject to
accelerated vesting upon certain qualifying terminations of employment in connection with change of control events, and any vesting acceleration provisions set forth in our executive employment agreements. If a definitive agreement for a change in
control is executed prior to our 2018 annual general meeting of shareholders and certain other employment conditions are satisfied, the RSU Awards will be deemed vested, but settled pursuant to a cash payment equal to the value of the shares that
would otherwise have been issued if the RSU Award had vested.
Any shares issued in settlement of an RSU Award granted to a Section 16 officer will
be subject to a minimum holding period of one year before the shares may be sold or transferred.
Equity Long-Term Incentive Program and 2018
Performance Share Awards
The Compensation Committee approved an equity long-term incentive program for our executive leadership team, including our
named executive officers (the
Equity LTIP
) and approved performance share awards to be granted under the Equity LTIP for 2018 as described below (the
PSU Awards
). A copy of the Equity LTIP is
attached as exhibit 99.1. Timothy P. Walbert, chairman, president and chief executive officer, received a 458,899 target PSU Award; each of Robert F. Carey, executive vice president, chief business officer, and Paul W. Hoelscher, executive vice
president and chief financial officer, received a 197,087 target PSU Award; Barry J. Moze, executive vice president and chief administrative officer, received a 51,779 target PSU Award and David A. Happel, executive vice president, commercial
development, received a 20,388 target PSU Award. The maximum PSU Award granted to any individual that may vest will in no event exceed 200% of the applicable target PSU Award.
The vesting of the PSU Awards is contingent upon shareholder approval of amendments to the 2014 EIP which will be
set forth in the proxy statement for our 2018 annual general meeting of shareholders. If a definitive agreement for a change in control is executed prior to our 2018 annual general meeting of shareholders, and certain other employment conditions are
satisfied, the PSU Award will be deemed vested pursuant to the criteria summarized below, but will be settled pursuant to a cash payment equal to the value of the shares that would otherwise have been issued if the PSU Award had vested.
Any shares issued in settlement of a PSU Award granted to an executive officer will be subject to a minimum holding period of one year before the shares may
be sold or transferred.
Relative TSR Portion of PSU Award Vesting Criteria
30% of the PSU Award that may vest (such portion of the PSU Award, the
Relative TSR PSU
) will be determined by reference to the level
of our relative total shareholder return over the three-year period ending December 31, 2020, as measured against the total shareholder return of each company included in the NASDAQ Biotechnology Index (NBI) during such three-year period.
Generally, in order to earn any portion of the Relative TSR PSU, the participant must also remain in our continuous service with the Company through the earlier of January 1, 2021 or the date immediately prior to a change in control. If a
change in control occurs prior to December 31, 2020, the level of our relative total shareholder return will be measured through the date of the change in control.
Net Sales Portion of PSU Award Vesting Criteria
70% of
the PSU Award that may vest (such portion of the PSU Award, the
Net Sales PSU
), will be determined by reference to our net sales for our business units during 2018, weighted with the rheumatology and orphan business units
comprising the majority of the target sales (with respect to the total PSU Award):
If, and to the extent earned, the Net Sales PSU portion will vest in
three equal annual installments on each anniversary of January 5, 2018, subject to the participants continued service with the Company through the applicable vesting dates.
If a divestiture of any of our business units occurs before December 31, 2018, other than in connection with a change in control, the portion of the Net
Sales PSU that may vest based upon nets sales of the applicable business unit will be calculated based on the greater of: (i) 100% achievement of net sales target for the applicable business unit or, (ii) the portion of the Net Sales PSU that
would have been earned if the divestiture had not occurred as determined by the Compensation Committee.
If a change in control occurs before
December 31, 2018, the portion of the Net Sales PSU that may vest will be calculated based on the greater of: (i) 100% achievement of net sales target for the applicable business unit or, (ii) the portion of the Net Sales PSU that would
have been earned if the divestiture had not occurred, as determined by the Compensation Committee.
Cash Incentive Program and 2018 Awards
The Compensation Committee also approved a performance cash incentive program for our executive leadership team, including our named executive officers (the
Cash Incentive Program
) and approved awards under the Cash Incentive Program for 2018. A copy of the Cash Incentive Program is attached as exhibit 99.2.
Participants receiving awards under the Cash Incentive Program for 2018 will be eligible to earn a cash bonus based upon target award levels set forth below
and based upon achievement of specified corporate goals. Timothy P. Walbert, chairman, president and chief executive officer, received a $3 million target award; each of Robert F. Carey, executive vice president, chief business officer, and
Paul W. Hoelscher, executive vice president and chief financial officer, received a $900,000 target award; Barry J. Moze, executive vice president and chief administrative officer, received a $375,000 target award and David A. Happel, executive vice
president, commercial development, received a $200,000 target award. In no event will the actual cash bonus award to any individual exceed 150% of the target cash bonus award approved for such participant.
The criteria for the cash plan is focused on ensuring the Company achieves key milestones with its two key
growth/value drivers, KRYSTEXXA and teprotumumab, in 2018 and beyond.
70% of the actual cash bonus award that may be earned under the Cash Incentive
Program for 2018 will be determined by reference to achieving an aggressive percentage increase in KRYSTEXXA vial sales during 2018 as compared to KRYSTEXXA vial sales during 2017. 30% of the actual award will be determined by reference to the
achieving patient enrollment levels in the Teprotumumab phase 3 clinical trial by December 31, 2018.
If and to the extent earned based upon
application of the performance criteria, such determined portion of cash bonus award will vest and become payable in three equal annual installments on each anniversary of January 5, 2018, subject to the participants continued services
with us through the applicable vesting dates or the date of any earlier change in control, or a termination due to death or disability.
If a change in
control occurs before December 31, 2018, the cash bonus award will be calculated by reference to the greater of the target cash bonus award amount or such cash bonus amount as would have been earned if the change in control had not occurred, to
the extent reasonably calculable, and as determined by the Compensation Committee.
Amendment to 2014 Equity Incentive Plan
The Compensation Committee approved an amendment to our 2014 Equity Incentive Plan, as amended (the
2014 EIP
), to reserve an
additional 800,000 of our ordinary shares to be used exclusively for grants of awards to individuals who were not previously employees or
non-employee
directors of ours (or following a bona fide period of
non-employment
with us), as an inducement material to the individuals entry into employment with us within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules
(
Rule 5635(c)(4)
). The 2014 EIP was amended by the Compensation Committee to increase the inducement pool without shareholder approval pursuant to Rule 5635(c)(4). A copy of the 2014 EIP, as amended, is attached
as exhibit 99.3.
Incentive Compensation Recoupment Policy
The Compensation Committee approved an incentive compensation recoupment policy which provides for recoupment of certain compensation paid to executive
officers of the Company under certain circumstances involving material financial restatements (the
Recoupment Policy
). A copy of the Recoupment Policy is attached as exhibit 99.4. Amounts payable under the Cash
Incentive Program and in settlement of PSU Awards granted under our 2018 Long-Term Incentive Program, as described above, are subject to potential recoupment in accordance with the terms of the Recoupment Policy.